{"id":4403,"date":"2016-01-26T08:07:04","date_gmt":"2016-01-26T08:07:04","guid":{"rendered":"http:\/\/www.ap-northeast-1.blog-v1.compareglobal.co.uk\/my\/?p=4403"},"modified":"2026-03-27T09:56:24","modified_gmt":"2026-03-27T01:56:24","slug":"islamic-personal-financing-explained-2","status":"publish","type":"post","link":"https:\/\/www.comparehero.my\/blog\/lifestyle-finance\/islamic-personal-financing-explained-2.html","title":{"rendered":"How Does An Islamic Personal Loan Work?"},"content":{"rendered":"<p><img data-recalc-dims=\"1\" loading=\"lazy\" decoding=\"async\" class=\"alignnone size-full wp-image-4404\" src=\"https:\/\/i0.wp.com\/optimized-blogassets.comparehero.my\/blog\/my_MY\/wp-content\/uploads\/2016\/01\/MY_IslamicFinance_blog.jpg?resize=640%2C289&#038;ssl=1\" alt=\"islamic personal loan \" width=\"640\" height=\"289\" \/><\/p>\n<p style=\"text-align: justify;\">Many have wondered how a personal loan from an Islamic bank differs from a conventional bank. You won&#8217;t have to after today, because we\u2019ve got you covered with the facts you need to know to help you understand Islamic personal loans to broaden your financial options!<\/p>\n<p style=\"text-align: justify;\"><!--more--><\/p>\n<h2 style=\"text-align: justify;\">Basics of Islamic Banking<\/h2>\n<p style=\"text-align: justify;\">Islamic banking adheres to Shariah, which is the Islamic religious law as defined in the Quran, hadith and sunnah. The difference between conventional and Islamic finance is that no money is actually loaned to the client as the bank will \u201cbuy\u201d the item for clients and sell it back to them at a marked up price.<\/p>\n<p style=\"text-align: justify;\">Islamic banking is governed by both Islamic law and financial industry rules so it is also tightly regulated, like its conventional counterpart. Islamic banks must comply with a variety of principles besides not charging interest, such as ensuring the products offered to clients are <em>halal<\/em> and <em>shariah<\/em> compliant. In order to do so, there are <em>shariah<\/em> boards which consist of Islamic scholars who are qualified to give opinions on Islamic financial products.<\/p>\n<p style=\"text-align: justify;\">Although the Islamic banking system is different from a conventional banking system, there are some similarities between the two. For instance, Islamic banks offer products and services similar to those offered by conventional banks. However, Islamic bank conducts their activities in accordance with the Islamic <em>shariah<\/em> principles that strictly prohibits all of the below:<\/p>\n<ul>\n<li style=\"text-align: justify;\"><em>Haram<\/em> business (alcohol, gambling etc)<\/li>\n<li style=\"text-align: justify;\"><em>Riba <\/em>(the practice of lending at high rates of interest)<\/li>\n<li style=\"text-align: justify;\"><em>Gharar<\/em> (speculative or hazardous sales where the value is uncertain)<\/li>\n<li style=\"text-align: justify;\"><em>Zulm<\/em> (exploitative, oppressive or cruel activities and practices)<\/li>\n<\/ul>\n<p style=\"text-align: justify;\">Operations of Islamic banks in Malaysia must also be carried out according to certain procedures as determined by the <em>Shariah<\/em> advisory council of Bank Negara (SAC). The SAC is the highest <em>Shariah<\/em> authority for Islamic finance in Malaysia. Part of the SAC\u2019s duties include examining and endorsing the validity of application of Shariah laws in Islamic financial products.<\/p>\n<p style=\"text-align: justify;\">In Islamic principles, money does not have an intrinsic value and time does not create any returns. Money cannot become more valuable simply with the passing of time which is why asking for compensation for lending someone money in the form of interest is prohibited and is not allowed in Islamic banking.<\/p>\n<p style=\"text-align: justify;\">However, the value of money can be increased if it is invested in a project that itself is for example, increasing in size, success and more. An economic activity that takes place and the time spent on the economic project can create value for the money. So Islamic banks charge profit rate instead of interest rate with their financial products.<\/p>\n<h2 style=\"text-align: justify;\"><a href=\"https:\/\/i0.wp.com\/optimized-blogassets.comparehero.my\/blog\/my_MY\/wp-content\/uploads\/2016\/01\/MY_IslamicFinance_blog02.jpg?ssl=1\"><img data-recalc-dims=\"1\" loading=\"lazy\" decoding=\"async\" class=\" wp-image-4417 size-full aligncenter\" src=\"https:\/\/i0.wp.com\/optimized-blogassets.comparehero.my\/blog\/my_MY\/wp-content\/uploads\/2016\/01\/MY_IslamicFinance_blog02.jpg?resize=640%2C289&#038;ssl=1\" alt=\"Islamic personal loan \" width=\"640\" height=\"289\" \/><\/a><\/h2>\n<h2 style=\"text-align: justify;\">How Does An Islamic Personal Loan Work?<\/h2>\n<p style=\"text-align: justify;\">Personal loans from Islamic banks in Malaysia are based by utilising the concept of <em>Bai\u2019 Al-\u2018Inah<\/em>. It is a concept widely used by Islamic financial institutions for \u2018personal financing\u2019 which is a commonly used term in Islamic banking instead of the term \u2018personal loan\u2019 as per conventional banks.<\/p>\n<p style=\"text-align: justify;\"><em>Bai\u2019 Al-\u2018Inah<\/em> is a concept which involves the selling and buying back transaction by a seller (bank) on a deferred payment basis. A seller will sell to a buyer (client) on a cash basis. The seller will later buy back on a deferred payment basis where the price is higher than the cash price. It can also be applied when a seller sells to a buyer on a differed basis. A seller will later buy back on a cash basis at a price which is lower than the deferred price, thus the transaction amounts to a loan. In personal financing, the asset involved in the <em>Bai\u2019Al-\u2018Inah<\/em> concept of buying and selling would be the cash.<\/p>\n<p style=\"text-align: justify;\">Islamic financial institutions will then charge customers an amount known as \u2018profit rate\u2019 for providing them with a personal financing facility. Again, this is because charging interest is not allowed in Islamic banking. So unlike personal loans offered by conventional banks, Islamic banks will offer personal financing with a profit rate that will be defined in the personal financing contract. The list of Islamic banks in Malaysia are:<\/p>\n<p style=\"text-align: justify;\">\u2022 Affin Islamic Bank Berhad<br \/>\n\u2022 Al Rajhi Banking &amp; Investment Corporation (Malaysia) Berhad<br \/>\n\u2022 Alliance Islamic Bank Berhad<br \/>\n\u2022 AmBank\u00a0Islamic\u00a0Berhad<br \/>\n\u2022 Asian Finance Bank Berhad<br \/>\n\u2022 Bank Islam Malaysia Berhad<br \/>\n\u2022 Bank Muamalat Malaysia Berhad<br \/>\n\u2022 CIMB Islamic Bank Berhad<br \/>\n\u2022 HSBC Amanah Malaysia Berhad<br \/>\n\u2022 Hong Leong Islamic Bank Berhad<br \/>\n\u2022 Kuwait Finance House (Malaysia) Berhad<br \/>\n\u2022 Maybank Islamic Berhad<br \/>\n\u2022 OCBC Al-Amin Bank Berhad<br \/>\n\u2022 Public Islamic Bank Berhad<br \/>\n\u2022 RHB Islamic Bank Berhad<br \/>\n\u2022 Standard Chartered Saadiq Berhad<\/p>\n<p style=\"text-align: justify;\">Aside from the <em>Bai\u2019Al-\u2018Inah<\/em> concept some Islamic banks use the Shariah principle of <em>Murabahah<\/em> via <em>Tawarruq<\/em> for personal financing. By definition <em>Murabahah<\/em> is a type of sale where the commodity is sold for cash or deferred price. <em>Tawarruq<\/em> refers to purchasing an asset with deferred price and then selling it to a third party to obtain cash.<\/p>\n<p><a href=\"https:\/\/i0.wp.com\/optimized-blogassets.comparehero.my\/blog\/my_MY\/wp-content\/uploads\/2016\/01\/PFislamicbankingblog.jpg?ssl=1\"><img data-recalc-dims=\"1\" loading=\"lazy\" decoding=\"async\" class=\"alignleft size-full wp-image-4405\" src=\"https:\/\/i0.wp.com\/optimized-blogassets.comparehero.my\/blog\/my_MY\/wp-content\/uploads\/2016\/01\/PFislamicbankingblog.jpg?resize=640%2C289&#038;ssl=1\" alt=\"islamic personal loan \" width=\"640\" height=\"289\" \/><\/a><\/p>\n<p style=\"text-align: justify;\">Most Islamic personal loans also come with Takaful (insurance) coverage but it is optional with certain Islamic banks such as Hong Leong Islamic Bank and Bank Rakyat. So you can opt to take a personal loan with or without Takaful. However, the profit rate will defer and depends on whether or not you decide to take personal financing with Takaful coverage. The rate is lower if you take Takaful, because it reduces the risk for the bank and because the banks can also make money from selling you Takaful coverage.<\/p>\n<p style=\"text-align: justify;\">A plus point with Islamic personal financing is that should there be any late settlement of loans, charges may actually be lower than conventional loans because compounding interest is prohibited by Shariah.<\/p>\n<h2>Check Out Some These Best Deals For Islamic Personal Financing!<\/h2>\n<h2>Maybank Islamic Personal Financing<\/h2>\n<p>\u2022 Minimum amount RM5,000<br \/>\n\u2022 Maximum amount RM100,000<br \/>\n\u2022 Fixed monthly installment<br \/>\n\u2022 Minimum tenure 2 years, maximum tenure 6 years<\/p>\n<p><a href=\"https:\/\/i0.wp.com\/optimized-blogassets.comparehero.my\/blog\/my_MY\/wp-content\/uploads\/2016\/01\/Maybank-Islamic-blog.jpg?ssl=1\"><img data-recalc-dims=\"1\" loading=\"lazy\" decoding=\"async\" class=\"aligncenter wp-image-4424 size-full\" src=\"https:\/\/i0.wp.com\/optimized-blogassets.comparehero.my\/blog\/my_MY\/wp-content\/uploads\/2016\/01\/Maybank-Islamic-blog.jpg?resize=640%2C151&#038;ssl=1\" alt=\"Maybank Islamic personal financing \" width=\"640\" height=\"151\" \/><\/a><\/p>\n<h2><a href=\"https:\/\/rpstagingdot.wpcomstaging.com\/personal-loan\/hong-leong-islamic\"><strong>Personal Financing-I from Hong Leong Islamic<\/strong> <\/a><\/h2>\n<p style=\"text-align: justify;\">\u2022 Minimum amount RM5,000 and Maximum RM150,000<br \/>\n\u2022 Profit rate at 7.5% per annum up to 13.5% per annum, however the final profit rate will be stated in the Disbursement Notice that will be given to you upon disbursement<br \/>\n\u2022 Takaful is optional<br \/>\n\u2022 Fast approval rate within 48 hours<br \/>\n\u2022 Minimum income eligibility RM2,000 per month<\/p>\n<p style=\"text-align: justify;\">Interested? You can apply for this loan <strong><a href=\"https:\/\/rpstagingdot.wpcomstaging.com\/personal-loan\/hong-leong-islamic\">here!<\/a> <\/strong><\/p>\n<h2 style=\"text-align: justify;\"><strong>Bank Rakyat\u2019s Personal Financing-I Private<\/strong><\/h2>\n<p style=\"text-align: justify;\">\u2022 Catered for private sector professionals<br \/>\n\u2022 Minimum amount of RM3,000 and maximum amount of RM150,000<br \/>\n\u2022 Profit rate 6.16% without Takaful, 6.74% without Takaful.<br \/>\n\u2022 <em>Ibra<\/em> (rebate) will be given for early repayment based on profits gained.<br \/>\n\u2022 Minimum loan tenure of 1 year, maximum loan tenure up to 10 years<br \/>\n\u2022 Minimum income eligibility RM2,000 per month<\/p>\n<p style=\"text-align: justify;\"><strong>See also:<\/strong> <a href=\"https:\/\/www.comparehero.my\/blog\/infographic-type-loan-get\">Which Type of Loan Should You Get?<\/a><\/p>\n<p style=\"text-align: justify;\">Islamic banking is fast gaining recognition around the globe with both Muslim and non-Muslim clients. So if the principles of Islamic banking appeal to you there are other financial products you should check out aside from personal financing. For more options of <strong>shariah compliant personal loans<\/strong> and <strong><a href=\"https:\/\/rpstagingdot.wpcomstaging.com\/credit-card\/islamic\">Islamic credit cards<\/a><\/strong> try out our free comparison tool!<\/p>\n<p><span style=\"border-radius: 2px; text-indent: 20px; width: auto; padding: 0px 4px 0px 0px; text-align: center; font: bold 11px\/20px 'Helvetica Neue',Helvetica,sans-serif; color: #ffffff; background: #bd081c no-repeat scroll 3px 50% \/ 14px 14px; position: absolute; opacity: 1; z-index: 8675309; display: none; cursor: pointer; top: 4133px; left: 20px;\">Save<\/span><br \/>\n[tags]<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Many have wondered how a personal loan from an Islamic bank differs from a conventional bank. You won&#8217;t have to after today, because we\u2019ve got you covered with the facts you need to know to help you understand Islamic personal loans to broaden your financial options!<\/p>\n","protected":false},"author":268230141,"featured_media":59614,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_coblocks_attr":"","_coblocks_dimensions":"","_coblocks_responsive_height":"","_coblocks_accordion_ie_support":"","_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_wpcom_ai_launchpad_first_post":false,"_jetpack_feature_clip_id":0,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"{title}\n\n{excerpt}\n\n{url}","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":false,"jetpack_social_options":{"image_generator_settings":{"template":"highway","default_image_id":0,"font":"","enabled":false},"version":2},"_wpas_customize_per_network":false,"jetpack_post_was_ever_published":false},"categories":[412],"tags":[],"class_list":["post-4403","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-lifestyle-finance"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v28.6 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>How Does An Islamic Personal Loan Work? - CompareHero<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.comparehero.my\/blog\/lifestyle-finance\/islamic-personal-financing-explained-2.html\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"How Does An Islamic Personal Loan Work? - CompareHero\" \/>\n<meta property=\"og:description\" content=\"Many have wondered how a personal loan from an Islamic bank differs from a conventional bank. 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Islamic personal loans are a part of Islamic finance, and personal loans from Islamic banks in Malaysia are more widely known as personal Islamic financing. Islamic banking adheres to Shariah, which is the Islamic religious law as defined in the Quran, hadith and sunnah. 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Some would probably simply say that Islamic Financing disallows interest-based transactions. Sounds easy to understand, right? But if interest rates are prohibited, then how does anyone gain from the initial investment. 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Don\u2019t worry, we have you covered. Islamic financing is on the rise, as practitioners of Islam, who currently make up more than 24% of the global population, are also the fastest-growing religious demographic worldwide, due to a combination of\u2026","rel":"","context":"In &quot;Loans&quot;","block_context":{"text":"Loans","link":"https:\/\/www.comparehero.my\/blog\/loans"},"img":{"alt_text":"","src":"https:\/\/i0.wp.com\/rpstagingdot.wpcomstaging.com\/wp-content\/uploads\/2020\/01\/image-17.png?fit=1024%2C768&ssl=1&resize=350%2C200","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/rpstagingdot.wpcomstaging.com\/wp-content\/uploads\/2020\/01\/image-17.png?fit=1024%2C768&ssl=1&resize=350%2C200 1x, https:\/\/i0.wp.com\/rpstagingdot.wpcomstaging.com\/wp-content\/uploads\/2020\/01\/image-17.png?fit=1024%2C768&ssl=1&resize=525%2C300 1.5x, https:\/\/i0.wp.com\/rpstagingdot.wpcomstaging.com\/wp-content\/uploads\/2020\/01\/image-17.png?fit=1024%2C768&ssl=1&resize=700%2C400 2x"},"classes":[]},{"id":5866,"url":"https:\/\/www.comparehero.my\/blog\/lifestyle-finance\/best-islamic-home-loans-malaysia-2.html","url_meta":{"origin":4403,"position":3},"title":"The Best Islamic Home Loans in Malaysia","author":"CompareHero","date":"11 April 2016","format":false,"excerpt":"Are you looking to purchase a property? Why not broaden your financing options by considering Islamic home loans? We\u2019ve rounded up the best Islamic home loans in Malaysia for you to read below! How Does Islamic Home Financing Work? An Islamic home loan must first and foremost ensure that it\u2026","rel":"","context":"In &quot;Lifestyle Finance&quot;","block_context":{"text":"Lifestyle Finance","link":"https:\/\/www.comparehero.my\/blog\/lifestyle-finance"},"img":{"alt_text":"","src":"https:\/\/i0.wp.com\/rpstagingdot.wpcomstaging.com\/wp-content\/uploads\/2016\/04\/image-4.png?fit=1024%2C768&ssl=1&resize=350%2C200","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/rpstagingdot.wpcomstaging.com\/wp-content\/uploads\/2016\/04\/image-4.png?fit=1024%2C768&ssl=1&resize=350%2C200 1x, https:\/\/i0.wp.com\/rpstagingdot.wpcomstaging.com\/wp-content\/uploads\/2016\/04\/image-4.png?fit=1024%2C768&ssl=1&resize=525%2C300 1.5x, https:\/\/i0.wp.com\/rpstagingdot.wpcomstaging.com\/wp-content\/uploads\/2016\/04\/image-4.png?fit=1024%2C768&ssl=1&resize=700%2C400 2x"},"classes":[]},{"id":18559,"url":"https:\/\/www.comparehero.my\/blog\/loans\/best-islamic-financing-malaysia.html","url_meta":{"origin":4403,"position":4},"title":"The Best Islamic Personal Loans in Malaysia","author":"CompareHero","date":"23 June 2021","format":false,"excerpt":"\u00a0 *Updated: Nov 7, 2019 Are you in need of financial\u00a0assistance, but want it to be Shariah compliant? Or are you looking for more financing options? Why not consider Islamic personal loans? Lets see what exactly is an Islamic loan? 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