Know the Process of Bad Credit Auto Loans and Buy Your Dream Car at Lower Rates

A car is a necessity for the people of America. But, most people don’t have the resources and ready cash to buy a car. That’s where a car loan is useful. With the help of auto financing, one can easily buy the car of their choice. By and large, Americans use this option for buying the much needed automobile.

But, what about those individuals who don’t have a good credit score? We all know that getting any type of loan is difficult when you have a bad credit score. But, does it mean that a mere bad credit history can cause so much trouble? Thankfully, the answer is no. Bad credit auto loans can really help someone in distress. Understand how it can be useful to you. Also, this article will help you in availing an auto loan with bad credit.

A bad credit often causes trouble. But, a bad credit history never means your car dream is over. You can get a car loan despite your very poor credit score. Lenders have understood that many Americans have a poor credit history today. It is impossible for them to suddenly improve their credit score. Also, it makes business sense to offer car loan to such a large segment of the population.

With a bad credit auto loan, you can buy the car you always wanted. You just need to know the exact car loan process. If you know how and where to apply, you can easily get buy a car.

Affordability Is Important

When opting for such loan or any other type of auto loan, most people tend to miscalculate and end up with a loan beyond their affordability. If you sign the car loan contract without thorough research, you may end up paying more. A complete attention is required to get the best loan rates. So, calculate your total income and expenses and ascertain your budget for buying a car.

What To Expect While Applying for An Auto Loan with Bad Credit?

When your credit score is bad, you must avoid banks and traditional car financing institutions. The reason is that they have stringent lending criteria and so, they approve less car loans applications. You can opt for a credit union if you are its member. Online auto financing companies are also a good option. You can get instant approval on bad credit auto loans because they work with sub-prime lenders.

If you have bad credit history, you cannot expect lowest possible rates. Your interest rates will be higher than the average. Your poor credit score is a red flag for the lender and he considers you risky.

How to Lower Interest Rates on a Bad Credit Auto Loan?

You can lower your interest rates by convincing the lender that you are not a high risk credit borrower. Here are few important tips to help you get auto financing.

Down Payment
By making a down payment of 10%-20%, you can improve your car loan approval chances. The lender will understand that you are capable of making a down payment and will be ensured of your financial capacity.

Co-Signer
A co-signer is someone who agrees to co-sign your car loan contract and makes payment if you fail to do so. When you have a co-signer, a lender is assured of his money. So, the lender will not hesitate in providing a car loan.

Using a Collateral
If you have a really poor credit score, you can use your home, machinery or any other car as additional collateral. Even though your new car will be used as collateral, additional collateral will have a positive impact on the lender. The safety of his investment will increase which will be beneficial to you.

So, this is how you can get a bad credit car loan. This loan can really help you in buying a car and improving your credit score.

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Bad Credit Auto Loans Online

Yes there are bad credit auto loans online for people with a poor credit history and low FICO scores who need transportation, and need a fresh start in repairing their credit. Although it may seem hopeless if you have blemishes on your credit there is a solution. First you will want to get rate quotes from various sources. This is very important, you should shop around to find the best deal. However, keep in mind that there are different factors at play with each lender, as to whether or not you get a loan and if so at what interest rate.

You can get approved for a auto loan. But lets be clear, obviously you are not going to get the preferred interest rate on a car loan that a person with A+ credit will receive. However with a little research, especially online, you can find the best auto rate quote that meets your circumstances.

Most people just dive head first into the auto financing process when buying a car, giving no thought to how the auto loan interest rate affects the overall cost of the vehicle or monthly payment. With no plan of action or alternative financing source, this results in them receiving high interest rates and high processing fees which lead to high monthly payments.

It is vital that you make a plan, especially if you carry a bad credit history. As you know, it can be difficult to finance a car with poor credit. Lack of proper planning only complicates the process. So before you go to a dealer get a copy of your credit report and FICO score so that you know whats on it, and that there are no errors. There are, however, auto loan companies and banks that are actually competing for your business and that offer bad credit car loans. Planning is essential.

A history of bad credit leaves many individuals feeling hopeless in their ability to get reasonable auto loan quotes. Sometimes they fill out a loan application at one dealer and then are shown one or two vehicles that the dealer says they qualify for, with out even knowing the value of the car or the loan rate. You want to go to the dealer with a pre-approved auto loan quote and pick out what you really want. You have options available to you. Several auto lenders specialize in helping people start over regardless of their past credit history.

However, you should compare three or more auto loan quotes in order to get the lowest auto loan rate and monthly payments. This can be done easily, you will find well known banks and reputable lenders that want your business have bad credit auto loan applications online that are simple and quick to fill out. You can complete one in minutes and get a response, if not in minutes in a few hours. Best of all there are no fees, most are free, and you are under no obligation to take a loan quote. But once you secure an car loan you like, you can then go to the dealer and purchase a car as if you have cash. This allows you negotiate the lowest price on the vehicle you want at the best possible rate.

To really save you will need to get quotes from various lenders, whether or not they are online, credit unions are another good source. You should compare a minimum of three auto loan quotes. Of course, online quotes are easier to get since you do not have to leave your home or office to find them. Once you receive approvals, you will know what your options are, repayment options and monthly payments costs. The internet has made it ideal for you to find not one but many lenders that offer bad credit auto loans online. Pick the lowest and save.

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How to Get Bad Credit Auto Loan Refinancing

Usually people with a bad credit record find it difficult to get an auto loan. Most loan providers are reluctant to release a huge amount to people with poor credit rating. In addition, automobile loans for applicants with bad credit will have much higher interest rates compared to normal auto loan interest rates. This is due to the risk of repayment by people with bad credit is much higher.

Nowadays, demand for the credit card and loan is on the rise. The money lenders start to opt for the credit scoring which is based on the mathematical algorithm. This algorithm is designed to assess the credit worthiness of applicant. This credit rating is much effective tool to measure the level of the risk to approve the loan application compared to previous criteria.

If you have higher the credit rating, the more chances you will get the loan application successful. There are some factors like delay in payment, unpaid, etc will certainly deteriorate your credit ratings. There are major three agencies like Experian, Equifax and TransUnion which provide the credit ratings services for you. People with poor credit are still possible to repair their bad credit records. First of all he should take time to review his credit reports which he can get it from reporting agencies as mentioned above. He should examine whether there is any mistake in the credit report. He must check properly to find out any pending payment which is not reported earlier.

If you want to apply for the automobile refinancing, you should select the suitable auto car loan at lower interest. The bad credit auto loan is beneficial to those who have poor credit ratings. Before applying for the loan, applicants should investigate whether the company offers the good interest rates or not. Online bad credit loan service is the best option to apply for your loan refinancing.

Before signing the loan contract, people should go through the whole agreement to avoid any misunderstanding. Furthermore, to apply for the new auto car loan, he must estimate the value of the car also. There is minimum car value required by each loan lenders. The car value should be at least worth that specified value.

Poor credit auto car loan is now reachable easily online. Many loan companies nowadays understand that more and more people do not have perfect credit ratings. Many people actually do not know this bad credit auto loan is actually very popular among car lenders nowadays.

With little understanding of bad credit auto loan, it is possible for you to own a car now. Nowadays, you can find out much lower interest rate auto car loans online compared to you get the bad credit loan from the market. Most of the car loan online lenders will provide application details to let the people with poor credit record also can get the loan successfully.

With automobile refinancing, you can also take opportunity to improve your credit ratings. The secret is choosing the cheapest loan repayment that you can afford and carefully making repayment to the auto loan timely.

In conclusion, auto loan refinancing not only provides you a chance to own your dream car but also giving you a chance to repair your credit records and save more money from higher interest rate you are having. Auto loan refinancing is also much easier to apply for compared to other types of loan. If you are familiar with debt consolidation strategy, this is another good option for your to improve your overall financial status.

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Just the FAQs – Bad Credit Auto Loans

Are you a candidate for an auto loan for bad credit? If you have a shaky credit score or worse, chances are you’re a prime candidate. Auto loans for poor credit can be obtained, provided you meet certain criteria. The following FAQs should define the loan for you in more detail and answer most of your questions with regards to obtaining one.

What is an auto loan for bad credit?
This type of auto loan is for people who are unable to get approved through the conventional means of securing a loan. Such sources include local banks, credit unions or lenders associated with the major automakers such as GMAC and Ford Credit.

What is the criteria for obtaining a bad credit auto loan?
Auto loans for people with bad credit can be obtained by those individuals who have a low credit score, have filed bankruptcy, are in a lower income bracket, have nothing to put down on a car or have a previous vehicle repossession.

When can’t you obtain an auto loan for people with bad credit?
You won’t be able to obtain loan if you don’t have a permanent job but instead work as a temporary worker, you can’t provide proof of income or have had a recent repossession which wasn’t part of bankruptcy.

What are the basic qualifiers for obtaining the bad credit auto loan?
For you to apply for most auto loans for bad credit, you must typically have to be at least 18 years old, have a minimum monthly income of $1,500, currently reside in the U.S. and are a citizen, have full-time employment that can be guaranteed or a fixed income that can cover the loan term. In addition, it’s important to have a working phone number and proof of residency that can be obtained from a utility bill or credit card statement.

How do you demonstrate proof of income?
Normally with a poor credit auto loan, you will have to demonstrate proof of income depending on your circumstances. For instance, if you’re employed, this can be done readily by showing the lender a payment stub with, sometimes, the previous year’s tax return for validation. If you’re self-employed, proof of income must be demonstrated, typically, by gathering three years of tax returns prepared by a professional tax preparer with applicable Schedule Cs showing a profit was made.

Is there a cut-off point as far as the age of the car with regards to financing?
Yes. Most dealers will not assist funding a loan for any vehicle over seven years old.

How are bad credit auto loans funded?
It’s best to receive funding of your loan through a franchised dealer as they are held to higher standards. Usually poor credit auto loans funded by such a dealer are later assigned to a finance company. If you purchase your car from a “Buy Here/Pay Here” car dealer, a third-party payment processor will usually service the loan.

The above questions should at least provide a basic understanding of how to proceed if you’re interested in obtaining a bad credit car loan and motivate you to pursue this course of action should you currently need one.

7 months of city road construction outside Owen Kellogg’s specialty retail shop meant that he had to close his doors – with substantial dings to his credit. Determined to find out everything about credit repair and loans for people with bad credit, he spent a great deal of time researching.

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How to Get Bad Credit Auto Loans

Preparing Yourself for an Auto Loan with Bad Credit Ratings

Many individuals have poor or bad credit ratings due to various reasons. And when such individuals try to avail their car loans, getting the required credit turns out to be difficult. It is quite common for such individuals to apply for car financing and end up with rejected car loan applications. The common reason being improper preparation of the application, or applying for the wrong kind of auto loan at the wrong time. Due to the ongoing economic recession, many of the moneylenders have started offering credit facility to borrowers having low FICO score and poor credit history in the form of bad credit auto loans, simply because they need to sell their loan products and earn some money in the form of interest. Having stringent measures would mean less business and lesser earnings, because there is no way the bulk of the market applicant would satisfy the harsh requirements. So what is the way out for the person if he or she wants to avail the auto financing facility, and has bad credit ratings? The following pointers can help you in deciding how to go about the problem.

Special Auto Finance Facilities for Individuals Having a Bad or Poor Credit History

Traditional loan providers need good or excellent credit ratings and a high FICO score before they provide their credit. They are generally not inclined to sponsor car financing if the applicant has a history of loan defaults or late monthly payments. Banks and credit lending institutions are typically such type of orthodox credit firm, including some of the car manufacturer like Ford Motor Credit and Toyota Motor Credit who offer car credit options. However, there are several institute and moneylenders who prefer to do business by providing loans and credit facilities for individuals having bad and poor credit ratings. The intention is to cater to the untapped potential of the loan market consisting of individuals who do not quality for traditional auto loans. The primary reason for undertaking the venture is many individuals do not qualify for the loans, and satisfying their requirements would mean earning a substantial chunk of money in the form of interest from such individuals. They are specialized moneylenders who have enough experience to know when to take the risks, and in what manner.

The best way to search for such bad credit auto financing institutes and loan providers is to browse online on the net. Almost all credit providers advertise their company or firm through portals, and these websites provide all relevant information related to the loan products offered by them. Variables such as the rate of interest, tenure, turnaround time, monthly installment schemes, and loan options are usually explained on the sites. In addition, majority of the sites also provide online auto loan calculators, which can prove to be very helpful in calculating the combinations of different interest rates and loan tenures. It becomes easy to work out what kind of repayment plan turns out to be most beneficial to you. Another important issue that needs to be worked out is the negotiation part. Car buyers negotiate with loan providers to get the most affordable deal. So if you are not that good at negotiations, it is recommended you seek the services of professional negotiators or credit negotiation service providers who can argue on your behalf, and help you get cost effective deals. Another important benefit of such services is that the company and firm experts help in working out your auto loan application, so your application gets prepared in an organized and professional way, thus increasing your chances of availing your auto finance.

Qualifying for a Bad or Poor Credit Auto Loan

One needs to qualify if one decides to apply for an auto loan for bad credit. Majority of the applications get rejected because of improper or incorrect submission of the forms. Insufficient or incorrect details, along with missing documentation such as credit status reports, bank statements, and even employment details can very easily lead to a rejection of your application form. Common documents required are usually ID proof, residential ownership or rent details, contact number, and minimum monthly pay earned. As per the current market trend, it is required to earn a minimum of $2,000 every month to qualify for even the basic amount required for car finance. Another important point to work out is the car insurance and accident claim coverage options offered by the insurance provider. The insurance also adds up to the car buying charges. So it is suggested you check out the various car insurance options offered by the lenders and select the plan which suits your requirement and budget.

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The Benefits Of Getting A Personal Loan

A personal loan is usually not secured. It means collateral does not need to be provided by you when you borrow. The loan is offered to you by the lender on the basis of your credit and qualifiers. You can easily get the approval of loan, if you have a good credit. A lower interest rate can also be offered to you. Visit a financial institution or search online to get a personal loan.

Here is a list of some of the benefits of such a loan.

Lower interest rate – If you have good credit, then personal loans with lower interest rates can be availed by you. Around 15% APR on a credit card balance is paid by the people with lower credit card balance. But if you have good credit, you have to pay only 6% APR. While making a big purchase, it is considered as a big difference.
Use for many purchases – Your cash can be used by you for making any purchase. A loan of this type can be used even for purchasing a vehicle, starting a business or renovating your house. Restrictions may be placed by other types of loans on the usage of fund. But the conditions of using a personal loan are flexible and can be used for any purchase.
Consolidate debt – High interest debt can be consolidated by using a personal loan. Several smaller debts with high interest such as credit cards and student loans can be paid off by using a larger loan. Money on interest can be saved if you consolidate your debt by using this loan. Your debt repayment plan can be managed in a better way by combing several loans in one place.
Smooth your cash flow – Your cash flow can be smoothened by using a personal loan. A personal line of credit can be got by you, by using your personal loans. You have to pay a low interest rate in this alternate way of use. An emergency fund doesn’t need to be raised for future. The borrowed amount can be repaid by accessing your line of credit.
Boost your credit score – Your credit score is counted depending on your different types of accounts. One type of credit is represented by credit cards. In this case, you can use your credit score to handle your loans. Your score can be boosted slightly by adding instalment loans in your credit report.
Thus, save a huge amount on all your purchases by using a personal loan. Always remember to compare different loans before borrowing any sum.

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Five Reasons for Refusal of a Personal Loan

Don’t you wish personal finance were a mandatory course in college? Unfortunately, too many of us learn by mistake. When you need a personal loan and are rejected, you might be baffled as to what went wrong- and how to fix it. Here are some clues.

NO CREDIT

No credit is a situation where you have never used credit and therefore have no credit history for the bank to review. They have no way of making an educated decision on whether or not you will pay back a personal loan based on your credit history. No credit is worse than bad credit. Qualifying for and making regular payments on these types of introductory forms of credit can overcome a “no credit” score:

· Student Loans

· Secured credit card (includes a down payment amount)

· Being added to a parent’s or spouses good credit: card, car loan, etc.

LOW CREDIT

Low credit takes on several forms. If you’re using more than 30% of your allowable debt, it can negatively impact your score. Too many inquiries from shopping around for loans will also hit you hard. Lapses in payment, defaults, or bankruptcies are giant red flags and can take a long time to rebuild from.

Other things that lenders may look at are whether or not you have sizeable assets should you default on the loan. They also check to see if your debts are diversified or if you are only carrying one type of debt.

INCOME

Proof of income is generally required when applying for a personal loan. If you are unemployed or underemployed, it can work against you in the loan approval process. Lenders may also require a work history to see how long you have been with your current employer, and to determine if you typically have job stability. Frequent job loss or change will tell a creditor that your payments may not be reliable.

PURPOSE OF THE LOAN

Believe it or not, your application can be rejected due to your proposed purpose for the loan. Financial institutions have the right to set up the parameters surrounding their disbursements and can accept or reject your application based on what you want to use the money for.

BLACKLISTING

If you’ve defaulted on debt before, your name may be put on a list of whom not to loan to,’ also known as a “Blacklist.” This will follow you around for a long time and is difficult to erase. If you do resolve the debt issues, get documents to prove the resolution.

NO CREDIT CHECK LOAN

If you need a loan now, but are concerned that you might not qualify for a personal line of credit, you can qualify for a No Credit Check Loan. You could be on your way to a better financial future in no time!

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A Latin Impact on the Finance Industry

Financial Institutions are a fantastic business model to learn from when considering ever changing market conditions. Their traditional target markets are stable, but, the needs of an emerging market, the Latino market is extremely underserved. It is certainly not for lack of money. Many Latinos have zero debt and healthy saving habits. The question arises, are financial institutions doing enough to serve this population? Are they adapting to the Latino needs? The answer is complicated.

There are two types of Latinos in the USA. One is the immigrant seeking a better life and wanting the American dream, whether they came through the proper channels or not it is irrelevant. The second, are the Latinos that are born here. These are two very different groups of people with different needs and goals. Most immigrants bring their culture, traditions, and customs with them to the US. Those born here develop a blended culture that is both Latino and American.

Financial Institutions are taking notice and making strides to accommodate this very economically influential population. The main reason is that there is a lot of investment in education and developing trust. An untold detail is that in Latino countries, people do not trust banks and financial institution because of corruption. Everything is paid in cash and there are no debt or traditional credit scores. This means that the Latino community have cash, probably stored under their mattress or in a shoe box. This is very dangerous considering that a house fire could burn an entire life savings. Another scenario is they could become a target for robbery. This is a foreign concept for Americans. What is happening is a huge learning curve, educating them on the process of building credit, saving their money in a financial institution, getting loans (mortgage, car, etc.), and most important having trust in the financial institutions.

The younger generations that are born here learn from their parents and surroundings. There is still a disconnect from the importance of financial products, building credit, and how that process works. Many of these young people are just translating for their parents, explaining financial products, and become an intermediary for conducting business. You will notice an increase in bilingual support at many financial institutions for this reason. There is still a lot of work to do in this regard, and this process will take time.

However, more and more financial institutions are offering products specific to Latinos. Information is becoming available in Spanish and more financial institutions are hiring bilingual and multi-lingual speakers. It will be interesting to see how we as a country adapt to this important demographic. It is truly an untapped market that has an important function in our economy for growth and stability.

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6 Home Loans Tips Before Applying

Applying for home loans could be dreadful, particularly on the off chance that you are a first-time home purchaser. There’s a considerable measure of printed material and indulgent preparing included. Yet at the same time, it is justified regardless of your exertion. This far reaching contract aide will walk you through the way toward securing financing for your home and make you feel that applying for a home loan is not that horrible all things considered.

1. Know about them Lender or Broker?

There are two approaches to apply for a home loan. To start with, you can manage a loan specialist or home loan organization straightforwardly. Second, you can procure a home loan representative who will help you look over an assortment of moneylenders. Most homebuyers think that its less demanding and less expensive to choose a loan specialist, without assistance from the outsider. In addition, with a specific end goal to locate an equipped and solid agent, you should do a really decent research and get references. That is the reason a great many people like to keep it straightforward and manage a bank themself. In a few circumstances, be that as it may, merchants can really work to support you. For instance, if your record of loan repayment is not all that good, an accomplished dealer might be exceptionally useful in shopping and arranging for the most ideal arrangement.

2. Know the True Rates

The publicized rate frequently snatches borrowers’ consideration yet it is really not the one that borrowers ought to depend on. The AAPR or “the genuine rate” is a much better guide, as it checks every one of the expenses and charges that will happen over the term of your loan. In spite of the fact that the AAPR is a stage up from the publicized rate, it is still only a quantitative device. Once you’ve chosen a couple loans in view of their AAPRs, you will at present need to investigate their different elements. Some worldwide think-tanks, for example, CANNEX and AIMS Home Loans can outfit you with some canny data about mortage loans and help you limit down your choices quicker.

3. Know about loans details & terms

When you search for a home loan and read through various home loan terms and conditions, you will go over money related wording that you most likely won’t discover somewhere else. It is critical for you to comprehend those home loan terms with the goal that you can secure the most ideal arrangement. Truth be told, numerous money related foundations and land firms offer free homebuying workshops, which can help you comprehend what individuals are discussing in land business. Here are some fundamental home loan terms that you ought to know:

APR – Yearly rate, expected to mirror the yearly cost of acquiring. It is otherwise called the “promoted rate” or “feature rate”, that ought to make it less demanding for borrowers to think about moneylenders and loan alternatives.

Closing Costs – Shutting costs incorporate “non-repeating shutting costs” and “prepaid things.” Non-repeating shutting expenses are any things to be paid only once as a consequence of purchasing the property or acquiring a loan. Prepaid things are things which repeat after some time, for example, property charges and mortgage holders protection. Normally a moneylender should gauge both the measure of non-repeating shutting costs and prepaid things, then issue them to the borrower inside three days of accepting a home loan application.

Collateral – An insurance is the thing that you use to secure a loan or ensure reimbursement of a loan. In a home loan, the property is the security. The borrower will lose their property if the loan is not reimbursed by assentions of the home loan.

4. Check Your Credit

When you apply for a home loan, your whole record as a consumer will be investigated by your forthcoming moneylender. FICO ratings more than 620 have a decent risk of getting affirmed for a home loan with a decent financing cost. On the off chance that your score is beneath 600, in any case, your application might be denied or you may get affirmed at a much higher loan fee. Whether you have a decent or terrible financial assessment, what you ought to do is check your credit report before your bank does. You can get your credit report from Equifax, Experian and Trans Union. In the event that there are any mistakes, attempt to contact these three organizations and clear them up. This procedure can take a great deal of time, so it is something you ought to do a while before apply for a home loan. Paying down your budgetary commitments, for example, Visa obligation and auto loans, before applying for a home loan is additionally an extraordinary thought.

5. Don’t afraid from your bad credit score

Regardless of the possibility that you have an awful financial record, you ought to in any case glance around for the best arrangement. Don’t simply expect your lone choice is a high-taken a toll loan. On the off chance that your credit issues were created by unavoidable circumstances, for example, ailment or a brief loss of pay, disclose your circumstance to the loan specialist or intermediary. Ask a few banks what you need to do keeping in mind the end goal to get the least conceivable cost.

6. Verify and clarify all the things

A pre-endorsement letter is extremely useful, yet not as awaiting as you may think. When you locate a home you’d like to purchase, and your offer has been endorsed, you will need to do a reversal to the moneylender and submit archives that confirm your monetary data to get a loan. Your benefits will be assessed. The loan specialist will investigate your work history. You ought to have no less than two years of business history in the same profession. On the off chance that you are new to the work power, advanced education may help you get endorsed. In the event that you don’t have a sufficient record as a consumer, you may utilize normal regularly scheduled installments, for example, lease, telephone, or satellite TV to demonstrate the loan specialist that you are a reliable shopper.

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The Role of Islamic Finance in Economic Stability and Social Justice

One of the most distinguishing times for the U.S. Islamic home financing industry began in February 2007. The Federal Home Loan Mortgage Corporation (Freddie Mac) sent out a press release announcing that it would no longer buy the most risky subprime mortgages and mortgage backed securities. Two months after the announcement, a leading subprime mortgage lender filed for Chapter 11 bankruptcy protection. Three months after that bankruptcy filing, nationwide financing entities warned of “difficult conditions” ahead. Manifestations of such difficult conditions appeared on the horizon of the financial market when once well-established mortgage companies suddenly began to file for Chapter 11. Similar circumstances reached the U.K. as the Bank of England cleared an authorization to provide liquidity support to Northern Rock, the country’s fifth largest mortgage lender. Five months later, Treasury of the United Kingdom became the owner of Northern Rock.

Up until that point, the gravity of these “difficult conditions” was not fully understood by most of the populace. Late in 2008, the Federal Reserve Bank of New York was authorized to lend $85 billion to the AIG. This was the beginning of the most serious recession in the United States since the Great Depression. What followed was a chain reaction that led to an unprecedented global financial crisis, as the world suffered from rising unemployment, rampant foreclosures, and severe skepticism of financial instruments.

This led to a renewed spotlight on an unfamiliar market segment that appeared comparatively more stable and, more importantly, far more ethical: the Islamic financing sector. From the financial centers in Malaysia to the Middle East, spanning across over seventy countries, Islamic finance in the U.S. increased from $5 billion in the 1980s to $1 trillion in 2010. This phenomenal growth caught the attention of global investors who were seeking to safeguard their investments through more ethical and reliable financial instruments. When financial sector workers realized that these Shariah-compliant instruments avoided many of the worst effects of the global financial crisis, it became an attractive investment vehicle to support a more diverse portfolio. The Shariah-compliant financial sector has avoided investment in predatory lending businesses and overly leveraged financial instruments due to the strict ethical nature of the Shariah governance system. News and media outlets started to cover this ancient yet unfamiliar industry in hopes of learning from the mistakes of the conventional banking sector.

The concept of the modern Islamic financial services industry is rooted in the principles of Islamic legal jurisprudence that deals with financial transactions, a branch of Islamic jurisprudence called Fiqh Al Muamalat. Fiqh Al Muamalat is a framework under Islamic Law that charts the conduct of Muslims in commercial or economic endeavors. Islamic finance products and rulings are based on specific injunctions from the Quran that prohibit certain features of financial transaction models and related economic activities.

The Quran forbids interest, also called usury or riba. The underlying reasoning is that Islam considers lending to be a charitable act to help another member of the society in his/her time of need – therefore, profiting from someone’s hardship is strictly forbidden. In the conventional banking system, when interest is charged on a loan, the risk of that transaction is transferred to the borrower while the lender gains profit from the interest-based transaction. There is no consideration for the hardships endured by the borrower in the event they undergo any loss from the transaction.

By its nature, Shariah law prohibits unethical financial practices. It also promotes wealth distribution among all people to reduce poverty and inequity. This is manifested in the prohibitions of activities such as excessive speculation, gambling, and investing in products that are harmful for society as deemed by Islamic law (alcohol, pornography, etc). The structure of Islamic financial products and services, especially its prohibition in speculative transactions, has helped the industry escape most of the adverse effects of the global financial crisis. The governance model of Islamic financial institutions has been praised as an ethical alternative by institutions such as the International Monetary Fund and the World Bank. Economic experts have suggested that Islamic financial principles can be leveraged to promote financial inclusion that uplift the quality of life in developing nations. Islamic financial principles can also contribute to financial stability and economic development around the world.

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