Student Loan Relief Programs: Keeping Federal Loans On Top

Since JPMorgan Chase announced that it will stop servicing student loans come October, other private lenders are working at extending their services to fill any potential gap. Student loan debt is a profit builder for both the federal government and public sector alike. With the high cost of college tuition and the need for a degree in such high demand, many private companies will continue to service the needs of their community. With federal student debt relief programs in place and lower interest rates, students turn to the government loans first.

For example, Wells Fargo plays an important role in lending. It is the nation’s second largest private student loan lender. With interest similar to that of mortgages and auto loans and oftentimes signed by a guarantor, there is a good return on the investment. Obtaining money for college is a need of the community and Wells Fargo services the community’s needs.

Student debt has toppled over home mortgages for the largest percentage of debt in households today. Scrutiny over private lenders may be heightened right now, but it doesn’t seem to deter any other banks from processing loans at the moment.

The majority of student debt is with the government. There is little risk in lending government money. Federal debt does not go away without payment of relief options. Government student loans continue to lead the way for college loan disbursement. Lower interest and relief programs are both key factors in students seeking government money prior to teaching out to the private sector.

The Consumer Financial Protection Bureau (CFPB) has focused their attention on educating borrowers on student debt relief programs as they take out the loans. Their hopes is to give each borrower a chance to find financial solutions for themselves without having to rely on student loan relief services or avoiding the debt altogether. Since government relief programs are not offered in the private sector, there is more debt in default. Options such as consolidation will definitely help lower monthly affordability problems, but create more debt over a longer period of time. Relying on credit scores or a guarantor will also prevent most debtors from seeking out a consolidation loan with a private lender. Some seek a secured loan based on the value of their home which could potentially place their home at risk if payments are not made.

Interest on private loans is higher than government loans. Students will usually only go to the private lender after they have exhausted government opportunities. It is important to also seek out any community, academic or athletic scholarships to help lessen total overall school costs.

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Government Auto Auctions Guide

Government auto auctions are great opportunities to save a lot of money when your budget is tight. Everyone knows that auctions are a bit tricky though, you have to play your cards right, there’s a bit of a strategy to it.

Government auctions are popular because of the quality of the vehicles listed for auction. These auctions typically aim to unload fleet and service vehicles that serve many different Government agencies, staying in service for around 3 to 4 years, they usually have low mileage and a great record of maintenance.

Most Government auto auctions are open to the public, some are kept closed and reserved for licensed pre owned car dealers, and the majority of them get their inventory this way. But most are now open to the public.

There are thousands of these auctions going on throughout the US each week and they’re not that difficult to find. Usually local newspaper will have ads for local auctions.

The easiest way to find Government auctions is to use directory services that gather Government and Police Auctions listings from around the country into one single database that makes it easy to find these locations by zip code. Searching through these databases cuts down the chase of having to contact local Government agencies which usually have a very convoluted system of organizing this type of information.

But where do these vehicles come from? Well the sad truth is that everyday people default on their auto loans, fail to pay taxes or get in trouble for buying property with illegal funds. The Government and various other Law Enforcement Agencies around the country seize and auction off these vehicles to the public mostly to satisfy debts.

The chances of you finding the car you’ve always wanted are endless, since there tens of thousands of vehicles auctioned every month throughout the US.

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Stop Foreclosure – Your Credit Scores May Be Zapped by A Loan Modification

The focus of loan modifications is to help people facing foreclosure save their homes. Through the Making Home Affordable Modification Program and many other programs the modifications are accomplished by lowering the monthly payments on loans to amounts that the people can afford to make. The mortgage company normally does this by lowering the interest rate on the loan.

While it may enable a person to save their home from foreclosure, lowering the monthly payment can have a negative impact on them in another way. It may adversely affect their credit score.

When the person facing foreclosure negotiates a modification and pays the amount agreed to, they are actually paying less than the amount they agreed to pay originally when they got the loan. Technically the credit bureaus view that as settling the account for less than the full amount.

In the past many people with high credit card balances who had difficulty making payments sought help from credit counseling firms. These firms would contact the creditors and negotiate a lower balance on each account. The creditors in effect would be eliminating some of the interest which had accumulated on the accounts. The credit counseling firms would also negotiate a lower monthly payment on each.

On their part the creditors would close the accounts so that the people could not charge any more on those accounts. As the people made their reduced monthly payments, the creditors reported to the credit bureaus that they were paying less than the full balance owed.

The credit bureaus created a separate category for these accounts. They updated the accounts showing that the payments made were less than what was owed. They also considered these people a greater credit risk. Because of the greater risk the credit bureaus reduced the credit scores of these people.

Let’s fast forward to today. The person facing foreclosure who negotiates a loan modification and starts to pay a lower amount monthly is in the same category as the people for whom the credit counselors secured reduced payments. The mortgage companies are now reporting that these people are paying less than the full amount owed.

When the credit bureaus are notified of this, they lower the person’s credit scores. Large mortgage companies, such as, Citigroup, JP Morgan Chase and Bank of America are doing this. Most probably the smaller mortgage companies are doing the same.

Who are hurt most by this? Those people who have not fallen behind on their monthly payments but requested a loan modification because they knew that there was no way they could continue to make their payments.

One example is the person whose income is reduced drastically. That could happen because they lost their job and had to take one for less money or their employer suddenly cut their income substantially. Another example is the person who becomes totally disabled and whose income is reduced significantly. These people may see their credit scores drop as much as 100 points or more.

The credit scores for those people who had already fallen behind on the monthly payments would have already dropped. Their credit scores would drop more but not as much as those of the person who never was late

What is the big concern about the drop in credit scores?

We have become a credit score driven society.

A person’s credit score determines whether or not they can get a credit card. It also determines what interest rate they have to pay on that card. A low credit score may disqualify them from getting a card. If they can get one, the interest rate may be very high.

The same is true for auto loans. People with low credit scores have difficulty getting loans. When they can get a loan, the interest rate is very high.

Credit scores also determine how much a person pays for auto and home owner’s insurance. People with lower scores are viewed as high risks and their rates are higher.

Some employers are even looking at credit scores of people applying for jobs with their companies. They frequently view people with lower credit scores as less desirable candidates for their open jobs.

Let’s come back to the person facing foreclosure who gets the loan modification. One major factor in determining the monthly payment they can make is the amount of monthly debt they have. That is reviewed at the time they apply for the modification.

If the modification is approved and they start making the lower monthly payment, their mortgage company is going to report them as paying less than what was agreed to. The credit bureaus are going to lower their credits cores. Their monthly payments on credit cards and auto loans are going to increase. Their premiums for auto and home owner’s insurance are going to rise.

Within a short time their monthly payments have increased again. They are in danger of not being able to make the monthly payment on their loan again. Is there any sense in that?

In November of 2009 the credit bureaus will create a separate category on the credit reports for people who get loan modifications. This will indicate that the borrower’s loan was modified under a federal government plan. The company which developed the credit scoring system may do a study to see if these people are truly a greater risk than others and what impact there should be on their credit scores.

What happens to those people now whose credit scores are adversely affected? Will there be any adjustments to their credit scores?

What if in November of 2009 the credit bureaus start to put a notation on their reports that the borrower’s loan was modified under a federal government plan but no change is made to the way their credit scores are impacted?

We cannot wait to see if the credit bureaus and the company which developed the credit scoring system take the steps to correct what is happening to those people whose loans are modified. The longer we wait the more likely it will be that people who get loan modifications will suddenly see their other payments increase. They may fall behind on the monthly payments and face foreclosure again.

Send a letter to your congressman and your senators. Bring this matter to their attention. Ask them to get involved and to make sure that people who are given loan modifications are not victimized.

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Your Chapter 7 Bankruptcy and a Car Loan – A Feasible Symbiosis With the Right Approach

Your chapter 7 bankruptcy just been discharged: you got a great relief from getting rid of your past debts and got some headaches with being approved for loans and credit cards. While most people can live without incurring debts, sometimes they are a necessary evil, especially in cases of large purchases, such as a vehicle purchase. Most people do not even dream of getting a car loan, struggling with rising repair costs for their old car. The bad news is that it is going to die someday, and you would be researching all possible means of getting a new vehicle. Cars are not cheap these days, and getting one without using a car loan is a privilege very few may afford. Many people are simply afraid to go to a car dealership as they fear car loan rejection. The good news is that there are options available for borrowers with bankruptcy on their record.

Bankruptcy Is Not an End of Your Financing Options

Obtaining auto loan with a discharged bankruptcy is way easier than you may think. Since car loans are secured loans, many people with credit problems utilize them as a credit rebuilding solution, enjoying the benefit of driving a newer vehicle repair-free at the same time. Most people after bankruptcy are able to qualify for auto loan virtually in no time.

If your bankruptcy is freshly discharged, most financing companies and automotive dealers are not going to chase you down the road with loan offers. Knowing that you have failed to honor your obligations with other lenders in the past, they simply may refuse to deal with you. Bankruptcy, staying on credit report for up to 7 years, may be a serious obstacle to getting any kind of financing. There are many lenders, however, willing to work with you, giving a second chance after bankruptcy. Getting a car loan after bankruptcy is a great shortcut to good credit history: should you prove your ability to make timely payments on your auto loan, you may start enjoying higher credit scores and more welcoming attitude from lenders.

Lender Competition Enables People Even With Worst Credit to Get Approved For a Car Loan

There are plenty of auto loan vendors that may be easily found online that offer auto loans for people with past credit problems, including bankruptcies. While they will not offer you the best rates and terms, getting a fair deal on financing your next car purchase is very feasible. Most people are surprised to get offers from lenders that easily fit their budget. Getting loan quotes is as far away as your home computer.

Avoid loan denials at a dealership with getting your loan pre-approved online. This will definitely save you a lot of hassle of dealing with finance department at the dealership and help to make your new car purchase a pleasant shopping experience. Dealers would be very welcoming to you knowing your loan is pre-approved, since they would have no problems to sell you a car or truck you want. So, put your fears away, get pre-approved for a car loan online, and enjoy the excitement of car shopping once again.

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Generate an Increased Auto Loan Lead and Maximize Your Revenues

The car market could have grown substantially over the years if at least a specific percentage of the rising population in a city or country had the money required for investing in a vehicle of their choice. In reality, different car dealers operating in a city or town are finding it extremely difficult to meet their sales target; the reason being those who are visiting the showrooms throughout the month are finally not turning up to buy a car. To fight the situation, a number of auto dealerships have started offering car loans letting anyone apply for the same and get it approved without any problem.

All those US dealers who are offering the lending option are seen chasing the same number of potential customers to grab their attention and turn them to their site. In the process, some are successfully capturing leads while others are not. Those who are not being able to capture high-quality auto loan lead, they can take the professional help of a well-known lead generating company to start getting a large number of effective leads in less time.

Generating a large number of leads will not prove worthy unless the prospects purchase a car from your showroom. For that purpose it is necessary to produce a maximum number of quality auto leads that have a high chance of getting converted within a short time span.

The professional lead generation companies know the correct techniques of marketing or online promotion in order to attract the target audience to their website or blog. They sometimes run more than one PPC ad campaign, develop landing pages in order to capture sales or leads quickly, and also seen exploring social media sites to inform, engage, and encourage the social media users to share relevant information about the lead generating site with their own extended network.

Good lead specialists keep themselves up-to-date on the latest happenings in the digital marketing sphere as well as keep on learning about the smartest ways to attract and capture high-quality car leads.

A smart way of getting the attention of potential auto loan lead is by offering a special discount of say 10% or 20% on the price of a new car. A price cut means an increased number of people will show an interest to purchase the car model in turn steeply increasing the sales figure.

Almost all auto loan leads companies have a website where online car loan inquiry form is uploaded. A person interested to take a loan will fill the form and submit the same to learn more about the procedures for taking an auto loan. Once an online inquiry form is submitted, the data gets stored in the lead company’s database. Immediately the data is accessed to establish a communication with the potential customer. Best auto loan leads are those who quickly respond to a lead specialist’s email or call. Ineffective or bad leads are the people who for some reason is not eager to take a car loan at the moment. The personal details of such people are not sent to the dealer; rather they are removed from the list containing only the details of good quality auto leads.

Matthew S Barredo is a market research analyst in the automobile industry, who insists that it is not tough to get an auto loan lead if you choose the right service provider who guarantees to get your loan approved. In this article, he educates readers about choosing a lead generating site such as Quality Auto Leads.

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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 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 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.


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.


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.


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.


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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