[Mosaud1998]

My parents are thinking of buying an X7. But, currently, BMW is not offering 0%,0.9%, or even 1.9% on new or CPO BMWs.

It's somewhat against our religion to take loans out with interest rates. I've heard there are some banks/credit unions that will allow you to pay the interest upfront. But haven't dealt with any of them myself.

For example, I got 1.9% for 36 months on my 540. In the 3 year span, I'll be paying roughly $300~ in interest. I could've rolled the $300~ I would've paid in interest to the car's price. Does BMW or any other bank/credit union allow that?

[John @ BSPK]

A downpayment? I’m pretty sure they all allow that.

[Mosaud1998]

Originally Posted by John4C

A downpayment? I’m pretty sure they all allow that.

Not a down payment. What I mean is rolling the interest into the car's price.

For example, on my 540, I got 1.9% for 36 months. If I keep the loan open for 3 years, I'll pay $300~ roughly in interest at the end of the loan term. But, is there a credit union or bank that can get me a lower interest rate than 3.9% (current CPO rate) and let me roll the interest I'd be paying at the end of the loan term into the final price of the vehicle?

[John @ BSPK]

Originally Posted by Mosaud1998

Not a down payment. What I mean is rolling the interest into the car's price.

For example, on my 540, I got 1.9% for 36 months. If I keep the loan open for 3 years, I'll pay $300~ roughly in interest at the end of the loan term. But, is there a credit union or bank that can get me a lower interest rate than 3.9% (current CPO rate) and let me roll the interest I'd be paying at the end of the loan term into the final price of the vehicle?

That's literally called a downpayment.

A 50k loan for 60 months with 0% interest has a payment of 833

If the bank offers you 5% for 60 and you want to "roll the interest" into the price of the car, pay an extra 6k up front and the resulting 44k loan @5% for 60 has the same 830 payment.

So by paying 6k up front, the bank will give you the 50k loan with 0% interest, get it?

[Mosaud1998]

Originally Posted by John4C

That's literally called a downpayment.

A 50k loan for 60 months with 0% interest has a payment of 833

If the bank offers you 5% for 60 and you want to "roll the interest" into the price of the car, pay an extra 6k up front and the resulting 44k loan @5% for 60 has the same 830 payment.

So by paying 6k up front, the bank will give you the 50k loan with 0% interest, get it?

Ohhhh okay I get it now. So, say I get a loan for 66k for 36 months at 0%. Payments would be $1,861. Now, say the bank gives me a 3.9% rate. At the end of the loan, I'd pay $4,104 in interest. Unless, I put down the $4,104. If I put the $4,104 down, my payments are $1,854 without taxes. That makes sense

[Mosaud1998]

There's still interest added though

[dreamingat30fps]

My guess is no regular bank is going to do prepaid interest. Probably because no one would want this as it's a horrible idea. If you end up selling the car, totaling the car or paying the car off early you basically lose all that prepaid interest.

I'm sure there are niche banks that cater to this specific religion who have workarounds. Because you know we always have to find a way to out smart those all knowing all seeing ever powerful gods.

[ryan stewart]

No personal experience but I did hear about this during college (finance major). Google Islamic Finance or "riba free" loans. Ive only really heard of it for much bigger purchases like houses, businesses, etc though.

Def going to be a niche market domestically.

[Joe T]

here you go

https://www.lariba.com/sitephp/index.php

[spazzyfry123]

I don’t understand. You can’t pay interest over the life of the loan but you can pay it up front? You’re still paying interest. Albeit less interest because the principal amount has reduced due to the “upfront interest.”

Friend says they’ll loan you $20, but you’ll have to pay them back $22. You say that you’ll pay $2 now and $20 later.

[chassis]

Mosaud1998 Your parents want installment payments, but with no itemized interest, is this correct?

I’m positive there are posters on this site from all religions, including your parents’ religion, who could chime in. Your parents aren’t the first of their faith to buy a car, ask around your faith community.

[Mosaud1998]

Originally Posted by chassis

Mosaud1998 Your parents want installment payments, but with no itemized interest, is this correct?

I’m positive there are posters on this site from all religions, including your parents’ religion, who could chime in. Your parents aren’t the first of their faith to buy a car, ask around your faith community.

I asked a family friend. He Tells them to put the interest into the loan so on paper it's 0%

[wtwo3]

There are Islamic financing loans available, but IMO it's a facade as all they're doing is re-labeling interest and calling it "profit factor". In many cases their "profit factor" ends up being higher than market interest rates (i guess they feel they can charge more since they're offering a service atypical of most banks). If you finance your car, unless you truly find a 0% interest loan (which is impossible in the current climate), you will be paying interest in one form or another even if it's not called interest. If you're fine with just calling interest something else, then I would see if the Islamic financing services offer products for auto loans. I don't know of any non Islamic banks that would label interest as something else on the contract, but doesn't hurt to ask.

I think most Muslims in the US just end up financing and paying interest as it's extremely hard (damn near impossible) to avoid in this country. I'm not condoning you or your parents do that as your belief is your belief. But for those that are strictly against any form of interest (I have some friends who are), their only solution has been to simply pay cash (obviously easier said than done given individual financial situations).

[Mosaud1998]

Originally Posted by wtwo3

There are Islamic financing loans available, but IMO it's a facade as all they're doing is re-labeling interest and calling it "profit factor". In many cases their "profit factor" ends up being higher than market interest rates (i guess they feel they can charge more since they're offering a service atypical of most banks). If you finance your car, unless you truly find a 0% interest loan (which is impossible in the current climate), you will be paying interest in one form or another even if it's not called interest. If you're fine with just calling interest something else, then I would see if the Islamic financing services offer products for auto loans. I don't know of any non Islamic banks that would label interest as something else on the contract, but doesn't hurt to ask.

My friend said he tells the dealership to add the total interest from the loan into the total price and finance that at 0%. You still technically paid interest lol

[wtwo3]

One thought I had... a lease contract labels interest as "money factor". Is that something you'd consider?

[tdott]

Potato Potato.

You pay for it, but are asking for them to call it something else.

[wtwo3]

Originally Posted by Mosaud1998

My friend said he tells the dealership to add the total interest from the loan into the total price and finance that at 0%. You still technically paid interest lol

Yeah technically speaking you will always pay interest on a loan unless it's truly a promotional 0% loan (nissan/Infiniti loved offering those loans pre covid). Even if it's called something else or if you pay it up front, the extra you're paying stems from interest. The only other option is to pay cash.

[spazzyfry123]

Buy a Jeep. Their Grand Wagoneer has 0% financing right now.

[Joebie]

If I was god I'd be more pissed that my rules were being hella loopholed than anything

Imagine god lookin down from heaven like "Well he did pay $55k for a $50k car but the interest line on the piece of paper says 0% so I guess he's good to go. No hell for this dude."

I mean no serious disrespect btw, do whatever you gotta do for your own religion/culture. I'm sure my own culture does equally as goofy stuff.

[ASAP]

this would be a terrible idea generally speaking... interest is already rolled into the loan... the sooner you pay the loan off, the less interest you pay...

[Mosaud1998]

Originally Posted by ASAP

this would be a terrible idea generally speaking... interest is already rolled into the loan... the sooner you pay the loan off, the less interest you pay...

Exactly, I took a loan out on my 540. But that's because I got 1.9% for 36 months. I mean, come on that's $300~ I'm paying in interest over 36 years. Forgive me god

[wtwo3]

Originally Posted by Mosaud1998

Exactly, I took a loan out on my 540. But that's because I got 1.9% for 36 months. I mean, come on that's $300~ I'm paying in interest over 36 years. Forgive me god

There's varying degrees of interpretation I guess. Some people are strictly against paying even a penny of interest. In my case, I've more or less accepted that interest is pretty much impossible to avoid in majority of the world. It's a slippery slope, because some argue if you begin to make concessions in some parts of the religion, what's to stop you in making concessions in more severe offenses.

But I suppose if you get to the basis behind why interest is prohibited - it mostly comes down to people being taken advantage of and being stuck in a never ending spiral of compounding loan amounts where they end up owing money forever (see - minimum payments on credit cards). A sort of tax on the poor who can't afford something outright if you will.

So using that same logic - I'm not the one charging anyone interest and thus not taking advantage of others - I'm the one paying the interest based on my financial means (which admittedly can take a 180 at any time - even given contingencies - but at what point do you mitigate risk to no end?). I guess whatever helps us sleep at night

On the other end of the spectrum I've got friends who've decided to not purchase a house until they've saved the cash (in an interest-free account mind you) to pay for the house outright.