Murabaha vs Traditional Loans: A Complete Comparison

When it comes to financing, consumers have two main options: conventional loans and Islamic financing products like Murabaha. Understanding the differences can help you make an informed decision.

What is Murabaha?

Murabaha is an Islamic financing structure where the bank purchases an asset on behalf of the customer and then sells it to them at a marked-up price, payable in installments.

What are Traditional Loans?

Traditional loans involve lending money with interest, where the borrower pays back the principal amount plus interest over a specified period.

Key Differences

1. Interest vs Markup

2. Asset Ownership

3. Risk Distribution

4. Early Payment

Cost Comparison

While both products have costs, the structure differs:

Traditional Loan Example:

Murabaha Example:

Which Should You Choose?

The choice depends on:

Both products serve the same fundamental purpose but operate under different principles and structures.