What is an Islamic loan calculator or simulator ?
An Islamic loan calculator is a financial tool designed to estimate repayment schedules for Shariah-compliant financing structures; the purpose of such a calculator is to provide Muslims with clarity about their financial commitments while ensuring the calculations remain aligned with Islamic principles that prohibit riba (interest).
The calculator for Murabaha determines repayments by adding the bank’s disclosed profit margin to the purchase price of an asset (such as a home or car). This total selling price is then divided into equal installments over the financing term.
For an Ijara structure, the calculator computes repayments by splitting them into two elements: rent for using the asset and contributions toward eventual ownership transfer.
In a Mudaraba model, the calculator here does not produce fixed repayments but rather estimates potential returns or profit distributions based on expected outcomes.
Muslims use such calculators because they want to ensure their financing choices are compliant with Shariah, transparent in structure, and free of riba, while still allowing them to plan effectively for major expenses like homes, cars, or business ventures.