This monthly instalment is the monthly instalment payment on the entire home loan as agreed upon by the two parties, namely the borrower and the bank. The monthly instalment amount and payment date depend on the agreement reached between the bank and the borrower.

There are two main factors that influence the monthly instalment, which are the interest rate and the duration of the home loan as agreed by the borrower and the bank. Based on these two factors, the interest rate can change according to the type of home loan chosen by the customer. Herein lies the importance for customers to compare interest rates and suitable home loan types to enable them to make payments without any problems according to their respective capabilities.

A frequent question from customers is related to when the instalment payment deduction should start. Usually, the instalment payment deduction will start the following month after the bank successfully makes the loan disbursement. Customers need to examine and understand the offer letter that has been agreed upon regarding the amount of deduction for 'principal' and 'interest' to avoid confusion in the future.

Situations where the full bank loan disbursement will be made are when the customer buys a 'subsale' house without any debt burden or buys a house from a developer's project where the keys have been handed over. Here, customers will experience paying their loan at the same time they receive the keys to the purchased house simultaneously. This situation mostly does not cause any complaints or customer disappointment because the customer has already gained access to the purchased house, so the instalment payment deduction is very relevant for them.

We must clearly understand that not all bank loan disbursements will be made in full. This is because there are also bank loan disbursements that must be made according to progress. For example, for a customer who takes a bank loan to finance the purchase of a house from a developer's project, where the house is still under construction, the loan disbursement will be made based on the 'progress billing' advanced to the bank. Another example is where a customer takes a bank loan for the purchase of a subsale house that still has a debt burden from the seller. In this case, the loan disbursement will be made twice, the first being the loan disbursement to redeem the seller's debt from the seller's bank. Secondly, the disbursement of the remaining customer loan is to be paid to the seller as the net balance.

It is undeniable that some customers are confused when they have to pay their loan to the bank even though they have not yet received the house keys. Customers must understand that instalments must still be paid if the bank has made a disbursement, even if the house keys have not been obtained. Regarding the amount of payment to be made, customers must re-examine the offer letter they signed previously. This confusion sometimes leads to disputes from customers because they have to make payments for their rented house and another instalment payment for the house they are currently buying. This situation will cause a bad experience for customers who are less familiar with the actual procedure.

Difference between fixed rate and base rate

A fixed interest rate is a rate that remains the same throughout the loan period. The customer's monthly payment does not change even if the economy or market changes. This fixed rate is suitable for customers who have a stable budget and do not have to worry about the changing payment rate every month.

The variable interest rate (floating rate) is a rate that can change according to the current market rate, usually associated with the bank's base rate. The customer's monthly payment can go up or down depending on economic performance. If the economy is good, the rate may be low and customers can save, but if the market rate goes up, the monthly payment will also increase.

Difference between conventional loan and Islamic financing

A conventional loan is a traditional financing method that operates based on interest or riba (usury). In this system, the borrower must repay the principal amount along with the interest charged at a fixed or floating rate. This method is typically used by conventional banks and traditional financial institutions. Conventional banks act as lenders who profit through the interest charged on the amount borrowed. This interest rate can change depending on the Base Lending Rate (BLR) and Overnight Policy Rate (OPR), making the total repayment amount variable.

Islamic financing, on the other hand, operates according to Shariah principles that prohibit the use of riba. It uses specific contracts such as Murabahah (cost-plus sale), Ijarah (leasing), Musharakah (partnership), and Tawarruq (commodity trading) approved by the Shariah Advisory Council. The deferred price that looks 'expensive' is actually the selling price, not interest on debt.

In our country, there is the most complete Shariah regulator in the Islamic world. There is the Shariah Advisory Council of Bank Negara Malaysia, the Shariah Committee in every bank and takaful (Islamic insurance), Shariah auditors, and regular reviews where they collectively practise standards that are constantly updated according to the needs of the community. With the balance of two things, namely Shariah compliance and practical application in the modern economy, Malaysia is undeniably a global reference.

The Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI), Majma' Fiqh al-Islami, and Bank Negara Shariah Advisory Council have audited, examined, and confirmed that Islamic financing is a halal alternative to escaping the riba system. The majority of Islamic banks use the Tawarruq / Commodity Murabahah contract. This means the bank practises commodity sale with deferred payment and pre-agreed profit. This transaction uses a third party who acts as an intermediary managing the purchase of the commodity between the bank and the customer. The customer buys the commodity at the price that has been agreed upon and pays for the purchase on a deferred basis. Now, we understand that the customer is the owner of the commodity.

The customer's initial purpose was to buy their dream home, not the commodity. Therefore, to help the customer in the purchase of their dream home, the customer resells the commodity to the bank to obtain cash through the commodity resale process. So, from the Shariah perspective, it is considered a sales transaction, not a loan with interest (riba) like a conventional bank.

In terms of figures, Islamic financing looks almost the same as conventional. This is because banks operate in the same market, long term, with the same risks and inflation factors, which must also be taken into account. However, from the Shariah perspective, the big difference lies in the contract. The fundamental difference lies in the concept, structure, and operation of the two systems.