Turn a flat murabaha-style installment into a rate you can compare against a bank loan.
Islamic/participation-style home and vehicle financing (murabaha, ijara, and similar structures) doesn't quote an interest rate — it's structurally interest-free by design. Providers instead quote a financed amount and a flat monthly installment over a fixed number of payments. That makes it hard to compare against a conventional loan's APR at a glance. This tool reverse-solves the standard amortising-loan formula for the interest rate that would produce the same installment, so you can put the two offers side by side.
If you can find a mortgage rate lower than this equivalent rate, a conventional loan is usually cheaper. If market rates are higher than the equivalent, this financing plan looks relatively better on cost.
This reverse-solves the flat installment quoted by an Islamic/participation-style financier into the interest rate a conventional amortising loan would need to produce the same payment — so you can compare offers apples-to-apples. Down payments, step-up installments, and origination fees on advanced offers aren't modeled here; use the total repayment figure from your offer letter.
The cash-price amount the financier is covering — not including any markup.
The number of equal monthly installments and the flat payment quoted in your offer letter.
If a conventional loan's rate is lower than the equivalent rate shown, it's usually the cheaper option on pure cost. If market rates are higher, the participation offer looks relatively better.
The equivalent rate solves M = P · r / (1 − (1+r)^−n) for r, given the financed amount P, installment count n, and quoted installment M. There's no closed form for r, so the calculator bisects — the same numerically-stable approach used to compute a loan's internal rate of return (IRR).