Halal Home Loan

For example:

A car dealer can buy a car for $1,000 and sell it for $1,200 making a profit of $200, which can be expressed as 20%. On the other hand, a person can lend someone a $1,000 dollars and demand that the borrower pays it back as $1,200, thus making a 20% interest.

The difference between the two scenarios from a Shariah point of view is that the 20% made from selling the car is a permissible profit (as it involves taking risk of ownership in the items being sold), while the 20% interest on a loan is the pure definition of prohibited Riba (where the lender did not put any work or take on any risk to earn such increase).