Is such a loan possible, where the borrower repays back to the lender the exact sum that was borrowed in the first place? Say for example, a borrower receives $100 loan from the lender for 10 years, now the final amount repaid back by borrower over the course of 10 years in form of monthly repayments is exactly $100...

Is such loan possible, are any such loans in existence anywhere?

Say such loan is made possible somehow, then how will it effect the market & the economy of that respective nation where such loans are being given out? What can be benefits & drawbacks of giving out such loans?

What will be the pros & cons?

P.S. I know it will come up that how will the lender profit from a no-interest loan, so what if there was a way of lending to the borrower at 0.00%, yet the Lender doesn't loses out on the the Interest they would have made traditionally on the lended amount...

  • 6
    People do this all the time with informal loans to friends and family. If you're asking whether a bank or other instution would do this, the answer is probably no. Also, the macroeconomic aspects of your question (e.g., "how will it affect the economy") are off-topic here.
    – BrenBarn
    May 27, 2015 at 20:15
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    Sharia prohibits charging interest for loans. As such, the Islamic world has a variety of methods for making a profit on lending money without charging interest. en.wikipedia.org/wiki/Islamic_banking has some details.
    – Eric
    May 27, 2015 at 23:37
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    Another common example is manufacturer auto loans
    – VBCPP
    May 28, 2015 at 4:01
  • 3
    @VBCPP From my own experience: With manufacturer auto loans, accepting the "0% financing" often means giving up a significant "cash rebate" (a couple of thousand dollars not being unheard of) so there is actually an implied interest rate buried in those "0%" financing offers. If you could pay $N, but must pay $N+$M to get the "0%" deal, then the $M is, in effect, a finance charge. Math can determine what interest rate it is effectively equivalent to. May 28, 2015 at 13:26
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    @ChrisWRea lending money at 0% interest will always lose money for the lender due to inflation. To be sustainable, a business will earn money in other ways on a 0% loan.
    – Eric
    May 31, 2015 at 20:22

2 Answers 2


Such loans are of course possible. They exist because the lender gains something other than interest from them:

  • the bank of Mum and Dad gains the knowledge they are helping their child, and doesn't have to deal with any complicated calculations or tax issues
  • the credit card company that offers a 0% introductory rate gets merchant fees when you use your card, gains you as a customer (something that costs money to do eg buying ads, sending out letters), possibly gets an annual fee from you, and may make a fortune on you when the intro period is up and they start charging 20-30%
  • the car company gets to sell you a car. They may hide the interest in the price of the car or look at it as a cost of acquiring the customer (like advertising.) Same for the furniture store and the appliance store. Products that people have to save up for will generally sell better if you spare people having to save up for them by lending them the money, especially if you do so interest-free.
  • student loans are typically interest-free (and no payments required) while you're still a student, with the government paying the interest for you. This is because the government gets a more educated population and reduces the "can't afford higher education" waste of potential in the market and economy of that country.
  • in certain religious communities where charging interest is not allowed, the lender may charge "Rent" for using their share of the house, car, or whatever item the borrowed money paid for. As the amount owed shrinks, the rent shrinks too. Technically this is a no-interest loan.

What would happen to the economy if these were common? These are common, common as anything. In fact where it's not banks lending the money, these are the default. So, nothing would happen to the economy, this is one of the ways the economy works all over the world.

If you're more interested in a loan from a bank or other financial institution, made to you for whatever purpose you want - here's $10,000, have fun, give it back ten years from now - ask yourself what the bank would get from that? Perhaps they could do it as a perk when you do something else with them like get a mortgage or keep $1000 in your chequing account all the time. But in the absence of any other relationship, what would be their reason for taking on the overhead and paperwork of approving you for a loan and keeping track of whether you're paying it back or not, for no return, whether financial or intangible? No return? It doesn't happen.


This is very much possible and happens quite a lot. In the US, for example, promotional offers by credit card companies where you pay no interest on the balance for a certain period are a very common thing.

The lender gains a new customer on such a loan, and usually earns money from the spending via the merchant fees (specifically for credit cards, at least).

The pro is obviously free money.

The con is that this is usually for a short period of time (longest I've seen was 15 months) after which if you're not careful, high interest rates will be charged. In some cases, interest will be charged retroactively for the whole period if you don't pay off the balance or miss the minimum payment due.

  • 3
    I would add that they also have a slew of conditions which cause interest to be charged, sometimes even retroactively going back to the origination of the loan (or purchase). The latter being especially true on store financing.
    – briantist
    May 27, 2015 at 21:00
  • I have one (Barclaycard) for which the 0% period is two years.
    – jamesqf
    May 28, 2015 at 17:52

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