Asad borrowed Rs 10,000/- from Saad with a credit period of three months. Saad didn't demand for any extra benefits in return but after three months Asad repaid him with an additional amount of Rs 500/- i-e, the total repayment was Rs 10,500/-. Is this extra amount of Rs. 500 Riba?

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Cost of Credit

The cost of credit is an extra amount that the borrower has to pay besides the loan amount. These credit charges may vary from loan to loan. The cost of credit includes interest charges, maintenance charges, and arrangement charges. Some of the costs are mandatorily collected by the lender based on the loan amount and tenure of the loan. The cost of credit is also called finance charges of the credit.