In Sweden there's a known bank called JAK that offers interest-free loans which caught my attention since I think interest is only works if you earn enough money that a loan is next to useless.

Anyway, after trying to read how there system works it's cut down to the fact that an unsecured loan requires a loanpayment (effectively works as interest) at 4.5% and a secured loan at 3%.

If a normal bank has an interest rate that revolves around those numbers I don't see much of a point with an interest-free bank in the first place other than the fact that those numbers are constant, they don't change because their bank is a non-profit organization so there's no profit to deliver to the owners (who apparently are the members because the money goes around). They also use some kind of saving system since you don't get interest yourself (but this always pathetically low anyway on normal bank) that if you save enough money at their bank you reduce the cost on the loan, somehow, I don't know.

I think I lack the knowledge and the whole picture to know what I need to know so if anyone here has extensive knowledge in economy and or interest-free banks, please share it!

Asking a gaming forum to help you make important financial decisions is a terrible idea.

I agree
Ask a friend that went to a economic school, university or it's an accountant or works on a bank.

1 buy gun
2 rob bank with said gun
3 ????
4 profit.

I'm not sure what you're wanting to know here.

A normal bank derives its profits by charging a rate of interest above what it pays on the funds that it lends to you. Those funds are derived from a variety of sources, mainly customer deposits but also occasionally external financing.

I'm not sure how it's entirely sustainable to finance interest-free loans financed from customer deposits that have interest applied to them, no matter how low this interest rate may be. Not charging interest will have a pretty heavy effect on the bank's risk management, because defaults will affect a bank's reserves that much more.

Sweden doesn't have a statutory reserve requirement, which means theoretically that JAK could lend out all of its customers' deposits. According to the Wikipedia page, JAK's deposits are insured by the Swedish government. So while the deposits are theoretically safe, it's wholly likely that the Swedish taxpayer is footing the bill for unrecoverable debts, something which every bank has to deal with.

There ain't no such thing as a free lunch.
That being said, we also had something similar in Romania, called CAR (was short for "house of reciprocal help"). The basic idea was the same, you invested money and after a while you could take out a loan proportional to your investments. Which could help if you needed to buy for example something big, but didn't had all the money together.
Now since there is no interest the bank has to make money somehow (since it's not charity). Also it has employees etc. So instead of charging interest, it charges a fee from it's members (it can be annual or monthly or whatever).
Now to the bottom line. For any loan you have to calculate first and foremost the total value of the loan. It's a bit simplistic, but it would take too long to explain everything. So let's say you want to borrow $10000 for 5 years. The sum of your rates will be your total amount. So if you pay like $300 per month, that means your total cost for financing was $18000 (300*12*5). Of course without interest you'd pay only 166.66/month, but if you don't pay interest, then be sure you'll pay some other fee.
Thus the total interest (or fees) is $8000, but the annual interest rate is around 26% (which is btw the interest of some credit cards).
Also keep in mind that interest gets compounded which means it grows exponentially over time. Thus it's always better to have a 10 year long loan compared to a 30 year long loan.
There is still much about the topic, but if anyone has specific questions, I'll try to answer them.

You are pretty much right.

If you need a bank account, you can open an account at their bank and store/use your money as normal. The annual membership fee is 250kr, 50 less for additional family members, none for kids; no other fees.

If you want to take a loan, there is an upfront deposit (6% of the loan) that is returned to you after you pay back the loan, and additional fees which, if you don't screw up repayment*, end up working a lot like fixed interest rates.

If you showed your financial solvency and goodwill by keeping your savings in their bank before applying for a loan, you might get a discount on fees.

By keeping money in the bank, you get points: 1 point per 1 kr per month. You can take out the money later, but the point balance stays (perhaps until you stop paying the yearly fee? I don't know.) Loans subtract from the point balance at the same rate. JAK requires every member to keep a positive point balance (think torrent trackers that require each user to maintain a minimum ratio of 1.0).

Now, if you haven't kept enough savings but still want a loan, they have a solution, too. The monthly loan repayment amount is doubled (+ the loan fee on top of that). One half goes to repayment, the other half goes to your savings account which you are obliged to keep, so when you finally repay the loan, you are left with exactly as much extra money as you initially borrowed (plus the equity deposit is returned). Their promotional material claims that in this case the monthly payment is commensurate to that of a typical bank loan, except you get to keep half of it (in their bank), but a traditional bank takes it all.

The other difference between a regular and an interest-free loan is that regular interest is accrued monthly on the sum you still owe to the bank; JAK's fee is the same each month independent of what you owe them. Now if you decide to pay back a traditional loan sooner than you absolutely have to, obviously (barring fuck-you fine print) you don't pay any interest on the rest of the term. Do you still have to pay the rest of JAK's fee? I don't know. You'll have to ask them to find out.

(Note that either answer is not automatically good or bad. If the rest of the fee is waived, you are incentivized to repay the loan ASAP compared to traditional banking. If not, you are incentivized to do something else with the windfall and pay the loan on time.)

OCD, things must be done in 4's.

"Interest-free" banking appeared during the 20's and 30's, together with local exchange systems, as alternative financing solutions to bypass the successive credit freezes of that time. They reappeared recently, following two ideological trends : on one side the original belief that interests are against the common good and detrimental to the economy and are one of the causes of the current banking crisis , on the other the emergence of islamic banking in our western societies. JAK, as far as I know, was created in the wake of the fall of the Creditanstallt (1931) .

One thing to remember though is that their loans are not free. They need to be repaid and the accrued amount of repayment is in rule superior to the loan received. Now, it may take the form of an equity deposit, of a credit sale or of a sell and buy back of an underlying commodity.

For the consumer there might be little difference between all of this and regular , interest-bearing loans.

But the funding dynamics behind all of this are vastly different. Some people think that the "normal" dynamics of credit / fractionnal reserve banking are not sound and are destructive and will opt for it. Others simply compare the offers they get and opt for what suits them the best.

It seems so. When I googled about it I find some hits about on Swedish forums where they talked about JAK and in the end they said that people chose JAK for ideological reasons, e.g they think interest isn't good for the economy.

I understand the concept of interest and how necessary it is but I guess I lack the bigger picture and don't like that interesting hanging there and for loans such as a home they're too high that you'll keep the mortgage for the rest of your life (unless you're highly paid but for now I have to assume I won't be as I haven't even started my university education yet) and that is what pushes me away from typical banks.

Imho, the issue about mortgages is not that interest rates are too high, but that home prices are artificially high and/or salaries too low ( or too heavily taxed ) . The credit mechanism is one of the reasons of those inflated asset prices. Moreover, banks make a lot of money through their plays on credit and rate derivatives . But those gains in effect keep depreciating everything else ( in terms of real value) . This also explains why the current generation Y (30 years old) needs two salaries and 40 years to pay their home whereas those who bought in the 70's only needed one salary for 20 years. In that sense, it's not that much interests that are "evil" , but the ever-expanding monetary creation that is made possible by the current , interest based, fiat (based on confidence) banking system.

Just buy gold coins and keep them safe somewhere in your house.

Always invest in something solid, like gold or silver.

I found some of the responses quite informative