You are right that there is a time preference, but currently it's very low, hence why rates have been slashed to nothing. There is also the risk which needs to be compensated. For this reason the person who takes a loan must pay more than what he originally borrowed. So far we agree.

But. And here is where it gets interesting. What happens when the unexpected happens? If you earn more money and want to pay back quicker, what should happen? Does it mean you pay less for paying quicker or not?

And if issues happen and you are not able to pay back on schedule what should happen? Should the debt keep accruing interest? Or is the total interest fixed when the loan is taken out? Can the creditor reposses your house to pay for the debt or not? When that happens does it clear the debt (even though the house has dropped in valued) or not?

There are many ways of making these decisions, and some may be better or worse. Because I find these questions interesting I do pay a little bit of attention to islamic banking.