How much is the interest rate for Personal Loan and Car loan in Dubai banks?
What is the maximum available tenure for expats?
The following highlights the responses provided to the consolidated inquiries received from banks concerning Circular No.12/93, “Interest prices & fees applicable to Personal Loans, plus fees & charges on services supplied to personal cutomers”. Meetings were held with the Chief Executives/General Managers of Banks in Abu Dhabi and Dubai on Sunday, 16th May 1993 and 17th May 1993, respectively, to clarify the points raised by all banks in regards to Circular No. 12/93. A detailed summary of all the inquiries with the related responses is attached in Appendix 1.
PERSONAL GUARANTEES
The objective of Circular No.12/93 is to reduce risk. A bank’s decision to lend should be based on the credit worthiness of the expatriate borrower without the reliance of a guarantee. A reliance on the personal guarantee may compel a bank to lend more than a borrower is able to repay. A bank should not be compelled to lend any more than the amount deemed prudent or within the borrower’s own ability to pay.
Banks may accept personal guarantees of UAE Nationals for loans granted to other UAE Nationals. A bank, however, cannot accept a personal guarantee of an expatriate for loans granted to another expatriate. A personal guarantee from an expatriate for a loan granted to a UAE National is also not permissible. Transferring a guarantee provided by a UAE National on behalf of another UAE National is permitted, however, transferring a UAE National to guarantee the loan of an expatriate is not permitted. If the bank feels its security or repayment is threatened as a result of an unforseen circumstance, such as expatriate guarantor who has to leave the country, then the bank should ask for the full repayment of the loan. If the bank does not consider itself at risk, then the bank should allow the borrower to continue with the repayment schedule.
Interest rates
A bank can charge a range of rates of interest for the same loan category. (i.e. personal loans) depending on the financial strength of the customer, however, the highest interest rate charged for the category of loan has to be posted on the board. Banks are free to charge a lower rate of interest than the curiosity rate which is displayed on the board, but cannot charge a higher rate of curiosity than the rate displayed. A bank can only charge the curiosity rate of a personal loan if such an arrangement is agreed to by the borrower and is made part of the loan agreement. Curiosity is charged on personal loans should be calculated on the number of days in the month based on a 365 day year.
PENALTY Curiosity
A bank may apply penalty rates of curiosity as long as the amount or rate of penalty curiosity is disclosed towards the borrower and is displayed on board. The bank should charge penalty curiosity based on the balance in default and the bank should always try to recover its legal costs. The bank can also waive penalty charges on prepayments, but such a waiver should be displayed on the board. In such cases, the bank should display “” (zero) on the board concerning penalty charges on prepayments.
PERSONAL LOAN CEILING
The purpose of the personal loan ceiling is to reduce risk. Similarly, the European Community has proposed ceiling of ECU 20,000 while Kuwait has instituted a ceiling of Dinar 10,000. The ceiling on personal loans does not include credit card facilities. Credit cards are usually unsecured and are not considered to be personal loans, that are defined as loans secured by salary and service indemnity.
All personal loans granted to an individual borrower, however, should be viewed on a consolidated risk basis and be within the aggregate ceiling limit of Dhs. 250 thousand would be in violation of the Circular if both loans were secured by the salary and end of service indemnity. Such loans are considered personal loans and are subject to an aggregate limit of Dhs. 250 thousand.
LOANS INSTALLMENT
Banks should be prudent with the principal amount of the loan as well as monthly installments requirements in proportion towards the individual’s salary. The courts have given banks only a limited amount, as a percentage of monthly salary, that can receive as repayment of a personal loan, well below the 50-60% level. The Circular should be carefully studied for guidance on loan installment.
HOUSING LOANS / HOUSE AS SECURITY
The basic definition of a personal loan is a loan by salary and end of service indemnity. If a housing loan scheme is secured only by salary and the end of service indemnity, then this may result in a National having to save more money before the purchase of a house. A bank can take a mortgage over a house in which a National was granted a housing loan, if the concerned municipality agrees. A bank may also take a mortgage of property rented out against loans to UAE Nationals if the concerned municipality agrees towards the renting of the property.
CAR LOANS
Car loans are personal loans towards the extent that the repayment is based on and secured by an individual’s salary and end of service indemnity. If the car, however, is not for personal use but for a commercial use (i.e. truck or car rental), then such a loan may not be considered personal loan.
DISPLAY BOARD
Printed matter cannot be substituted for the disclosure of items on the display board. The objective of using a display board is to divert the blame from banks on hidden charges, fees and curiosity. The items required by the Circular to be displayed on the board are limited and there should be sufficient space on the board to display all of the required items.
CIRCULAR 197
In view of the changes that have taken place since Circular 197 was implemented, the Central Bank has decided its role is not longer to regulate competition amongst banks rather than Central bank’s role is to supervise banks.
OTHER MATTERS
The Circular related to loans secured by salary and end of service indemnity “Personal loans” is just a title, its meaning, however, is clearly defined by the Circular.
The Circular did not mention foreign exchange boards because most banks have foreign exchange boards for quite some time. The Central Bank will review the impact of Circular 12/93 on or before year end 1993.
Popularity: 1% [?]
Incoming search terms for the article:
No related posts.
Related posts brought to you by Yet Another Related Posts Plugin.
June 2nd, 2009 at 6:09 pm
Personal loan about 15-18 %
car loan 3-4 %
June 2nd, 2009 at 10:40 pm
Personal loan generally in the range of 9 to 11 per cent. Car loan is lower than this. Tenure 3 to 5 years.
June 3rd, 2009 at 2:31 am
With the UAE being an Islamic country, I dont think there is any interest on loans as under Islamic law interest is forbidden wether you give or receive it.