Individuals take loans to fulfill their personal needs. On the other hand, companies and corporations also require loans to carry out their business activities. Every country has its set of rules regarding loans.
It is crucial because in many instances the borrowers fail to pay back their loans. Therefore, there are set laws to determine the repayment. Sometimes, some individuals may choose to leave the country to avoid the payment of loans. Therefore, the laws are essential in such situations.
We will dig into the procedure of seeking loans in the United Arab Emirates. We will also discuss the implications of leaving the country without paying off the debts on time.
As per the legislation of United Arab Emirates, individuals can easily apply to seek personal loans. It should be done via an approved bank or financial institution. The Central Bank of the country is the governing body that has specified a set of guidelines for individuals who intend to seek personal loans. Let us discuss the particular rules set by the Central Bank of United Arab Emirates:
- Firstly, the loan amount is specified by the Central Bank. The personal loan cannot exceed 20 times the value of the salary or gross income of the borrower.
- Secondly, Repayment Limits are established. Financing companies make sure that the loan repayments cannot exceed 50% of the borrower’s gross salary. However, or any other regular income from a verifiable source.
- Fourthly, the Retirement Age Considerations are a crucial factor to consider. In case the loan’s duration extends beyond the borrower’s retirement age, then the banks and financing companies must reduce the loan. It is reduced to only 30% of the borrower’s income or pension.
- Banks and financing companies calculate the loan’s interest. They also announce the interest rates on the loans taken.
- It’s done on an annual basis. It is prohibited for banks to take blank signed checks from individuals.
- There are a set of Penalties for Bounced Cheques in the UAE. The country follows proper and flexible financial policies for granting loans to individuals.
- Still, the government of UAE has a consensus over the strict penalties. They impose severe penalties in cases of fraud, bad faith, or failure to repay debts or loans. There are legal penalties for evasion of loan installments or failure to pay the installments.
- On the flip side, there are heavy Fines imposed on individuals who fail to pay loan installments. Although, it is not imposed in every case and may differ in some situations.
- During COVID-19 pandemic there were some initiatives introduced in light of the exceptional scenarios. In response to it, the Emirate of Dubai’s banking sector launched an initiative in March 2020.
- Under this special initiative, individuals are provided with relief. The relief is given to people who are unable to pay back loans due to financial difficulties or loss of job.
- They were given a grace period of up to 3 months. In this grace period, they don’t need to pay interest or fees over the loan over unpaid leave.
- There are serious Consequences of Leaving Unpaid Debts in the UAE. Henceforth, it may lead to severe penalties and heavy fines.
- Legal and Judicial Pursuit is possible from UAE. The Debt collection agencies and law firms operating in UAE may pursue the defaulting person in their new place or their new residency. This may lead to some serious legal and judicial actions.
- Travel Bans can be imposed. Travel bans can be implemented against fugitive borrowers in the UAE. This will prevent the individuals from traveling outside the UAE or traveling freely in the country.
- Blacklisting can also be bought under consideration. The fugitive borrower’s name may be blacklisted in the UAE.
- Obtaining a bank loan in the UAE is subject to certain specifications that individuals need to fulfill. Additionally, in case of failure to pay the debt their individuals can face serious repercussions.
- Insolvency laws do protect borrowers to an extent but still, they need to meet the specifications in the procedure. On the contrary, some people choose to leave the UAE, which is not a good option. It can tarnish your reputation and also restrict future opportunities in the UAE. Moreover, it is also associated with a serious legal challenge.
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