Loan Rules in the UAE: Cases where Banks can Claim Instant Payment
The Central Bank in the UAE issued unified forms of all kinds of bank loans, putting an end to the controversy of years over these contracts and continuous complaints by the borrowers.
The main three types cover the overdraft, car financing, and personal loan in UAE and they are binding to all the 51 banks & other financing companies that are operating in the 2nd largest economy in the Arab.
Those forms that are shortly enforced have been prepared following various rounds of consultations and negotiations between the UAE Central Bank & the Emirates Banks Association that groups all the banks in the Emirates.
These new contracts allow the banks to ask the borrowers for making sure all the borrowers are covered under a life insurance or disability insurance plan, in a few cases to confirm that the loans would be repaid as the loan provider can make use of its value for regaining the rest of the funds.
The forms should include all the details regarding the loan size, maturity, and rates of interest while the borrowers should submit a letter from their employers committing them to have their salary and the end of service facilities transferred to that bank within the term of the loan.
The Central Bank defines 7 cases where the period of the loan must get suspended and the payment should be done instantly, including the termination of the borrower’s services, salary transfer to another bank with no prior approval from the bank, violation of any of the loan terms by the loan borrowers, defaulting on the payment of 3 successive installments or 6 non-successive installments, providing false information by the borrower, demise of the borrower, the departure of the client from the Emirates permanently.
When it comes to the overdraft, the fresh contract lets banks to cancel or decrease such options any time they consider important and for asking the borrowers for paying back at a date as determined by the loan provider, provided the loan borrowers get a notice of 30 days.
The 3 loan types clearly describe the relationship between lenders and borrowers. One of the terms stresses that the concerned bank should not open an account & agree to provide a loan before the loan borrower submits all the necessary documents as requested by the lender or the bank. Another term allows the banks to close the borrower’s account in case they provide them with the cheques, which bounce.
These forms also allow the banks to offer all the necessary details regarding the borrowers & their accounts to the courts or the other competent departments.
Banks may claim instant payment on the loans if-
- The debtor gets terminated from his or her for any of the reasons.
- The monthly salary transfers of the borrowers or any of the part of it to some other party with no written consent from the bank.
- Breach of the obligations or commitments that have been included in the loan contract.
- Failing to make payment of 3 consecutively installments or 6 non-consecutive installments in addition to the invalidity of the data of the customer.
- When the borrower leaves the country permanently.
- The demise of the borrower.
- Banks have the right of obtaining an insurance plan on the debtor’s life in the case of disability and must be paid by the loan borrowers themselves. Banks can make use of the revenue of the plan to make the payout of the loan, for keeping the interest or other amounts that are due to the borrowers’ shoulders or their heir.