What you need to know when taking a bank loan in the UAE

What you need to know when taking a bank loan in the UAE
14 July 2013

As a your say post on cashy.me by Expat in trouble revealed losing your job in the UAE when you have bank loans can be extremely nerve wrecking and fraught with potential issues.

Thankfully the UAE Central Bank has released regulations clarifying the statement that: “banks operating in the UAE have no right to seize the money of their clients unless they had defaulted on payment of three successive loan installments.”

The full Central Bank regulations (pdf) pertaining to ‘personal loans, overdrafts, and auto loans,’ outlines the factors that banks may consider when deciding on ‘seizing the money of their clients.’ A bank may also consider the loan lapsed and seize funds from any account associated with the borrower:

If the borrower’s employment is terminated for any reason.

Here’s what you need to know

When loans elapse and become due

The terms and conditions stipulate that the ‘loan elapses and all the installments, interests and any other fees and expenses become due and payable immediately without having to give any notification or any court ruling and without prejudice to any other rights of the Bank’ … in the event of occurrence of any of the following:

    1. 1. If the borrower’s employment is terminated for any reason.
    2. 2. If the monthly salary of the Borrower or any part thereof (is) transferred to any other body without the prior written approval of the Bank. (cashy note; you should always advise the bank if you have any payments to third parties sent direct from your salary, including pension, etc.)
    3. 3. If the Borrower violated any of its undertakings or obligations arising from this Agreement.
    4. 4. If the Borrower failed to pay three consecutive installments or six nonconsecutive installments without approval of the Bank.
    5. 5. If, at any time, the information or documents submitted by the Borrower to the Bank are  incorrect or any of acknowledgement or undertaking submitted by him or provided for in this Agreement is invalid.
    6. 6. If the bank notices that there are grounds which could lead to the inability of the Borrower and/or any of his guarantors, as permissible under Central Bank’s prevailing regulations, to fulfill his obligations towards the Bank.
    7. 7. The death of the Borrower or his leaving the country permanently.

All bank accounts

When you open a bank account in the UAE the General Terms under banking regulations indicate that you agree to the terms and conditions applicable to ‘ALL Accounts types opened with the bank.’

You should be aware when signing any bank forms that the terms and conditions are predominately ‘at the Customer’s absolute responsibility and risk and without any liability on the Bank.’

Further at this stage you authorize and agree to the terms and conditions whereby the bank may ‘set off the outstanding balance against credit facilities and loans’ from any ‘collateral in any account held at the bank.’ Collateral includes, ‘all money securities, bonds, collateral shares, shipping document, banknotes, coins, gold or other valuables and property of whatever nature which are held in the name of the Customer by the bank.’


Just as giving out a loan is a risk to the bank, taking any loan is a risk for the individual, we never know when we may lose our employment; have an injury which prevents us from working (and have no insurance in place), divorce or any other unforeseen circumstance. The banks are hedging against these risks and have in place watertight terms to ensure they can collect repayment of loans in the eventof any of the above seven circumstances.

The UAE Central bank also urged individuals subjected to having their funds frozen by banks for unjustifiable reasons to file complaints with it.

Have you been affected by these regulations, do you read the small print before signing for any loan?


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Head of Behavioral Finance
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