The UAE clarifies regulations regarding personal loans

In the United Arab Emirates (UAE), individuals employed on a salary basis have the opportunity to apply for personal loans from banks or financial institutions.

These loans are typically secured against the borrower's salary and end-of-service benefits, as per the provisions outlined in Central Bank Regulation No. 19 of 2011. According to this regulation, a personal loan is defined as a loan provided to individual customers with repayments made from their salary, end-of-service indemnity, or other regular income from a defined source.

To secure a personal loan, borrowers must provide an undertaking letter from their employer, confirming that their salary and end-of-service benefits will be deposited directly into the lender's bank account. This requirement is outlined in the Personal Loan Agreement Formats Approved by the Central Bank of the UAE.

In the event of default on the loan, defined as failure to make three consecutive monthly payments or six non-consecutive payments, the lender may take legal action. This may include depositing any security checks provided by the borrower for collection. If the check is dishonored due to insufficient funds, the lender has the option to file an execution case against the borrower and request a travel ban.

Alternatively, if the outstanding debt exceeds Dh10,000, the lender can approach the relevant court to impose a travel ban on the borrower. This process is governed by the provisions outlined in UAE Federal Decree Law No. 42 of 2022 on Civil Procedures Law, specifically Articles 324 and 325.

Furthermore, lenders have the option to pursue legal action through payment orders or civil cases to recover the outstanding debt. If the court rules in favor of the lender, execution proceedings may include a request for a travel ban and the issuance of an arrest warrant against the borrower, as per the Civil Procedures Law.

Read also: Indian government allows Onion Exports to UAE Amidst Export Restrictions

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