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29 March 2024

Banks imposing 11 types of fee on personal loans

Banks imposing 11 types of fee on personal loans. (FILE)

Published
By Staff

The banking sector is imposing 11 kinds of fees on personal loans, according to a survey.
 
Local banks require customers  to pay administrative fees (transaction fees for issuance the loan), in addition to other charges such as fees for delaying the payment of the installment of the loan and as well fees for fines on delaying repaying the installment, said Emarat Al Youm.

The list of fees also include fees for life insurance, guarantee for the loan, fees for early repayment, fees for final settlement, as well as fee to schedule the loan (modify the value of the monthly installments or the date of payment or term of the loan).

The banks also impose fees for the loans transferred from other banks, and a fee to cancel the loan, and the issuance of clearance certificates at the end of repayment.

As well as the administrative fees imposed by local banks, ranging between 1 -1.5 per cent of the total value of the loan, with a minimum ranging between Dh250 and Dh500, with early repayment charges ranged between 3 -5 per cent of the value of the balance of the loan.
 
Bankers acknowledged multiple charges on loans, but stressed that the client can simply pay the basic fee in case he didn’t request services related directly to loan funding.

Bankers also said “some banks overstate fees and exploit contracts signed with the client. They called on clients to read the charges of each bank and compare the fees and make the effort to differentiate between banks.

They pointed out the collection of fees for services is an inherent right to the banks, like any service from hotels or hospitals charge a fee for each service provided to the client. They added the charges are applied in all countries, and UAE banks no exception to that.

An official in the Central Bank told  Emarat Al Youm that the UAE Central Bank does not interfere in determining the fees, but stresses that fees be displayed in a prominent place in the branches and banks should inform the client before the application.

A head of a local bank who requested anonymity accused some banks of greed and exploitation of clients. He said the contracts signed by banks with customers for personal loans or various finance are always in the interest of the banks, and the client is often forced to sign those contracts to obtain the liquidity needed to meet some emergency situations.

He added “banks are exploiting the existence of its legal departments to ensure that in the contracts are certain items that allow them to impose what they want on the clients, such as clauses which provides for eligibility for the bank to add any fees unidentified previously or modify the interest rate.

The official said some banks use the inadequate laws to exploit clients, particularly as they try to take the maximum money from the client to compensate for financial problems faced after the global financial crisis through imposing additional charges or increase the value of the current fee.
 
He called customers to study lists of bank charges and make an effort to investigate the reputation of banks to see which ones have more problems with clients and identify the bank, which will get him loan or financing.

On the other hand, Senior Vice President and head of the Retail Banking group at Union National Bank, Hani Badrawi said the client determines the fees paid to the bank for services.

Badrawi said in the case of personal loans client can pay only three types of the basic fees, the management fees or transaction fees and interest on the loan, as well as the insurance fees that come in the interest of the client.

He added  that the fees imposed by banks such as late fees or for postponing an installment, or early repayment charges, or fees for the clearance certificate, is the fee for additional services the client can be requested or not requested to pay.

Badrawi rejected claims of clients who accuse banks of imposing unlawful charges such as early repayment charges for personal loans.
Badrawi added that the desire of the client for early repayment leads to disruption of loan schedules.
 
Badrawi that the fees charged by banks for banking services is not a new and does not violate the law and customs. The fees are stipulated in the contracts signed by the client.

Meanwhile the expert in Islamic banking, Dr Ghassan Taher Telfah, explained, however, that the transaction fee for example, is fees related to funding, while the fee for issuing a clearance certificate is a charge for additional service is not directly tied to the process of funding.