Many look to bank loans to offset whopping gaps in family budgets
Published: Aug 30, 2010 01:22 Updated: Aug 30, 2010 01:22
RIYADH: A huge increase in the cost of living has ended up with many Saudis caught in debt traps.
Many Saudis recount melodramatic accounts of what happened to them after taking out loans. They see loans as the only option to offset a whopping deficit in their family budgets, according to a report in Al-Riyadh Arabic daily.
Speaking to the newspaper, a number of Saudi women, including employees and housewives, say they consider bank loans as not only a means to “solve their crises” but also a channel for citizens to shoulder their responsibilities and settle financial obligations that they are unable to fulfill otherwise.
Reem Abdullah, an insurance company employee, says people are forced to take loans to meet their various needs. Sometimes, this will be for financing some projects. Others take loans for personal needs, such as buying a house.
“If a person buys a house by spending his savings, then how can he find means to cover his livelihood expenses? He thinks that a portion of the wealth can be set aside to pay part of the cost of the house, thus he possesses a house on installments and spends his hard cash launching a commercial venture to earn income for day to day life,” she pointed out.
Jawhara Abdul Rahman, a public sector employee, says her experience after taking a bank loan was not satisfactory.
“I had to go through a number of negative experiences after taking a housing loan. First, I had to pay administrative fee as mentioned in the contract. The bank also takes a monthly amount exceeding SR1,000 from my salary in the name of house insurance,” she said while complaining that she had not been informed earlier about the fee.
According to Jawhara, most citizens have no option other than taking loans for owning real estate. “There are no major differences in the loan conditions or period of repayment as far as most banks are concerned. The only option for the customer is that he can reduce the period of repayment by increasing the amount of the monthly payment,” she said.
Haya Abdullah, an employee, stressed that banking loans should be restricted only to real estates and investments.
“It is not ideal to take loans for other purposes, say, for example, loans for vehicles and furniture, because their value diminishes over time. This is not the case with the real estate, where value increases day by day,” she said.
Haya bought a house on installment. “I know the price of the property (bought on loan) is nearly double the actual price. However, I have no other option to have a house of my own,” she says.
The experience of Reem Al-Ahmad is quite different; she relied on brokers to escape from paying a big percentage as service charge levied by banks for personal loans. However, she is now suffering from unexpected financial problems.
Ali Daqaq, an economic expert, says the percentage of personal loans being taken by Saudi citizens from local banks is much higher than that of public loans.
“Therefore, most of the banks have expanded their activities in this vital sector, and repayment of these loans has been mainly through monthly deductions from salaries,” he said, adding that many citizens have to set aside a major portion of their salaries for repayment of loans.
Comments
ECONOMIST
Aug 30, 2010 14:59
Report abuseDOUG
Aug 30, 2010 16:47
Report abuseABULHAARITH
Aug 30, 2010 17:30
Report abuseSAH
Aug 30, 2010 17:41
Report abuseIndulging in 'riba' (not necessarily shown as a percentage of the principal amount) is like being war with Allah and his Prophet (peace be upon him). And none can win a war against Allah and his Prophet (PBUH).
ASHLEYWATSON
Aug 31, 2010 13:21
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