Find out what you can do if you can't repay your loan
Bank loans are the most common means of leading a luxurious life. In the event that everything works according to plan, they can repay their bank loans, but what happens if they lose their jobs in the middle of repaying their loans? What will they do in such a situation? Consider the following example. There is a person who is working in a Dubai-based firm who does not seem to have a steady job right now. He has taken out two loans: a personal loan as well as a car loan. When he loses his job, the loan will not be completely repaid. What will the legal proceedings be if he cannot pay back the loan?
Here's the answer to your question.
The provisions of Notice No. 3692/2012 of Central Bank of the UAE pertaining to General Terms & Conditions and Loan Agreements texts drafted and approved by Emirates Bank Association (the ‘Loan Agreements Formats Approved by Central Bank of UAE’); Resolution of the Cabinet No. 33 of 2020 Amending Certain Provisions of Resolution of the Cabinet No. 57 of 2018 on the Regulations of the Federal Law No. 11 of 1992 on the Civil Procedure Code (the ‘Cabinet Resolution No. 33 of 2020); and Resolution of the Cabinet No. 75 of 2021 Amending Certain Provisions of Resolution of the Cabinet No. 33 of 2020 on the Regulations of the Federal Law No. 11 of 1992 on the Civil Procedure Code (the ‘Cabinet Resolution No. 75 of 2021’) are applicable.
Along with the signed loan agreement or a signed application form which contains the terms and conditions, a lender may collect checks as security against the loan amount when a borrower takes out a personal or car loan facility in the UAE.
If an individual fails to pay three consecutive instalments or six non-consecutive instalments on a personal loan, it may be considered a default. As outlined in Article 4(4) of the Personal Loan Agreement format of the Loan Agreements Formats Approved by the Central Bank of UAE, which says:
"The loan elapses and all the instalments, 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 according to this agreement or in accordance with the law - in the event that the borrower failed to pay three consecutive instalments or six non-consecutive instalments of the monthly instalments without the approval of the bank."
According to 4(4) of the Auto Loan Agreement format of Loan Agreements Formats Approved by the Central Bank of UAE, an individual must provide a written undertaking to the lender stating that the car may be seized and auctioned if instalments are not repaid. In the event that auction proceeds are less than the outstanding loan balance, the borrower will be responsible for paying the remaining balance as well as all fees and expenses relating to the seizure and auction.
Consequently, the lender may deposit your security cheque(s) for collection in the case of a default on a personal loan or car loan. A lender may take payment order action against you if your security cheques are dishonoured due to insufficient funds as stipulated in Cabinet Resolution 33 of 2020 and Cabinet Resolution No. 75 of 2021.
When you fail to appeal within 15 days of receiving the judgment in the payment order case, the lender may begin execution proceedings against you.
In addition to this, your lender may file a civil action against you to recover the debt.
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