Contribute to re-finance in the rescue of many institutions and individuals from their financial difficulties and provide opportunities for borrowers to take advantage of macro-economic changes and partial in addition to being one of the important channels for raising the levels of credit.
The central banks seek to raise levels of credit to the revitalization of the economy and increase economic growth rates in the event of deflation. When a decline in levels of economic activity declining corporate profits and economic incomes drop derived from the investment in financial assets and in kind.
Therefore, the re-funding at the rate of decline in borrowing costs reduce the debt burden on institutions and individuals, and provide opportunities to provide financial resources to increase investment and consumption of individuals and institutions which are active in the economic sectors of the economic slowdown.
It can refinance existing loans from the financial institution itself, which borrowed from the person or institution or other financial institution. And put banks in the Kingdom of conditions to qualify for the refinancing of the same financial institution or other financial institutions, some reasonable and some of them seem arbitrary and exaggerated.
The use of banks in the Kingdom to set conditions and obstacles for reducing re-financing of the financial institution itself and more emphasis in the event of another financial institution to re-finance.
One of those conditions or rather the obstacles to a minimum rate of repayment of the loan before they can qualify for refinancing. And require some banks in the Kingdom of the payment of at least 15 or 20 per cent to qualify for refinancing. This imposes the ratio of banks to maintain their profits from loans, as the share of the benefits or profits at the beginning of loans are high.
For this bank might receive 40 per cent of the gross profits in the case of a 20 per cent of the term of the loan. Rising interest borrowers from refinancing if you are at the beginning of the loan, but if oversaw the loan to an end, the benefit of borrowers refinancing operations be limited. The borrowers are advised to continue in the repayment of loans if the remaining period is limited and for example, less than a quarter of the period.
Local banks will also raise the annual rate of return or interest in the case of refinancing, where banks raise the rate of return on total loans refinanced by between 2 to 4 per cent above the prevailing lending rates in the market. The process of re-financing through two phases, where you must pay the current value of the loan or the balance thereof in the first phase. In the second stage gets the borrower to repay the loan surplus replaced.
It is well known that banks in the UK imposed in the case of early payment of some duties that are either a lump sum in the event that the small size of the loan or a percentage of the remaining amount up to 2 per cent or more of the remaining amount of the loan. Not only that, but that the banks are calculating the rate of return or the annual interest on the total loan which is for the most part, in many cases, the remaining part of the previous loan.
This means that in many cases, the banks raise interest rates on the old loan (replaced), and thus earn high commissions and amounts in return for re-financing. A vivid example was the attempt to get someone to refinance for a personal loan from a local bank after a year of a personal loan of five years. The Bank had informed him that he must pay more than 91 thousand riyals in additional expenses for the 49 thousand riyals from the bank. In other words, the bank would receive through the process of refinancing profits or benefits of more than 42 thousand riyals.
This amount represents the composite interest rate exceeds 13 per cent annually. This situation is not limited to a designated bank, but practiced by local banks, without exception.
Resort to the banks and other impediments to reduce the debt refinancing, the most important of procrastination and spend a lot of time in administrative procedures. There is, to my knowledge, which protects borrowers from unfair banking practices in the re-financing. Bear the Saudi Arabian Monetary Agency responsible for overseeing the commercial banks and therefore expensive to reduce unfair practices established by the commercial banks to exploit the borrowers need for additional funding.
It may be the practice of commercial banks is not fair to reduce re-financing a big role in reducing the levels of growth in domestic credit, despite the significant reduction in interest rates or borrowing costs. Unless Monetary put an end to these practices, the policies followed by the revitalization of lending would be limited impact.
Borrowers also bears a great responsibility when signing the loan contracts that subjected them to many other conditions, including that prevent re-qualify for funding only after the payment of fees and has many benefits. The banks should be required at the signing of loans should be abolished or at least reduction of fees for early payment and to facilitate the procedures, so that people and institutions to acquire a greater ability to refinance at lower costs. And should the Assembly of consumer protection lawsuits against banks that charge obscene profits from re-financing. They defend the rights of borrowers to obtain refinancing at lower cost and in accordance with the conditions better.
* Quoted by the Saudi Economic.
The central banks seek to raise levels of credit to the revitalization of the economy and increase economic growth rates in the event of deflation. When a decline in levels of economic activity declining corporate profits and economic incomes drop derived from the investment in financial assets and in kind.
Therefore, the re-funding at the rate of decline in borrowing costs reduce the debt burden on institutions and individuals, and provide opportunities to provide financial resources to increase investment and consumption of individuals and institutions which are active in the economic sectors of the economic slowdown.
It can refinance existing loans from the financial institution itself, which borrowed from the person or institution or other financial institution. And put banks in the Kingdom of conditions to qualify for the refinancing of the same financial institution or other financial institutions, some reasonable and some of them seem arbitrary and exaggerated.
The use of banks in the Kingdom to set conditions and obstacles for reducing re-financing of the financial institution itself and more emphasis in the event of another financial institution to re-finance.
One of those conditions or rather the obstacles to a minimum rate of repayment of the loan before they can qualify for refinancing. And require some banks in the Kingdom of the payment of at least 15 or 20 per cent to qualify for refinancing. This imposes the ratio of banks to maintain their profits from loans, as the share of the benefits or profits at the beginning of loans are high.
For this bank might receive 40 per cent of the gross profits in the case of a 20 per cent of the term of the loan. Rising interest borrowers from refinancing if you are at the beginning of the loan, but if oversaw the loan to an end, the benefit of borrowers refinancing operations be limited. The borrowers are advised to continue in the repayment of loans if the remaining period is limited and for example, less than a quarter of the period.
Local banks will also raise the annual rate of return or interest in the case of refinancing, where banks raise the rate of return on total loans refinanced by between 2 to 4 per cent above the prevailing lending rates in the market. The process of re-financing through two phases, where you must pay the current value of the loan or the balance thereof in the first phase. In the second stage gets the borrower to repay the loan surplus replaced.
It is well known that banks in the UK imposed in the case of early payment of some duties that are either a lump sum in the event that the small size of the loan or a percentage of the remaining amount up to 2 per cent or more of the remaining amount of the loan. Not only that, but that the banks are calculating the rate of return or the annual interest on the total loan which is for the most part, in many cases, the remaining part of the previous loan.
This means that in many cases, the banks raise interest rates on the old loan (replaced), and thus earn high commissions and amounts in return for re-financing. A vivid example was the attempt to get someone to refinance for a personal loan from a local bank after a year of a personal loan of five years. The Bank had informed him that he must pay more than 91 thousand riyals in additional expenses for the 49 thousand riyals from the bank. In other words, the bank would receive through the process of refinancing profits or benefits of more than 42 thousand riyals.
This amount represents the composite interest rate exceeds 13 per cent annually. This situation is not limited to a designated bank, but practiced by local banks, without exception.
Resort to the banks and other impediments to reduce the debt refinancing, the most important of procrastination and spend a lot of time in administrative procedures. There is, to my knowledge, which protects borrowers from unfair banking practices in the re-financing. Bear the Saudi Arabian Monetary Agency responsible for overseeing the commercial banks and therefore expensive to reduce unfair practices established by the commercial banks to exploit the borrowers need for additional funding.
It may be the practice of commercial banks is not fair to reduce re-financing a big role in reducing the levels of growth in domestic credit, despite the significant reduction in interest rates or borrowing costs. Unless Monetary put an end to these practices, the policies followed by the revitalization of lending would be limited impact.
Borrowers also bears a great responsibility when signing the loan contracts that subjected them to many other conditions, including that prevent re-qualify for funding only after the payment of fees and has many benefits. The banks should be required at the signing of loans should be abolished or at least reduction of fees for early payment and to facilitate the procedures, so that people and institutions to acquire a greater ability to refinance at lower costs. And should the Assembly of consumer protection lawsuits against banks that charge obscene profits from re-financing. They defend the rights of borrowers to obtain refinancing at lower cost and in accordance with the conditions better.
* Quoted by the Saudi Economic.
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