Rules and Regulations for Early Loan Settlement in Saudi Arabia
The Saudi Central Bank (SAMA) provides clear consumer protection rules for early loan settlement. When a borrower chooses to settle personal or consumer financing before maturity, the financing entity cannot charge unearned future profit.
Statutory Early Settlement Rights
- Waiver of Future Profits: The borrower is entitled to complete relief from all unearned profit for the remaining loan period.
- Statutory Bank Compensation: The lender is permitted to recover actual administrative costs or a maximum compensation of up to 3 months' profit margin or the cost of reinvestment, whichever is lower.
Frequently Asked Questions
Yes, SAMA rules mandate that lenders must drop all unearned future profits for the remaining tenure of the loan.
Lenders may only charge compensation equal to the profit margin for the subsequent 3 months, or actual reinvestment costs incurred.