How to obtain a personal loan in Lebanon -
How to obtain personal loan
How to obtain personal loan in Lebanon -
When a customer wishes to purchase something that is not covered by a specialized lending plan, they can apply for a personal loan. Loan amounts usually range between $1,000 and $50,000. Loans can be taken out in either Lebanese liras or in US dollars. Over 70 percent of loans are offered in dollars because dollar-denominated loans often entail lower interest rates. The repayment period for a personal loan is normally between six months and five years. In most cases, banks will not grant a loan if the monthly repayment amount is more than one-third of the applicant's salary. Interest will be charged on the loan and there are also various fees involved, including file and commissions fees, some of which may have to be paid upon loan approval but prior to the money being granted.

Interest charges are quoted in one of two ways; either flat or regressive. A flat rate is interest charged on the full loan amount over the entire loan period. For example, a seven percent flat rate on a $20,000 loan over three years would produce the following: $1,400 (seven percent of sum borrowed) x 3 (years of repayment) = $4,200 in interest. A regressive rate of interest recognizes that part of the loan is paid back every month, and then reduces the amount owed. This interest rate is applied only to the amount still owed and the figure quoted will be higher than a flat rate. A 12 percent regressive rate on a $20,000 loan over three years would incur total interest of $3,972. So 12 percent regressive is cheaper than seven percent flat. The only way to compare the cost for each formula is to ask for the total paid over the whole period. The rate for a personal loan, whether in US dollars or in Lebanese liras, is fixed for the entire repayment period and is usually higher than the interest rate of most other types of loan.

The level of fees varies from bank to bank, and several don't charge any at all. Some charge a fixed fee of $50-$500, while others charge a percentage of the loan amount - usually between 0.5 percent and three percent - while stipulating a minimum that varies between around $25 and $250 (or its lira equivalent). Filing, or application, fees are payable at the beginning of the process before a loan is granted.

Some banks charge a commission on loans which varies between 0.1 percent and 0.8 percent of the loan or the outstanding loan amount. This is calculated quarterly, but its payment will be spread over the period of the loan.

The government may also benefit from customers taking out personal loans. One repayment method is to make out monthly notes for the period of the loan. Each note carries stamps worth 0.15 percent of its value. A $500 monthly repayment, for example, requires stamp fees of $0.75 or its equivalent in Lebanese liras per note. Sometimes a single note is made out for the whole repayable amount. Either way, the total payments due in fiscal stamps remain the same. An alternative method of repayment is for banks to fix a schedule for the payment to be made to them directly. This is most common when a loan is taken from the bank where the borrower has an account, although it could encompass domicilitating payments from one bank to another. In these cases, no fees are required for fiscal stamps, but there is still an extra charge for the borrower. Banks charge for transferring money to another bank. Some banks still prefer the note system because the notes themselves become a tradable commodity among banks should the lender (bank) wants to get hold of instant cash.

The last cost incurred when taking out a personal loan is that of life insurance to cover the total amount of the loan - and sometimes more - that lasts for the duration of the repayment period. Coverage may reach up to 120 percent of the amount borrowed and in most cases is not regressive. In other words, the full amount of the money borrowed is covered by insurance for the full repayment period. Most banks insist that the policy premiums be paid before the loan is granted. A few build the premium cost into the monthly payments. Some banks insist on insurance greater than the amount borrowed to cover the costs they will incur in case they have to claim against the policy. A bank would probably suffer some delays - and therefore financial loss - in collecting against the policy. The majority of banks ask for coverage against both death and total disability, while a few also require partial disability and war risk insurance.

Late-payment penalties range from two percent to twenty-two percent per month of the amount of the installment, with some banks also fixing a minimum. Early repayment does not reduce the interest if only 'a few' notes are paid off. What constitutes 'a few' is a matter of negotiation. For substantial early repayment, the interest rate on the amount being paid off is often reduced by one to four percent.