Thursday, 14 May 2015

Working for an unlisted company can affect your loan application

If the company you work for is not listed with the bank, it may become a little problematic to get a loan. Here’s what you need to know.

Banks in the UAE are making it extremely easy for residents and expats to avail of bank personal loans. They are offering excellent interest rates and easier procedures to process the loan applications. However, the procedure is not as simple for those who work with unlisted companies in the UAE.
In the absence of a credit bureau in the UAE, banks in the country follow a system of assessing an individual’s credit score and eligibility by a criterion known as ‘listing’ of companies. This is a system wherein individual companies are studied for their company size, annual revenues, field of operations and overall stability. Based on this information, companies may receive approval for listing with banks.
Once a company is listed, employees of that company may avail of loans from that bank. The UAE is constantly adding more and more companies to the list; however, it can get slightly difficult to apply for a bank personal loan if one works for an unlisted company.

What is the need to list companies? Since banks are lending money to individuals, they must be assured of that individual’s repayment capacity. A lot of this repayment ability hinges on the individual’s income, which in turn, hinges on the financial health of the company he or she works for. If the company is unlisted, the bank has no way to assess the applicant’s eligibility.

Is there a way to get the company listed? If you want to avail of a bank personal loan but are unsure of your company’s listing status, contact banks to find out if the company is listed with them. A company may apply to be listed with a certain bank – this works out better for the company’s credit score, too. The bank will check the company’s accounts and overall financials and follow a process of due diligence before listing it. Once listed, the employees of that company may avail of bank personal loans or other loans. 

What are the procedures for loan applicants from unlisted companies? Different banks in the UAE have differing requirements to offer loans to applicants from unlisted companies. Normally, the interest rates will be higher for such bank personal loans, and there will be more stringent paperwork as well. Interest rates are higher, and the salary requirements may differ. Banks can also ask for a local guarantor, at least two local references and supporting paperwork for income proof (apart from company-furnished salary slips and appointment letter).