Frequently Asked Questions (FAQ) by customers of banks, investment companies, and finance companies supervised by the Central Bank of Kuwait (CBK).
1. What types of loans/finance facilities are granted?
To provide customers with various loans and financing facilities, lenders refer to the customer’s net monthly salary to determine eligibility to receive the following:
- Consumer loans/financing facilities.
- Housing loans/financing facilities.
- Credit cards.
2. What is meant by the net monthly salary? Does it include other sources of income (such as building rent or a salary from another entity (government or private) after retirement, or a deceased person’s pension or any other income other than the salary given from primary work, such as the salary for being delegated in a government entity, or association with a sports club or a non-profit organizations, etc.)?
The net salary is defined as the customer’s monthly salary as stated in an official salary certificate issued by the entity in which he/she works, or by the Public Authority for Social Security for retired customers. The net salary includes employment support allowance, and excludes deductions and rent allowance according to the housing welfare scheme. Any other monthly income shall not be considered within the customer's net monthly salary.
3. What is the maximum amount for a consumer loan/financing facilities?
The maximum amount which can be granted under a consumer loan/financing facility per customer is 25 times the customer’s net monthly salary and up to a maximum amount of KD 25,000 (subject to the applicable Debt Service to Income Ratio).. The amount is to be repaid over a maximum period of 5 years.
4. What is the maximum amount for housing loans/financing facilities?
The maximum amount that can be granted under a housing loan/financing facility per customer is KD 70,000 (subject to the applicable Debt Service to Income Ratio), to be repaid over a period not exceeding 15 years.
5. May a customer be granted the maximum amount for both a consumer and a housing loan/financing facilities?
A customer may be granted a maximum amount for both consumer and housing loans up to KD 95,000. The total amount granted to a customer is subject to the applicable Debt Service to Income Ratio (40% for employees and 30% for retirees), in addition to other criteria stipulated in the instructions.
6. Do the instructions restrict the use of the consumer loan/financing facility to specific purposes?
The instructions do not specify the purposes for which the consumer loan/finance facility should be used. Accordingly, the customer may use the consumer loan/finance facility for any personal purposes. However, to maintain their financial well-being, we advise that customers avoid overburdening themselves with unnecessary financial obligations.
7. What documentation is required to apply for a loan/financing facility?
Each bank specifies the required documents according to its internal procedures. In general, the instructions of the Central Bank of Kuwait require the following documents to be provided:
- The customer’s salary certificate from the entity he/she works in, including details of the monthly salary and all deductions.
- An undertaking from the customer to provide all documents requested by the lender, including bills and documents proving usage of the housing loan/financing facility for the purpose it was granted for.
- A credit report statement signed by the customer regarding the balance of loans and financing facilities obtained from other lenders, which are subject to the supervision of the Central Bank of Kuwait, or any other ongoing commitment.
- A copy of a valid civil ID.
8. Does the customer have to provide documents indicating the use of the consumer and housing loan for the purpose for which it was granted?
In case of obtaining a consumer loan/financing facility, the customer must clearly and fully disclose the purpose of the loan/finance but is not obliged to provide any supporting documents. On the other hand, in case of obtaining a housing loan/financing facility, the customer must provide the lender with all requested documents, including bills and documents that prove the use of the loan for housing purposes. If the customer does not fulfill this requirement within the time period specified by the lender, the customer will not be granted any new facility. The contract with the customer must detail how the use of the housing loan/financing facility is verified, the required documents and the date of their submission along with complete data on the property being financed.
9. Are customers who fail to provide bills and documents indicating the use of the granted housing loan/ financing facility prevented from borrowing again or rescheduling his/her existing loans?
Customers who have pledged to provide the required documents, but haven’t adhered to submitting all the documents required by the bank in accordance with the instructions, including bills and documents that support the use of the housing loan/ financing facility, will not be granted new consumer or housing facilities.
10. Why are lenders requesting additional financial details and data other than those available with the Credit Information Network Company (Ci-Net)?
In line with the key objective of the instructions, which is to regulate the granting of personal loans/finance facilities and limit the overburdening of customers, it is the responsibility of the lenders to verify that certain conditions are met. This is done by reviewing the credit status of the customer, verifying the purpose of the requested loan/financing facility and the customer’s needs. Lenders are also obliged to provide financial advice to customers, whether upon granting or throughout the term of the financing, identify the nature of monthly obligations and burdens under the requested loans/financing facilities. Lending institutions must also clarify the risks of increased obligations and burdens, especially if a change in financial status has occurred such as a job change, retirement or due to a change in the applicable interest rate (in the case of conventional banks).
Consequently, lenders are required to know the customer's financial position and monthly obligations, whether those are available on Ci-Net or elsewhere, as well as to obtain the necessary documents and data in order to achieve the stated goal.
11. Can customers, who have already restructured their existing loans, benefit from the new instructions issued on 11/11/2018?
A customer, who has obtained a loan or financing facility or has modified the terms of the contract, can benefit from the new instructions, whether by obtaining new financing or by restructuring. This is provided that the other conditions prescribed in the instructions are met and do not exceed the maximum limit for each type of loan/ financing facility and the ratio of the monthly installment to the net monthly salary (40% for employees and 30% for retirees).
12. How can a customer, with monthly installments of 40% of the net monthly salary, obtain a new loan/financing facility according to the instructions?
If 30% of the loan/ financing facility installments are repaid within the specified time (regardless of whether the repayment has been expedited), the customer may restructure the terms of the contract to obtain a new loan/finance of the same type of the existing loan (consumer/housing). As set forth in the instructions, the new contract has to adhere to the limits, value, or monthly installment which are calculated according to the financial position of the customer on the date of the new contract.
13. If the customer is willing to change the lender and pay the outstanding balance, can the new lender change the interest rate before the lapse of five years since the date of granting the original loan?
Where the customer is willing to change the lender or to obtain new finance from the orignial lender after the regular repayment of no less than 30% of the installments of the original loan/finance, the lender of the new loan/finance will draft a new contract in accordance with the underlying terms and conditions, and apply the interest rate applicable on the date of the new contract.
14. Is it allowed to obtain loans/financing facilities from more than one lender?
A single customer may obtain personal loans/financing facilities from more than one lender, provided that the total of these personal loans/financing facilities granted by all lenders does not exceed the total maximum limit stated in the instructions, and that the ratio of the total monthly installments to the customer's net monthly salary does not exceed the specified limit in the instructions.
15. May lenders collect installments before the due dates if the salary is credited early? May they withhold the salary in this case?
The lender may (if the contracts concluded with the customers so permit) collect the value of the monthly installment before the due date thereof if the customer’s salary is credited into his/her account before the said date. This payment is considered an early payment of the installment, and the customer should be notified accordingly via SMS. It is not permissible for the lender to block any balance in the customer’s account without legal cause or prior approval from the customer. Furthermore, the customer shall verify the availability of sufficient amounts in his/her account whenever the monthly installment is due.
16. May lenders apply balloon payments to finance facilities they provide to customers, including Ijarah financing facilities?
According to the instructions, balloon payments are prohibited in all financing facilities provided by lenders to customers. For example, if financing facilities are made under Ijarah ending with ownership, there should not be a balloon payment. This due to the implications of exceeding the established limits for the value of the financing, the monthly installment and finance term.
17. May retirees qualify for loans/financing?
The decision to grant credit is subject to the lender’s policies and procedures. However, the Central Bank of Kuwait’s instructions allow for the granting of retirees a loan/financing facility provided that the monthly installment should not exceed 30% of the net monthly pension, while adhering to the stipulated conditions.
18. If a person guarantees a customer of one of the lenders, should the monthly installment of the guaranteed debt be included in the guarantor's monthly obligations?
The value of guaranteed loans/financing facilities or installments thereof are not included in the guarantor's monthly obligations. However, it is the responsibility of the guarantor to know the consequences of his/her guarantee and recognize that such guarantee is an obligation that may result in future monthly installments if the customer fails to repay. Therefore, the guarantor must disclose all of his/her guarantees to the lenders to whom he is applying for a personal loan/financing facility, so that the lender can determine the guarantor's credit status and provides the necessary advice.
19. Is it permissible to consolidate salaries of customers?
Salaries of customers may not be consolidated, regardless of their kinship, it is also not permissible for one of the spouses to guarantee the other.
20. May a bank refuse to grant a loan to a customer? What is the role of the Central Bank of Kuwait in this regard?
Granting a loan is decided by the lender in accordance to its credit policy, and the Central Bank of Kuwait does not interfere in this aspect.
21. What is a Black List, and is it permissible for the customer to obtain a loan or finance if his name is on the black list?
The Central Bank of Kuwait has no such thing as a black list. However, the credit information available through Ci-Net includes information on cases of the customer's failure to repay and legal action taken by other lenders. In general, the Central Bank of Kuwait’s instructions do not prevent the customers with legal procedures taken against them from borrowing or obtaining finance, as the decision to grant credit and finance is considered the lender’s sole responsibility and is subjected to their credit policy.
1. What are bank cards and what are their types?
There are credit and debit cards which include ATM and prepaid cards. The various cards are listed below:
- Debit Card:
- Direct debit cards are linked to a customer’s bank account. They are therefore limited by the balance available in the customer’s account.
- Prepaid Card:
- It is a stored-value card tied to a previously deposited amount.
- Credit Card:
- Credit cards provide customers with credit, and are divided into the following two types:
- Credit Card:
* Cards that grant installment of payment (i.e. the use of it will result in debt to be repaid in installments).
- Charge Card:
* Cards that provide temporary debt arrangement to be repaid on the due date in full, provided that the credit does not exceed a month.
2. What is the maximum credit card limit?
The limit granted by credit cards that is allowed is ten times the customer’s net monthly salary, with a maximum of ten thousand dinars, to be repaid in instalments (which are subject to the applicable maximum debt to income ratio).
3. What is the payment period of credit cards?
The payment period resulting from the use of credit cards should not exceed one year.
4. Is the bank entitled to cancel the credit card without consulting the customer?
The topic refers to the terms and conditions of the credit card signed between the bank and the customer and does not relate to instructions issued by the Central Bank of Kuwait.
5. Can the customer get a credit card if the percentage of his monthly installments to the net monthly salary reaches 40%?
The value of the monthly credit card installment is determined based on the card limit, monthly installments for all loans and personal financing facilities. Credit cards are included in calculating the ratio of the monthly installments to the customer’s net monthly salary, and therefore, the customer is not granted a credit card if the monthly installments ratio to the net monthly salary reaches the set percentage in these instructions, i.e. 40% for employees and 30% for retirees.
6. Are Charge Cards debit cards included in a customer’s credit report? Do they fall within the maximum monthly installment ratio to the customer’s net monthly salary (40% for employees and 30% for retirees)?
No, because they don’t entail installments. The receivable must be paid on this type of card (charge cards) at the end of the period (end of the month) in full.
7. What actions are taken when the customer fails to pay the credit card installments on their due date?
- If the due bills are not paid 60 days after their due date, the card will be frozen and the customer will not be allowed to use it until after the full amount has been settled.
- If the amount is not paid 90 days past its due date, the card may not be used until six months after the date the bank receives the full due amount.
- If the customer repeatedly fails to pay, the card will not be renewed until one year after the date the bank receives the full due amount.
- If the customer fails on their obligations for the third time, the customer's credit card will be canceled without possibility of renewal.
1. How does changing the discount rate affect the cost of existing personal loans?
Existing consumer loans are not affected by the change in the discount rate, as the instructions provide for the application of a fixed interest rate.
As for housing loans, the lenders adjust the applied interest rate to match the rate declared by the Central Bank of Kuwait at the end of every five years, provided that the change must not exceed 2% throughout the life of the loan (whether by increase of decrease) of the contracted interest rate applied before the change. For example: if the discount rate is 3%, the lender will charge a maximum interest of 6%. In the event that the Central Bank of Kuwait raises the discount rate by 3% to 6%, the maximum adjusted interest rate should be 8% (i.e. the change in the discount rate or 2%, whichever is lower).
2. Shall interest or returns be outstanding upon early repayment? Are they recalculated in the case of adjusting the loan/finance term and the value of the installment or if the contract is restructured?
Lenders may waive interest for the remaining period (in the case of conventional loans) or remaining due returns (in the case of Islamic financing), but only if the customer is willing to restructure the terms of the contract to obtain a new loan/finance, or adjust the loan/finance term and installment amount, or restructure in case of retirement.
1. Is the bank entitled to collect a specific fee?
Each bank must adhere to fees and commissions that are approved by the Central Bank of Kuwait and educate customers about them.
2. Are fees and commissions consolidated for all banks?
There are no instructions that oblige banks to apply consolidated fees or commissions as they are tailored according to the service provided to the customer. In all cases, these fees are approved by the Central Bank of Kuwait to ensure that they are in exchange for actual services provided to customer.
3. Is the customer obliged to insure a loan/finance? What is the maximum limit of the value of this insurance?
The customer has the right to choose whether to insure the loan/finance or not, and the lender must obtain the customer’s approval in writing if he chooses to insure. The premium borne by the customer must not exceed 2% of the financing value, or what the lender bears. It should be noted that the lenders must inform the customer of the terms, conditions and coverage of the insurance policy.