So you want a personal loan: How do you know your bank is not charging you a high interest rate? Can you make sure you were given the right amount? Should you take it in dollars or liras? What kind of guarantees should you have? Here are important facts that you must know before taking a personal loan from a bank in Lebanon:
1- Maximum Amount: The maximum amount of a personal loan in Lebanon vary from USD 15,000 to USD 150,000.
The maximum amount is usually calculated as a function of your monthly salary or income: - It can go from 10 to 16 times your monthly salary. - Your monthly loan repayment has to constitute maximum 1/3rd of your monthly income.
2- The interest rate: Here are the average Interest rates charged on personal loans by Lebanese banks. If you are paying lower, your bank loves you!
On USD: (considering all loan durations, as of April 2013)
- Average flat rate: 8.1%
- Average regressive rate: 11.31%
On LBP: (considering all loan durations, as of April 2013) - Average flat rate: 8.89%
- Average regressive rate: 11.75%
Remember, the longer the loan duration is, the higher the interest you will generally have to pay, whether flat or compounded.
3- Types of interest rates: There are also two types of interest rates charged by banks in Lebanon on personal loans: regressive rates and flat rates. A low flat rate can effectively cost you more than a higher regressive rate. So make sure you compare apples with apples!
- Flat rates are calculated on the initial amount of the loan, NOT the remaining balance of the loan! So if you take a 20,000$ loan for 5 years at an interest rate of 5% you still have to pay 5% of 20,000$ EACH year.
- As for regressive rates, they are calculated on the remaining loan amount, so if you reimburse 5,000$ the first year and the remaining balance is 15,000$ you will pay a 5% interest on 15,000$ the second year.
4- Guarantees: In order to give you a personal loan, your bank asks for guarantees in return: most banks in Lebanon now do not accept real estate mortgages on personal loans. They usually accept three types of guarantees:
- Salary Transfer: You need to transfer your salary to the bank.
- A Personal Guarantor: Someone signs that he/she will pay in case you can’t.
- Cash collateral: You have to block the same amount of money in the bank as your loan amount!
N.B If your bank really loves you (because you have loads of money), then it won’t ask you for any kind of guarantees!