Banks hike salary limits for car loans

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HIGHER GEAR: Banks have tightened up on car loans, (Getty Images)

Banks in Qatar and the UAE have raised the minimum salary limit for customers seeking car loans as the credit crunch in the region intensifies, it was revealed Wednesday.

The requirements differ from bank to bank but come just a month after it was announced that sales of new cars fell by 60 percent at some UAE dealerships in November last year, because people were having difficulty securing finance.

HSBC has introduced new rules for car loans in both Qatar and the UAE. It stipulates that all applicants must have a minimum gross salary of 20,000 dirhams ($5,500) or QR20,000 ($5,500) per month to sanction a vehicle loan.

This is double the 10,000 dirham and riyal ($2,500) requirement in November last year.

Sean Drury, managing director, HSBC Middle East Finance Company Ltd said: "In line with current market conditions, HSBC has further tightened its lending criteria in order to ensure that customers who do receive loans can afford to repay them at a time of considerable uncertainty around the world."

Other banks in Qatar have set lower salary conditions than HSBC but have imposed extra rules such as requiring verification from a loan seeker's employer of their occupation and salary.

The Doha Bank asks for a basic salary of QR7, 500 ($2,000) a month and for the applicant to have been employed by their company for two continuous years. The bank also requires an official document from the employer certifying job title and salary.

The Commercial Bank of Qatar (CBQ) stipulates a basic salary of QR4,000 ($1,099) and requires the employer of the applicant to be reputable, and acknowledged by the bank for holding a good financial record.

One of the newest banks in Doha, Al Khaliji, also requires a lesser basic salary to authorise an automobile loan but it would go by the reputation of the employer of the loan applicant before authorising it.

In November a car industry expert warned that growth in the new car market could slow by as much as three to four percent next year as the global financial turmoil combined with the expansion of transport services in the country impacted on car sales.

Jose Paul, a consulting manager for the Middle East and North Africa at research group Frost & Sullivan, said over the last year the new car market grew by 38 percent in the UAE, with around 370,000 new passenger vehicles sold.

Car ownership across the country stood at around 1.4 million, he added.

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