Warning over rise in personal loans, summer credit cards

PERSONAL LOANS: Banks see loans as big profit and are offering easy access to money in the run-up to the summer holiday season. (Getty Images)

The number of people who have taken out personal loans in Saudi has grown to 2.3 million, with a total debt of SR275bn, it was reported on Saturday.

The figure exceeds genuine demand and is being boosted by fierce competition between banks to attract business.

Essam Mustafa Khalifa, a senior marketing planner and member of the Saudi Economic Society has warned that the number of people getting into debt is expected to rise further in the run-up to the summer holiday period, as more people take out credit cards to fund overseas trips.

Debt could reach “dangerous” levels for many whose income would not cover their repayments, he added.

“Banks encourage personal loans because they bring huge profits. If consumer loans keep growing at this rate, the banks will turn into installment companies like cars firms,” Khalifa said in an interview with Saudi Gazette.

“The summer is traditionally high season for local banks as thousands of holidaymakers apply for credit cards to fund tourist trips and purchases in the Kingdom and abroad," he added.

“To attract holidaymakers most banks offer easy loans as they know that this is a high-spend group during the summer vacations.”

“People who have trouble obtaining personal loans turn to credit cards which are usually used irrationally, resulting in the accumulation of debt,” he pointed out.

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