How to borrow responsibly?
Always ask yourself if any high-value purchase is a necessary expenditure. If it is a necessity – and you are short of funds – check if a loan or financing is the best option to raise the funds you need.
- Consider your debt burden
Remember, a loan or finance has to be paid back every month. Calculate your net income to see if you can afford a monthly deduction for the loan – and still have enough funds to meet all your other big and small commitments. For instance, food, rent, utilities, and the needs of dependents; fuel or transportation cost; mobile, internet and DTH / OOT/cable charges; domestic service providers’ cost; as well as a buffer for unanticipated future expenses, if any.
- Avoid over-indebtedness
Over-indebtedness makes it hard to meet your regular obligations. Besides creating a potentially stressful mental situation, it can also negatively affect your Mala’a Credit score.
- Before you borrow...
If you find that a loan/finance is the best option to raise funds, remember to ask your lender the following questions:
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- What is the Monthly Instalment amount?
- What is the repayment period?
- What are all the fees and commissions on the loan /finance?
- What is the annual interest rate? And is the interest/return fixed throughout the loan period?
- Is there early repayment fees?
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- Maximum debt service deduction for an individual
Debt service deduction is the percentage of one’s income that goes towards repaying a loan or finance. In order to avoid over-indebtedness, the Central Bank of Oman has stipulated a maximum debt service deduction for an individual’s monthly income or salary. For instance, the maximum monthly deduction permitted on an employed person’s salary is 50% for a personal loan/ finance; and 60% for a housing loan/ finance. Whereas, the maximum monthly deduction permitted on a retired person’s income is 30% for a personal loan/ finance; and 40% for a housing loan/ finance.