UAE: Can a bank confiscate my vehicle if I default on loan payments?

UAE: Can a bank confiscate my vehicle if I default on loan payments?

A KT reader asks if they can renegotiate lower EMIs

Published: Sun 7 May 2023, 10:18 AM

Question: As a cost-cutting measure, I have had to take a pay cut. I have a year's EMIs pending on my car loan, but no other liabilities. Can my vehicle be confiscated if I default on payments? What's the legal procedure involved? Can I renegotiate lower EMIs?

Answer: Pursuant to your query, the provisions of Notice No. 3692/2012 of Central Bank of the UAE pertaining to General Terms & Conditions and Loan Agreements texts drafted and approved by Emirates Bank Association and Federal Decree Law No. 14 of 2020 Amending Certain Provisions of the Federal Law No. 18 of 1993 Concerning the Commercial Transaction Law are applicable.

In the UAE, on obtaining a vehicle loan from a lender, a borrower needs to pay the monthly instalments of loans as agreed.

In the event of non-payment of three consecutive instalments or six non-consecutive instalments of vehicle loan by a borrower to a lender, it is considered as default in accordance with Article 5 (4) of the Auto Loan Agreement format of Loan Agreements Formats Approved by Central Bank of UAE, which states, "The Loan elapses and all the instalments,