Riyadh, Saudi Arabia (The Media Line) – When Reem Muhammad sought a personal loan to pay off some lingering debts, a Saudi bank offered 100,000 riyals ($26,667). The price tag? Repayment of the loan, plus 33,000 riyals.

“I took the loan and repaid it, but I never knew what the 33,000 was for since it wasn’t interest,” Muhammad, 38, told The Media Line. “But it sure felt like interest.”

Muhammad is one of thousands of Saudis taking advantage of Saudi Arabia’s healthy economy and banks’ increasing willingness to offer personal loans and credit cards. Her loan also illustrates the continuing debate in the Saudi banking industry whether some aspects of the loan system contravene shariah, or Islamic law, that guides how Muslims conduct financial transactions.

Personal loans in Saudi Arabia jumped nearly 20-fold to a staggering 219 billion riyals in 2011, up from an estimated 11 billion riyals in 1998. Loans included 27.7 billion riyals in property loans due in part to the passage of the 2011 mortgage law. Credit card debt in 2012 is estimated about nine billion riyals.

Asher Noor, chief financial officer for the Riyadh-based AlTouq Group, a global investment firm, told The Media Line the increase in loans reflects Saudi Arabia’s strong economy.

“I find the increase in line with the growth of the Saudi economy, an emergence of an affluent middle class and creation of more high net worth individuals now than at any time in the past,” says Noor, who emphasizes he was offering a personal opinion. “The surge in personal loans is not just due to proliferation of credit cards in the Saudi economy, although plastic money has clearly made it easy to stack up debts. Real estate loans have also been a big reason for personal loan surge.”

Until about 2000, banks were reluctant to issue personal loans to individuals, preferring to limit their lending to large companies. Consumer credit card use was also relatively rare.

However, the demand for easier access to money has increased as the Saudi middle class has grown more affluent. Banks devised methods to offer credit cards compliant with shariah. Islamic law does not permit usury, charging or paying interest and conducting business contrary to Islamic values, such as operating a casino and selling pork or alcohol.

Saudis pay a fixed monthly fee on credit cards. Banks may require customers to have a savings account with a specific amount of money on deposit. Charges for late payments may be about 3 percent of the outstanding balance. Another way the card issuer earns a profit is to pre-purchase an item a customer plans to buy and then instantly resell it to him at a higher price.

Noor acknowledged there is “cause for concern” over the rapid increase in consumer loan and credit card debt, but the Saudi Arabian Monetary Agency (SAMA) has not allowed it to get out of control. “I think SAMA has not been asleep at the wheel and has kept the commercial banks in check with regulations like limiting loan to deposit ratios.”

SAMA in 2006 established regulations that total loans may not exceed 33 percent of the total salary of employees and 25 percent of the income of retirees. Nabil Al-Mubarak, executive-director of SIMAH, told the Arab News that SIMAH’s policy labels card debtors as defaulters under two conditions: if they have not paid for six consecutive months and if the amount due is SR 500 and more.

Noor said the criteria to issue credit cards is heavily regulated in Saudi Arabia, noting that customers are rarely pre-approved and must prove their eligibility for credit cards. “There are SAMA regulations dictating the credit card and personal loan limits and the central database [Saudi Credit Bureau] SIMAH is monitoring defaults,” he said.

Noor said that given the large expatriate population, whose work and residence permits are linked, banks are very careful in credit card issuances and usually require having a bank account with them, salary transfer and employer letter before a card is issued.

“Since expatriates here are unable to leave the kingdom with credit card debts disproportionate to their earnings or end of service, the banks here have not struggled with staggering default rates as elsewhere,” Noor said.

Yet the explosion in obtaining credit cards and personal loans, and how banks charge fees, has led to consternation among some Islamic scholars whether the high fees are tantamount to paying interest.

Ahmed Alkady, a trainer at the Jeddah-based Islamic Development Bank, told The Media Line that he sees no difference between paying penalty fees and charging interest on credit cards.

“I don’t use or even recommend credit cards,” Alkady said, “It is a hidden type of interest as banks make you pay what they call a fine or a penalty for failing to pay them back on time. The same thing is applied in non-Islamic banks but they call it interest. I see no difference between the two unless you make sure you don’t use it for drawing cash. Or when you buy goods make sure you pay it back before the end of the time limit.”

Alkady also considers Muhammad’s 100,000-riyal loan as contrary to Islamic values with some Saudi banks skirting shariah-compliant regulations.

Islamic banks use an asset-based loan system, such as providing an automobile loan, in which the bank purchases the car, maintains ownership and then rents it to the customer. The customer makes monthly payments that add up to more than what the bank paid for the vehicle. Ownership is then transferred to the customer once all payments are made.

Alkady described Muhammad’s loan as tawreeq, or securitization, meaning the asset is made into a financial tool like a share in a company. The transaction originates with an item, such as equipment or even property bought by the bank and then sold to the customer to be paid for on an installment basis. This allows the bank to raise the price of the item as a way of earning a profit while at the same time providing immediate liquidity for the borrower.

However, the Organization of Islamic Cooperation’s International Council of Fiqh Academy, a group of Islamic scholars, ruled in 2009 that tawreeq is “legal trickery” with roots in interest-based lending.

Alkady said the Islamic Development Bank followed with a similar ruling in April 2011. “The bank’s scholars have issued a decree in which they consider tawreeq un-Islamic simply because the bank is selling goods that it does not actually own,” he said.

Yet most Islamic banks worldwide embrace tawreeq, with many Islamic scholars in Muslim countries endorsing the practice.

Sami Al-Nwaisir, chairman of Al-Sami Holding Group, wrote in the Arab News recently that loans “favor the banks and their regulations” and “the unfair contracts by banks designed for their benefit alone, which victimize and suppress the individual through the systematic brutality of the one-sided agreement.”

Noor faults the banks for not educating borrowers. “Islamic banking is asset-based and borrowers need to understand that to better appreciate it,” he said. “Bankers, however, remain the culprit by complicating documentation and structures, and thus making it difficult for the layman to make a rational choice.”

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However, this is really a good time to consider making gifts.  In a low interest rate environment, there are many tools allowed by the Internal Revenue Code, which allow a person to give more than they would in a higher interest rate environment.  These tools are given various names by estate planners such as SCINs, GRATs, CLAT’s and IDGT’s.  Since the value of the gift is based upon interest rate tables shown by the IRS referred to as the” applicable federal rates”  and those rates are low, the low interest rates enable you to transfer more of your wealth tax free.

If you think that your children will need to borrow money (and they are a good credit risk), consider acting as their banker.  While you must have a note and proper collateral, just like the bank, using the IRS tables published in October, you can make a nine year fixed rate loan to your child for a rate as low as 2.63%, which your child will not be able to match in the open market.  Then you can collect the interest on the note for at least one year and forgive up to $13,000 ($26,000 if your child is married) of your child’s obligation each year, without incurring current gift taxes and also decreasing your potential future estate tax liability.

There are other more complex techniques where the low interest rates also help to minimize your future federal estate taxes and are most helpful to those persons with a higher amount of wealth.  One concept mentioned above is a SCIN, which is a self-cancelling note.  Using this technique, you sell an asset to a family member.  You, as the seller, agree to finance the sale and you provide the buyer with a note payable to you which stipulates that the unpaid balance will be cancelled when you die.

Another technique, the GRAT, is called a grantor retained annuity trust, allows you to transfer future appreciation on assets that you think may appreciate in the future to your children or other heirs.  Assuming that you live longer than the term of the trust, which may be two or three years, the balance in the trust will go to your heirs tax free of either gift or estate tax.  However, you if fail to survive the term of the trust, the amount reverts to your estate and may be taxable upon your death.

There is another technique referred to as a CLAT, a charitable lead annuity trust, which is a longer term strategy than a GRAT.  While a GRAT will revert to your estate if you fail to survive its term, a CLAT will not.  In a CLAT, property is placed in trust for a period of years during which a fixed amount is paid to a charity each year, with the remainder of the trust at the end of the term passing to non-charitable beneficiaries.  Using the CLAT, you may receive a large charitable deduction in the first year the trust is set up for the gift portion to the charity, but in that event, you are taxable from an income tax standpoint on the income that is being paid to the charity.

A technique that moves the assets out of your estate immediately and is not dependent upon your survival is a sale to an IDGT, an intentionally defective grantor trust.  This trust is perfectly legal and is not actually defective.  Using this estate freeze technique fixes the value of the asset that will be includible in your estate.

As you may be able to tell from this article, there are a number of perfectly legal techniques in which you are able to give more to your heirs due to the low interest rate.  Since these are more complex techniques, it is wise to use a trust attorney who specializes in this area to assist you in making these types of gifts.

Denice Gierach is a lawyer and owner of The Gierach Law Firm in Naperville. She is a certified public accountant and has a master’s degree in management. She may be reached at deniceg@gierachlawfirm.com. For more information on Denice and The Gierach Law Firm visit Gierach Law Firm

Article Source:http://www.articlesbase.com/personal-finance-articles/is-this-a-good-time-to-transfer-your-wealth-to-your-children-1366649.html

Advantages

• People with the lower credit rating can easily pay off their old debts with the help of such loans.

• Constantly repaying the installments of these loans is the most prominent way to re-build your credit rating.

• These loans can create goodwill of yours among the current creditors.

• Once you repay these loans completely, chances are better to acquire more loans at cheapest interest rates.

• You have the option of selecting either secured or unsecured loans according to your requirements.

Disadvantages

Usually, these loans are available with higher interest rates. In case, if some loans are available with cheapest rates, then they require you to mortgage your assets or property.

In order to acquire such loans, a person has to bear several expenses including application charges and processing charges.

These loans in turn increased your monthly expenses as you have to pay their monthly installments too.

Although these disadvantages are associated with these personal loans poor credit, but the enormous benefits provided by them weigh more than them. Moreover, all these disadvantages could be eliminated completely, if you are going for a genuine money lender. As far as searching the best moneylender is concerned, you can opt for both the online and sub prime lone providers.

For those who are interested in dealing with Personal Loans Poor Credit, it is vital to get familiar with their pros and cons. If you are also one of these people, visit the following website at http://www.personal-loans-for-people-with-bad-credit-info.com before you deal with any moneylender.

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This has been greatly helped with the advent of the internet era, as it is now easier than ever for bargain hunters to search for the best value deals, thanks to the plethora of price-comparison websites that now exist, covering nearly every product and service imaginable.

With bank accounts though, it’s probably safe to say that many people don’t give a second’s thought to what provider they use or what benefits come with their current account, and switching to a different account may seem like more hassle than it’s worth. After all, a bank account is just a place to have a salary paid into each month, right? Well, yes, but there are some key differences between the myriad of current accounts on offer.

Most people will be familiar with the no-frills, basic current accounts that offer a small amount of interest, online access and a cash card. The main advantage of these basic accounts is that they are usually free to operate and they offer 24-hour access through ATMs or internet banking. This may be fine for those with purely functional needs, but with low interest rates and no additional benefits, it may be worthwhile investigating other options.

For example, some accounts offer travel insurance, car breakdown insurance, mobile phone insurance, interest free overdrafts and many other advantages. Importantly, some bank accounts also offer a much higher level of interest which will benefit those who keep a large portion of their cash in their current account. These accounts often have a monthly fee attached, but with higher interest pay-outs and these other extra add-ons, it can be more cost-effective in the long-run.

Whilst it may seem like an upheaval to switch current accounts, a simple online search will reveal that bank rates can vary greatly between different accounts.

In terms of interest received, it can be anything between 0.1% and 4% per month, depending on the type of bank account. It’s important to look at the amount of interest that is applicable on things such as overdrafts too, as this can vary from 0% to 1.5% per month.

Getting the most from a bank account isn’t difficult and the internet is a valuable resource which will help identify the best current account in terms of interest rates and key benefits on offer. It certainly pays to shop around.

Daniel Collins writes on a number of topics on behalf of a digital marketing agency and a variety of clients. As such, this article is to be considered a professional piece with business interests in mind.

Article Source:http://www.articlesbase.com/personal-finance-articles/dont-lose-interest-in-your-current-account-1329842.html

There is an option to apply online for the loans so you need not visit any particular place or office. Just open your computer and press some soft keys to apply for the emergency cash loans to provide some basic details about you. All the details provided by you should be genuine in nature otherwise your application form for the loan can be cancelled. In online application form you will be asked to provide details like your name, contact number, account number, job information including monthly salary and residence address etc.

Approval process of emergency cash loans is so fast that it is easy to grab amount in your mentioned account same day or next working day. The lenders of described loans will not ask you to manage for guarantor or to provide any collateral even having bad credit in your past credit record. They just want that you should be currently employed in a reputed company, should have completed 18 years age, resident of UK and earn at least 1000 per month. If you are capable of qualifying described conditions, you need not worry about your urgency because you will soon get amount in your account. But have in mind that these lenders release loan amount for short term till your next payday and charge high interest rates. You have to repay loan amount on its due date with interest otherwise interest rates will get increased. So, try to repay loan amount on its fixed due date.

The repayment period for these loans ranges from 1 to 30 days and is so crafted that the borrower does not need to repay the loan amount until he gets his next pay check. The repayment period is generally fixed but can be extended with the approval of the lender. Any person with a salaried job can avail these loans irrespective of his credit history. Since this loan is available to people instantly, the rate of interest charged here is fairly high and increases if the applicant extends the repayment period. High rate of interest is only charged to minimize the risk involved in granting loans. These loans are unsecured in nature and do not require the pledging of assets as collateral. Before availing a loan a borrower must undertake proper research to get the best deal of lenders with low interest rates and longer repayment period.

EAST GREENWICH, R.I. — Drastic times call for drastic measures, and former Cranston Mayor Stephen P. Laffey didn’t pull any punches Saturday morning when telling a citizens’ watchdog group how he would solve the state’s staggering fiscal woes.

The City of Providence, which could easily topple the whole state if it doesn’t pull out of its downward fiscal spiral, needs to immediately file for bankruptcy, Laffey said, and state Treasurer Gina Raimondo should close the books on a crippled state pension program.

“Just end it — write the checks,” Laffey said as he addressed about 150 people gathered at the Varnum Armory for a financial symposium organized by Operation Clean Government.

“Just give [some employee] a check for $350,000 and say the truth; say we’re really sorry that they screwed it up over 40 years.”

“The City of Providence is never going to make a comeback,” he said later. “They need to file for Chapter 9 [bankruptcy] now.”

Citing that the state pension system is underfunded by billions of dollars and that the state budget has a huge structural deficit, Laffey, who now lives in Colorado, also urged the crowd to “humiliate” elected officials into doing their jobs properly. “It’s over for Providence. … It’s over for Rhode Island,” he said. “You people have to publicly humiliate your elected officials.”

Laffey’s remedies for the state were countered by more moderate measures suggested by other members of the morning’s panel, which included Gary Sasse, former state director of administration and former executive director of the Rhode Island Public Expenditure Council; House Finance Committee member Democrat Larry Valencia; and Edward Mazze, a college professor and former dean of the College of Business Administration at the University of Rhode Island.

There was a general consensus, however, among the panel members that Rhode Island’s state officials are lacking in the political will and gumption needed to solve the state’s financial problems.

“We have met the enemy and the enemy is us,” Sasse said, quoting an old Pogo comic strip. “There is an entitlement mentality in the state … and with the leadership that’s the problem. They are more concerned with special interest than the public interest.”

Valencia, who is serving his first time, said he has been surprised by the number of special-interest lobbyists and union leaders at the State House, but he said he believes that the state’s problems can be sorted out by people from all points of interest working together.

Some of his remarks drew catcalls and scornful criticism from people in the audience as opposed to the cheers and applause garnered by Laffey.

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Quick Cash Loans as the name suggests are speedy advances which are made available to the applicants to enable them to fulfil all their tasks, obligations and other needs instantly without delaying. These loans are very beneficial as they have certain amazing features. First of all, they have instant approval which allows a borrower to get a loan approval within minutes of submitting the application. Thus saves a great deal of time and energy of the debtor as he does not have to take extra efforts of waiting for approval for days together. Secondly, these advances are of short term and are granted for a month’s time only. Debtors can pay back the sum conveniently whenever they get their pay cheque.

In case a person does not have a very good credit score and cannot find finances elsewhere, he can avail these credit facilities without any difficulty as there is no credit check performed on the borrowers. This gives them a chance to improve their credit rating also. There is no requirement of placing any collateral in order to avail these finances. The only drawback of these loans is that it comes with a high rate of interest.

Quick Cash Loans are available for everyone online. One gets to choose the best deal online with the lowest interest rates as there are innumerable lenders and other financial institutions over the web.

In these types of loans, the lender provides you with a wide cash limit to choose from and you are also given sufficient time to repay your loan. Not only this, if incase you are unable to repay the borrowed sum, along with the interest levied within the stipulated time frame, you can also ask for an extension in period, which will be granted, along with an added amount of interest.

This Quick Cash Loans has attractive benefits. Mainly, as the lender understands the gravity of your situation, this loan is made available to you within 24 hours from your application time! Another advantage is that even bad debtors can apply to avail this fund. However, the interest levied is more than other loans.

You can also apply online to receive these loans. All you must do is provide your true details online. Once he lender is assured that your provided details are genuine, you are entitled to receive this loan.

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