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Summer vacations leave many heavily in debt
The lure of vacations abroad is leading many people into debt they can't repay.
June 12, 2010 10:37 by Samuel Potter
With school vacation closely around, large numbers of citizens and expatriates are approaching banks and car showrooms for loans to finance their trips abroad.
They feel happy when they get the loans but their suffering starts when they come back and discover that their salaries are being cut monthly to pay installments and that will continue for three to four years.
One loan seeker described obtaining credit as anesthesia out of which one will soon come out to be shocked by the reality that the vacation is over but the money spent on it has to be returned.
Talib Hussein, a private sector employee, said that under persistent persuasion of his wife and children he agreed to take them on a vacation abroad. He went to a bank seeking a loan but the bank turned down his request because his salary was only SR3,800. He said his friends advised him to go to a car showroom, buy a car on installment and resell it at a lower price to obtain cash.
“I went to a car showroom, quickly finished all the procedures, bought a mini-truck at SR70,000, sold it at SR55,000 and traveled abroad with my family but when I came back I was faced by the harsh reality that I have to pay for the car a monthly installment of SR1,500 which will continue for four years,” he said.
Hussein said the monthly installments and the daily needs of the house and the family left him totally broke.
Ziyad Amin said his life almost ended up in jail because of a loan he took for vacationing abroad. He recalled that three years ago he obtained a loan of SR50,000 from a commercial bank on condition of paying it back in three years in monthly installments of SR1,800.
“A year later I started to suffer from financial problems,” he said. “I was forced to borrow from my friends to pay the installments. They started demanding their money.
I had no option but to buy a car from a showroom on installment and sell it at a much lower price only to obtain cash to repay my friends. I became indebted both to the bank and to the car showroom,” he said.
Amin said then he had to sell his own private car, his furniture and the gold jewelry of his wife in order to be able to pay both to the bank and the showroom.
“When I defaulted on installment payments, the car showroom took me to court, which put me in jail until I paid. Some philanthropists came to my rescue. They repaid all my debts and I am now a free man thanks to them,” he said.
An employee at one of the car showrooms said the owners of the showroom are aware of the phenomenon of buying cars and selling them for lower prices to get extra cash.
“The same car is bought and sold several times generating a lot of profit from this process,” he said.
A source at a car showroom, who also did not want to be named, estimated that about 3,000 cars are annually sold and then bought back at a profit.