Some resort to real estate loan in order to obtain the necessary financing to purchase a housing unit, real estate or even a piece of land, and the mortgage loan is often linked to monthly installments with fees and costs of obtaining it, and some may fail to repay these loans, which requires imposing penalties on customers who default on loan repayment.

According to the Saudi Central Bank SCB “SAMA”. According to Saudi Central Bank, financing is a credit instrument that allows the customer to borrow a certain amount of money to achieve his financial goals, provided that he commits to repay this amount, plus the associated costs, in the form of periodic installments agreed upon under the financing contract.

The central bank explained on its website that defaulting on installment payments may occur as a result of sudden changes in the customer's financial situation or due to mismanagement of borrowed funds, and failure to allocate part of the monthly income to pay the due installments.

<According to SAMA, a person becomes a defaulter if he/she loses the ability to pay his/her financial obligations to the licensed financing entities. In such cases, the lenders update the customer's credit report with licensed credit information companies in the Kingdom, such as the Saudi Credit Information Company. The Bank explained that the penalties for defaulting on loans vary according to the circumstances of the customer and the terms and conditions contained in the financing contract, the most prominent of which are:

These penalties include:

• Difficulty in obtaining other financing: A defaulting customer can find it very difficult to obtain new financing in the near future, given the deterioration of their credit rating.
• Freezing of bank accounts and seizure of assets: The client's bank accounts may face actions such as freezing or seizure of balances, depending on the decisions of the competent authorities.
• Property seizure: If the financing is collateralized, the customer's property may be seized in accordance with applicable laws and regulations.
• Liability and prosecution: The client may be subject to legal liability and prosecution by creditors to recover their rights.

<The Saudi Central Bank stressed that financing entities must take into account the circumstances of the defaulting customer when issuing any court judgment in their favor. These entities must provide the option of rescheduling the debt to the customer, with the possibility of adjusting the cost of financing without imposing additional fees.

<SAMA requires banks and finance companies not to deduct any amount from the customer's account without a court ruling. However, financing entities have the right to take legal action against defaulting customers, including resorting to the competent judicial authorities. Provided that the customer is notified before any action is taken if he/she fails to pay for more than three consecutive months or five separate months during the financing period, and that the last attempt to contact the customer is through the national address.

To avoid defaulting on a loan, the customer must be contacted via the national address. To avoid defaulting on the loan, the Saudi Central Bank has provided four important tips for customers:

1. Borrow for necessities only: Ensure that borrowing is limited to what is important and necessary, and avoid borrowing more than is actually needed.
2. Organize your finances: Ensure that the monthly income is sufficient to cover monthly expenses as well as loan installments.
3. Ensure adequate credit: The customer should ensure that there is sufficient balance in their account before the due date of installments to avoid delays in repayment.
4. Notify the bank immediately if financial circumstances change: Such as a change in salary or job, or any other changes that may affect the customer's ability to fulfill outstanding financial obligations.

By following these guidelines, customers can avoid defaulting on mortgage loans, helping them maintain their credit rating and avoid financial and legal issues.

Following these guidelines, customers can avoid defaulting on mortgage loans, helping them maintain their credit rating and avoid financial and legal issues.