UAE: Took a car loan for my friend, now he’s refusing pay back: What to do?
This guide outlines the responsibilities, risks and steps you can take to protect yourself
Dubai: Are you considering financing a car for a family member, friend, or loved one? Whether it is for your child who just reached driving age, your spouse, or a friend in need, it is important to understand the implications before committing to a car loan.
Who is responsible for the loan?
According to Yasmine Luqman, a Dubai-based lawyer, if the car loan is under your name, you are responsible for the repayment, regardless of who actually owns the car.
“If the car loan is in your name, then you are responsible for repayment, regardless of who owns the vehicle. If the loan is in your spouse or friend’s name, then they are liable for both the loan and any vehicle issues as the owner, even if you make the payments. Liability is tied to the name on the loan agreement,” she said.
If the car loan is in your name, then you are responsible for repayment, regardless of who owns the vehicle. If the loan is in your spouse or friend’s name, then they are liable for both the loan and any vehicle issues as the owner, even if you make the payments. Liability is tied to the name on the loan agreement
Who owns the vehicle?
The ownership of the vehicle is defined by the registration. As Sunil Ambalavelil, principal partner at Nasser Yousuf Alkhamis Lawyers (NYK Lawyers) and Legal Consultants, explained, “If the car is registered in someone else’s name, such as your friend’s or spouse’s, they are the legal owner. This means they are responsible for all matters related to the vehicle, including traffic fines, insurance, and other legal obligations.”
You will not be financially liable for the loan if it is in their name, unless your name is also on the loan agreement. In such cases, both parties may share the repayment responsibility.
What happens in case of a loan default?
If the loan is not repaid as agreed, the bank may take action against the borrower, including repossessing the vehicle or initiating legal proceedings to recover the outstanding amount. “Typically, the bank will pursue the individual named in the loan agreement,” Ambalavelil said. Ignoring loan payment demands could even result in a travel ban.
Should the loan not be repaid as agreed, the bank may take action against the borrower, including repossession of the vehicle or initiating legal proceedings to recover the outstanding amount, typically pursuing the individual named in the loan agreement.
Can you share loan responsibility?
Gulf News spoke to a banking official in the UAE who shared that alternatively, you can apply for a joint car finance application, if you want to share the responsibility of the loan payments with a family member or friend. This will lead to both parties having equal responsibility for car payments.
What if the car needs to be sold?
If the car needs to be sold, the person named in the finance agreement will need to settle the loan before transferring ownership. “The individual whose name is on the loan agreement holds the primary legal responsibility for ensuring payments are made,” the banking official clarified.