Understanding the Potential Impact of Unpaid Loan on Family Members in Saudi Arabia

Table of Contents

unpaid loans in saudi arabia

In July 2023, the Philippines’ migrant workers’ department announced that four Filipino expats, who had been imprisoned in Saudi Arabia for three to five years, were finally flown back home after being granted pardon. These expats were detained in a deportation facility due to debts they had incurred while previously working as technicians, a driver, and a merchandiser in the Kingdom.

In the Kingdom of Saudi Arabia, like many other countries, individuals may find themselves facing financial challenges that lead to unpaid loans. While the immediate consequences of unpaid loans in Saudi Arabia are evident for the debtor, there is often an overlooked aspect – the potential impact on their family members. Unpaid loans in Saudi Arabia can have wide-ranging effects on the financial, emotional, and social well-being of the debtor’s spouse, children, and other dependents. This blog post aims to shed light on the various ways in which unpaid loans can affect family members in Saudi Arabia and the measures that can be taken to mitigate these consequences.

The Background

Approximately 60,000 individuals in Saudi Arabia are currently facing challenges in repaying their loans, according to Abdullah Marei bin Mahfouz, chairman of the Jeddah branch of the national committee for the care of prisoners and their families. Among them, around 300 Saudis are currently imprisoned due to their inability to settle their bank debts. Additionally, approximately 500 prisoners are unable to pay off credit card debts and car installments.

Between 2009 and 2011, the payment system’s improved effectiveness, which protects banks’ rights, contributed to a decline in the number of individuals borrowing money for consumer goods purchases. However, some Saudis still acquire debts to fund extravagant summer vacations or buy luxury cars despite the strict procedures implemented by banks.

Bin Mahfouz pointed out that many debtors who are unable to repay their loans resort to purchasing multiple cars on installment plans and then selling them for cash. Unfortunately, in most cases, these borrowers are still unable to refund the car installments.

In certain situations, husbands compel their wives to borrow money for them. Currently, six women are imprisoned for being unable to repay debts taken out at the insistence of their husbands, despite working as teachers.

The bank system is stringent in its debt collection efforts. If money is not repaid on time, the bank freezes the debtor’s account, halts all electronic transactions, and issues notifications through the police department.

Most of the incarcerated debtors are Saudis, while expatriates tend to be more committed to settling their debts. Filipino debtors make up a small portion of those in prison, primarily due to credit card debts starting at around SR 10,000. On the other hand, Saudis with debts of SR 100,000 or more are more frequently imprisoned.

The Saudi Arabian Monetary Agency (SAMA) recently reported that consumer debts reached SR 246.9 billion in the first quarter of 2012, a 19 percent increase from the previous year. SAMA warned banks against rescheduling unpaid debts of individuals and stressed that 45 percent of debts should be repayable within three years.

Fadhel Albu Ainain, a Saudi banker, expressed concern over the high ratio of consumer debts, estimating it to be about 75 percent. He believed that the entrance of the mortgage law might lead to a decrease in this ratio. He stated that many borrowers, mostly employees with low salaries, tend to incur debts to maintain luxurious lifestyles. Albu Ainain opposed increasing the payment period to more than five years or raising the maximum borrowing amount, as it could further strain borrowers’ ability to repay their debts.

Financial Strain and Stress on the Family

When an individual accumulates unpaid loans in Saudi Arabia, it creates a significant financial burden on the entire family unit. The debtor’s spouse may face stress and anxiety, knowing that the family’s financial stability is at risk. The pressure of managing daily expenses, bills, and possibly even servicing the debtor’s loans can be overwhelming. In some cases, spouses may have to take on additional jobs or increase their working hours to compensate for the financial loss caused by the unpaid loans.

Under Saudi Arabian law, family members may become jointly liable for the loans of the debtor, depending on the type of loan and the agreements in place. If the spouse is a co-signer or has co-guaranteed the loan, they may be held responsible for the loan repayment. Such legal implications can lead to legal actions against the spouse, further exacerbating the family’s financial and emotional stress.

Impact on Children and Education:

The financial strain resulting from unpaid loans in Saudi Arabia can directly impact the well-being and future prospects of the debtor’s children. Education, an essential aspect of a child’s development, may suffer due to lack of funds. The inability to pay for quality education or extra-curricular activities can limit a child’s opportunities and potentially hinder their academic growth. Moreover, children may experience emotional distress due to witnessing their parents’ financial struggles, leading to feelings of insecurity and anxiety.

Social Stigma and Relationships

In Saudi Arabian society, financial status can carry significant weight in interpersonal relationships. Families facing financial difficulties due to unpaid loans may experience social stigma and ostracization. This could lead to a sense of isolation for both the debtor and their family members, affecting their mental well-being and overall quality of life.

Impact on Mental Health

Unpaid loans in Saudi Arabia can be a major source of stress and anxiety for the debtor and their family members. The constant worry about loan collection, legal consequences, and financial uncertainties can take a toll on the mental health of everyone involved. It may lead to depression, strained relationships, and other psychological issues, affecting the overall harmony within the family.

Strategies for Mitigation:
a. Open Communication: The first step in mitigating the impact of unpaid loans in Saudi Arabia, and on family members is open and honest communication. Spouses should discuss the financial situation openly and work together to find solutions.

b. Seeking Professional Assistance: Engaging financial advisors or counselors can provide valuable guidance on loan management and budgeting. These experts can help create realistic plans to repay loans and alleviate financial stress.

c. Legal Advice: If facing legal implications, seeking legal counsel is crucial to understanding the rights and responsibilities of family members regarding the unpaid loans in Saudi Arabia.

d. Financial Planning: Implementing effective financial planning and budgeting practices can help stabilize the family’s financial situation and safeguard against future loan issues.

e. Parental Support: Parents can offer emotional support to their children during challenging times, ensuring that they understand the situation while reassuring them of their love and commitment.

Unpaid loans in Saudi Arabia can have far-reaching consequences on family members. The financial, emotional, and social impact can create a challenging environment for everyone involved. It is essential for individuals to proactively address their financial challenges, seek professional help, and communicate openly with their family members. By taking the necessary measures and fostering a supportive environment, families can navigate through difficult times and emerge stronger together. Remember, acknowledging the potential impact of unpaid loans on family members is the first step towards finding solutions and ensuring a more secure and harmonious future.

Start resolving Unpaid Loans in Saudi Arabia

Unsure if Banks Have Filed a Case for Unpaid Loans in Saudi Arabia?

Shopping cart


No Service Requested.

Continue Shopping


Expert local Lawyers. five Day Turnaround With Reports. Fully Online Service. All International Cards Accepted.

Pioneers in GCC Legal Tech with 15 years of service. 250,000+ clients served.