SAMA places significant importance on enhancing the protection of the rights of beneficiaries of financing products and promoting transparency and disclosure principles through the application of technical standards and international best practices aimed at improving transparency, disclosure, and fairness in transactions within the sector. Early repayment is considered a right for beneficiaries of various financing products. Therefore, SAMA has mandated financing providers (banks/financing companies) to use a unified method for calculating the early repayment amount for financing contracts with monthly payments, such as personal financing, vehicle financing through leasing or other means, and real estate financing, to enable beneficiaries to understand their rights.

This guide has been prepared to provide a simplified explanation of the early repayment amount and the method for calculating it, based on the provisions of Article (82) and (84) of the Implementing Regulation of the Finance Companies Control Law issued in the month of Rabi' al-Thani 1434H corresponding to February 2013 G , Article (9) and (11) of the Implementing Regulation of the Finance Lease Law issued in the month of Rabi' al-Thani 1434H corresponding to February 2013G, and Article (11) of the first update to the Regulations for Consumer Financing  issued in the month of Ramadan 1431H corresponding to July 2014G.

Financing regulations, their implementing regulations, and consumer finance controls ensure that beneficiaries of financing products can expedite the repayment of the remaining loan amount at any time, except during the period of prohibition on early repayment for real estate financing if specified in the contract, provided that the prohibition period does not exceed two years from the date of contract execution. This early repayment is made without incurring the term cost for the remaining period. However, the financing entity is entitled to receive compensation from the beneficiary for the following:

1. Use the declining balance method to distribute the term cost over the maturity period, with the term cost allocated proportionally among the installments based on the remaining balance of the financing amount at the beginning of the period for which the installment is due.
2. The amortization table must specify (number of payments, payment date, payment amount, term cost amount (profit) and principal amount for each payment, remaining balance of the financing amount after each payment
3. When opting for early repayment, the total remaining balance of the finance amount must be paid in full, along with the term cost for the three months following the repayment, calculated based on the declining balance.

1. How is the declining balance method used to distribute the term cost?

The financing contract must specify the use of the declining balance method to distribute the term cost over the repayment period, with the term cost allocated proportionally among the installments based on the remaining balance of the financing amount at the beginning of the period for which the installment is due.

2. Can the lessee acquire the leased asset early?

If the lessee opts to acquire the leased asset under the contract at any time, they may do so through an additional agreement that finalizes the sale or gift. This involves settling the remaining installments early without bearing the term cost for the remaining contract period. The lessor may be compensated for reinvestment costs and any payments made to a third party due to the financing contract. The contract may specify a period during which early acquisition is prohibited if the contract concerns real estate, provided the prohibition does not exceed two years from the date of the financing contract.

3. Can the beneficiary repay the entire remaining amount of the financing early? Will they incur the term cost for the remaining period?

The beneficiary can repay the entire remaining balance of the financing amount early at any time without incurring the term cost for the remaining period. However, the financing entity should be compensated for reinvestment costs, which should not exceed the term cost for the three months following the repayment, plus any payments made to a third party due to the financing contract.

4. Can the beneficiary repay part of the remaining financing amount early?

There are no regulations or implementing regulations that prevent early repayment of part of the remaining financing amount. The updated consumer financing regulations require the financing entity to accept any partial repayment under the financing contract before its due date, equivalent to one installment or its multiples.

5. Is there a specific period that must elapse before early repayment is allowed?

The real estate financing contract may specify a period during which early repayment is prohibited, provided that this period does not exceed two years from the date of the real estate financing contract. This also applies to leasing if the contract concerns real estate.

6. Can the financing entity refuse early repayment of the remaining financing amount?

The financing entity cannot refuse early repayment of the remaining financing amount if the beneficiary requests it. However, the real estate financing contract may specify a period during which early repayment is prohibited, provided this period does not exceed two years from the date of the financing contract.

7. What compensations can the financing entity receive in case of early repayment of the remaining financing amount?

The financing entity is entitled to compensation from the beneficiary in case of early repayment for: