Loan fees in Bahrain: what CBB allows

What a bank in Bahrain may charge on a loan besides the interest (or Islamic profit). CBB fixes the caps in Appendix BC-7 of its Rulebook for conventional retail banks and, with the same caps, in Appendix BC-8 for Islamic retail banks.

Processing fee: at most BHD 100 on a personal or car loan, and BHD 200 / BHD 300 / BHD 500 on a home loan by loan size. Paying off early: the lower of 1% or BHD 100 on a consumer loan and the lower of 0.75% or BHD 200 on a home loan — the most a bank may charge, plus VAT. VAT of 10% is added to bank fees, early-settlement fees included; the interest itself carries no VAT.

Not a valid document. Estimate for information only — not financial advice, not an offer of credit and not a bank document. Errors are possible. Only your bank's or finance company's official offer letter, contract and statements are binding.

The fee caps

Paying off early: where the cap switches

Paying off a consumer loan early, fully or partly: at most 1% of the outstanding amount or BHD 100, whichever is lower (plus 10% VAT on the fee). Paying off a home loan (residential mortgage) early, fully or partly: at most 0.75% of the outstanding loan or BHD 200, whichever is lower (plus 10% VAT on the fee). The early-settlement caps cover existing loans as well as new ones. Because the cap is the lower of a percentage and a fixed amount, the percentage applies to smaller balances and the fixed amount to larger ones. 10% VAT comes on top of the fee, and your bank may charge less than the cap:

• Consumer loan: 1% equals BHD 100 at an outstanding balance of BHD 10,000.000. With BHD 6,000 outstanding the charge is at most BHD 60.000 + BHD 6.000 VAT = BHD 66.000; with BHD 15,000 it is at most BHD 100.000 + BHD 10.000 VAT = BHD 110.000.
• Home loan: 0.75% equals BHD 200 at an outstanding balance of BHD 26,666.667. With BHD 20,000 outstanding the charge is at most BHD 150.000 + BHD 15.000 VAT = BHD 165.000; with BHD 80,000 it is at most BHD 200.000 + BHD 20.000 VAT = BHD 220.000.
• Part payment: the cap is the same — worked out on the outstanding amount, not on the part you prepay.
• Islamic banks, and CBB-licensed financing companies on Sharia-compliant financing: on early repayment the profit is limited to one month's profit — that of the month in which you repay (since 1 October 2011).

Work it out: early settlement calculator.

VAT on fees

Bank fees carry 10% VAT — arrangement and processing fees and other bank charges such as early-termination (early-settlement) and late-payment fees; the interest (or Islamic profit) itself is VAT-exempt. So a processing fee of BHD 100 costs BHD 100.000 + BHD 10.000 VAT = BHD 110.000, and an early-settlement fee carries the same 10% VAT (above). The calculators on this site take fees before VAT and add the 10% themselves: personal loan calculator · car loan calculator · home loan calculator.

Insurance, notice and other protections

• Insurance: If a bank asks for insurance on a loan, you may bring your own policy; if the bank arranges it, it may charge only the actual cost.
• Third-party costs: Valuations, insurance and government fees (registration, notarization, title-deed release) may only be passed on as billed by the third party.
• Notice of a rise: A bank must tell you at least 30 calendar days before it raises a rate, fee or charge, so you can accept or settle the loan.
• No flat rates: Banks must not charge interest using a monthly flat rate: they must use an effective rate on the reducing balance (since October 2019).
• Postponing an instalment: free when the bank offers it, at most BHD 10 when you ask.

Credit cards

Using a card abroad or in another currency: at most 3%, all inclusive. Spending BHD 500 abroad can cost at most BHD 15.000 in conversion charges. CBB sets no card interest cap and no minimum-payment percentage — see credit card: the minimum payment trap. A card also counts at 5% of its limit in the 50% check: loan limits: the 50% rule.

CBB's limits come from its Rulebook (Volume 1 for conventional banks, Volume 2 for Islamic banks, chapter CM-5 Consumer Finance, June 2022, and the fee caps in Appendix BC-7 / BC-8). Your bank's offer and its own credit review are what count.

Financing companies

Besides banks, CBB licenses financing companies. CBB-licensed financing companies follow Volume 5 of the Rulebook. Their fee table (Appendix BC-2, from 1 May 2018) caps early or part settlement like the banks' — the lower of 1% or BHD 100 on a consumer loan, of 0.75% or BHD 200 on a home loan — and an instalment postponement you ask for at BHD 10, but it sets no cap on processing fees: ask the company for its fees in writing. On Sharia-compliant financing they follow the same rule as Islamic banks: on early repayment the profit is limited to one month's profit. A loan from a financing company still counts in a bank's 50% check.