Here’s everything you need to know about debt consolidation loans in UAE.
Debt is a common problem faced by many individuals in the UAE. With the high cost of living and numerous expenses, it’s easy to accumulate multiple debts, such as credit card bills, personal loans, and mortgages.
Juggling multiple debts can be overwhelming, leading to missed payments and high-interest rates, which can affect your credit score. This is where debt consolidation loans can help.
What are Debt Consolidation Loans?
A Debt Consolidation Loan allows you to combine all existing credit card debts and personal loans into a single loan with a lower interest rate.
Instead of making multiple payments to banks, you only need to make one payment to your debt consolidation provider.
Debt Consolidation loans are designed to simplify your finances, reduce your monthly payments, and lower your interest rates.
Features of Debt Consolidation Loans
Debt consolidation loans are ideal solution for individuals struggling with multiple debts. These features include:
- Lower interest rates – Debt consolidation loans usually have lower interest rates compared to credit cards and personal loans, which can help you save money in the long run.
- One monthly payment – With debt consolidation loans, you only need to make one monthly payment to your lender, making it easier to manage your finances.
- Extended repayment period – Debt consolidation loans have longer repayment periods, which can reduce your monthly payments and give you more time to pay off your debts.
- No collateral required – Most debt consolidation loans in UAE do not require collateral, such as your home or car, making them a safer option for those who don’t want to risk losing their assets.
Benefits of Debt Consolidation Loans
Debt consolidation loans come with several benefits that can help you manage your debts and improve your financial situation. These benefits include:
- Simplify your finances – Debt consolidation loans simplify your finances by combining all of your debts into one loan, making it easier to manage your payments and avoid missed payments.
- Lower monthly payments – With lower interest rates and longer repayment periods, debt consolidation loans can reduce your monthly payments, freeing up more money in your budget.
- Improve credit score – By consolidating your debts and making timely payments, you can improve your credit score and increase your chances of getting approved for future loans.
- Reduce stress – Managing multiple debts can be stressful and overwhelming. Debt consolidation loans can help reduce your stress levels by simplifying your finances and reducing your monthly payments.
What is Debt Management Plan?
A debt management plan (DMP) is a debt strategy that helps individuals to settle their loans at a manageable cost.
The main advantage of getting a debt consolidation loan is debt management. You pay off all your credit cards and personal loans at once, in exchange for just one monthly payment to your bank at a lower interest rate.
You also have the option to make smaller monthly payments by stretching out the loan tenor up to 7-10 years.
Types of debt that you can consolidate under a debt consolidation plan
The following types of debts can be consolidated :
- Credit Card Debt
- Personal Loans
- Credit Lines
Banks offering Debt Consolidation Loans in UAE
Consolidation is one of the most powerful tools for debt elimination.
- Abu Dhabi Islamic Bank [ADIB] Debt Consolidation Loan
Features of Abu Dhabi Islamic Bank Debt Consolidated Loan
- Flexible repayment option.
- It is possible to postpone installments twice in a year for free.
- Avail a grace period of 90 days for the first installment.
- Easy processing and huge finance amount.
- Get pre-approved ADIB Visa Cashback Card (Free for 1 year).
- Attractive profit rates.
- Zero processing fee.
2. Mashreq Bank Debt Consolidation Loan
Features of Mashreq Bank Debt Consolidated Loan:
- Salary transfer is required.
- Huge loan amount (Up to 1 million AED for expats and 5 million for UAE nationals)
- Flexible loan repayment tenure (48 months).
- Reduced interest rates.
- Avail a grace period of 120 days for the first installment.
3.FAB Debt Consolidation Loan
Features of FAB Debt Consolidated Loan
- DBR above 50% is considered. (Exclusively for UAE Nationals)
- Competitive interest rates.
- Salary transfer is mandatory.
- Most Flexible payment option – Up to 12 years.
Who Qualifies for a Debt Consolidation Loan in UAE?
- To qualify, you must be a salaried employee with an annual income of more than 7000 AED. Depending on the bank, you may need to meet a higher minimum income requirement.
- DBR [Debt to burden ratio ] should be less than 50%.
- Applicant must be a resident of the UAE.
- Should have unsecured debts to consolidate.
- You can only have 1 DCL active at any one time.
It's important to note that once you are enrolled in an active Debt consolidated loan, you cannot apply for a new credit card or loan in UAE for some period of time.
Documents Required for debt consolidation loan in UAE
- Salary transfer letter as per bank format.
- Residence visa and passport copy.
- Latest income statements. (3-6 months).
- Valid Emirates Id.
- Latest credit card and unsecured loan statements.
Frequently Asked Questions :
- Who can apply for a debt consolidation plan?
Only UAE citizens and expats with a valid visa and passport are eligible for a debt consolidation plan. On top of these, the bank offering debt consolidated loan may have further requirements while assessing your eligibility.
2. How much will you owe the bank under a debt consolidation plan?
After calculating your outstanding bills and interest, banks will add up some more interest charges for your first debt consolidation loan.
3. What kinds of debt can't be consolidated under DCP?
Secured loans like car loans and housing loans cannot be consolidated under DCP.
4. What else should you be aware of?
If your outstanding bills are very high, there's a chance that your approved DCP loan amount is not enough to cover all your debts.
5. Do consolidation loans hurt your credit score?
Debt consolidation loan can hurt your credit score in several ways, depending on which method you use. Debt consolidation loans normally do not appear on your credit reports but sometimes banks may ask you to close your credit accounts which may impact your credit scores.
Lowering your debt may help your credit score over time.
Conclusion:
If you’re struggling with multiple debts in the UAE and Dubai, debt consolidation loans can be a lifesaver. By combining all of your debts into one manageable monthly payment, debt consolidation loans can simplify your finances, reduce your monthly payments, and improve your credit score.
It’s essential to choose a reputable lender that offers debt consolidation loans with reasonable interest rates, repayment periods, and fees.
With the right debt consolidation loan, you can say goodbye to your multiple debts and hello to financial freedom.
