Personal loan is a loan, which establishes consumer credit that is granted for personal use. It is typically unsecured and based on the integrity of borrower and his ability to repay.
Features of personal loans in UAE:
The main feature of personal loan in UAE is that it is unsecured by any collateral, and this applies to even personal loan to those who are not salaried.
Collateral is just any economic resource of fundamental value such as car, boat or house, which can be repossessed by a lender in case borrower forfeits on repayment of the loan.
Let’s check out how do personal loans in UAE work!
Every bank in UAE stipulates a maximum amount of loan provided to you. After you estimate how much you require, you can compare loans where the maximum pay-out is higher than you require.
Need of minimum salary
Every bank in UAE imposes a minimum level of salary you need to earn if you want to qualify for a loan. When you are searching to compare loans, choose only those with a minimum salary requirement that is less than your monthly remuneration.
Fees for arrangement
Arrangement fees are charged by the bank as soon as you take the loan and are clubbed with your principal loan amount. In some cases, arrangement fees may be offered at 0% interest, but this can rise to AED 600 or 2% of your loan amount.
Early fee for settlement
In case, you are planning to take a loan for 5 years but wish to pay off the loan much before, early settlement fee becomes a crucial factor in your judgment.
This is a fee imposed on you when you want early payoff of your loan.
You must take great care on checking the fine print because early settlement fees apply only if you settle in cash and not in case you are refinancing.
Types of interest rate
The rate of interest is a crucial criterion for raising a personal loan. But this issue is subject to much confusion.
The rate on the personal loan can be estimated in two ways: a flat rate and a reducing rate. Reducing rate is estimated on the outstanding balance of your loan.
In contrast, a flat rate is estimated on the principal amount of your loan, throughout its duration.
Hence a loan at a reducing rate of 8% is equivalent to a flat rate of 4.41%. Take care while making comparisons because one bank may be offering a flat rate loan while the other, a reducing rate loan.
Banks in UAE have various rates of loan for different customers who wish to open an account and have their salaries transferred to that account on a monthly basis from their employer as opposed to a person who does not transfer his salary.
The customers, who transfer their salary, are regarded as less risky, and the banks offer them loans at very less rate. Some banks do not provide personal loans to customers who do not transfer their salary to them.
In UAE, some Islamic banks follow the Shariyah Law according to which charging interest rates on loans is forbidden. Thus, you can check out for attractive loans from such banks.
Company that is not listed
In case, your employer is not listed with a bank; this will make it extremely tough to get a loan.
Extending personal loans
In case, you need to extend your personal loan; there are many options. You can get in touch with your bank to explore whether they are happy to extend your current loan. You can even have another bank to buy out your loan, which is called as re-financing.
This option helps you by merging all your loans into one loan. So, whether there are overdrawn credit cards or personal loans, there will be an offer by banks to combine these debts into one balance, which you can pay off easily.
These are all some aspects of taking personal loans in UAE. Whatever be the reason for taking out a personal loan, ensure you compare them, their arrangement fees, settlement fees, and rates.
It is also good to grow familiar with customer service level of the bank before taking on personal loans.
[…] Firstly you need to understand how personal loans in UAE works . […]