Personal Loan in UAE is recognized as the amount which can help the individuals to manage their expenses without using their own savings. Sometimes, people needs lots of money for the home improvement, education, medical expenses, clearing debts or travel then they can take Personal Loan in UAE from bank or other financial institutions. There are different types of personal loads which you can take according to your eligibility.
Before applying for a loan, it is important for the people to know about Personal Loan in UAE, who can apply, required documents, interest rates, repayment commitments and many more. This guide contains detailed information about the personal loans. So, we suggest you to read it carefully before submitting any application for the loan.
What is Personal Loan in UAE?
Personal loan is considered as a type of finance which is mainly provided by bank or financial institutions to an individual. The borrower will receive the specific amount once their loan gets approved and then they have to repay it on installments over an agreed time period.
Personal Loan in UAE is mainly used for the personal expenses. This finance is mainly available for the salaried person, self employed or even other eligible customers. You should know that the loan amount, interest rates, eligibility and repayment period vary between the lenders.
Sometimes, personal loads are approved against salary while other can have different structure. So, you cannot compare the terms of different loans.
How does Personal Loan in UAE works?
You need to know that the basic process is straightforward.
Firstly, a customer applies for a specific loan according to their requirement. Then the bank evaluates the application by different factors such as income, existing loans or commitments, credit history, employment etc.
When you match the eligibility criteria then application gets approved. The lender will provide the amount according to the agreed terms. The borrower has to pay the monthly installments until the amount and interest is fully paid.
You need to know that installment will also include the financing cost which is a portion of the principal amount.
For Example, if you have applied for the loan for AED 50,000 and agree to repay it for several years. Then the installment will also include the applicable interest and other charges. A longer repayment period will reduce your monthly installment but increases the total financing cost over the life of the loan.
Who is Eligible to Apply for Personal Loan in UAE?
You need to know that there are different eligibility criteria which you should meet in order to get your loan approved. The common requirements are mentioned below:
- You must be a resident of UAE.
- You should meet the minimum age requirement.
- Must have a regular source of income
- Must meet the minimum monthly salary requirement
- Having acceptable credit history
- Provide a valid identification and supporting documents.
You should know that some banks offers personal loans only to the UAE residents while some gives to expatriate residents. However, the conditions will differ between various categories.
The applicants who are self employed may also have to complete different documentation or eligibility. It will be different from salaried employees.
What is the Minimum Salary Requirement for Personal Loan in UAE?
You need to know that the minimum salary required for a personal loan generally varies from one bank to another.
Some banks can approve the loan even with relatively lower salaries while other demands higher monthly income. In fact, the minimum salary can depend on the type of loan, employer category etc.
If you meet with the minimum salary requirement then it does not mean that your loan is automatically approved. Banks consider various factors which include existing loans, obligation on credit card or overall repayment capacity.
What are the Required Documents for a Personal Loan in UAE?
Applicants have to submit various documents in order to proof the applicant’s identity, employment as well as income. The common documents are mentioned below:
- Emirates ID
- UAE residence visa if applicable
- Passport
- Bank statement
- Salary certificates
- Application form
- Proof of employment
- Additional documents will include for self employed applicants
The exact document will depend on the bank as well as circumstances of the applicants.
It is essential for the applicants to provide accurate and updated information. If you will submit incomplete application or inconsistent documents then it can delay the process.
What is the Interest of Personal Loan in UAE?
Applicants must know that interest rates is one of the most important factor when you are thinking for a personal loan.
Sometimes, lenders in UAE advertise rates by using different method. So, it is essential for the customers to understand whether the quoted rate is calculated on a reducing balance or use any other basis.
You should know that a Reducing rate structure will calculate the financing charges based on the outstanding principal whereas the flat rate structure calculates the interest completely different.
Two loans with similar advertised rates can have different overall costs.
Before taking a loan, you should not only compare the handling rate but also know about the total repayment amount, monthly installments, processing fees as well as other applicable charges.
What is Fixed and Variable Interest Rates in Personal Loan in UAE?
Customers should know that personal loan can have different rate structures.
Fixed Rate Arrangement: If you will choose the fixed rate arrangement then the rate will remain unchanged for the agreed period of time.
Variable Rates: If you will choose variable rate then the rate will change according to the applicable benchmark or contractual terms
So, before signing any type of agreement, customers must understand about the interest rates. You must ask about changing interest rates if applicable and how it would affect the monthly payments.
What is Loan Repayment Period?
Actually, the repayment period is considered as the amount of time which is provided to the customers to repay the loan.
However, it depends on the product and lender; the personal loans are available for different tenures.
Customers should know that longer tenure will results in lower monthly installments but it will increase the total financing costs.
A shorter repayment period will increase the monthly installment but reduces the overall financing costs.
Actually, the right repayment period will depend on the borrower’s income, existing commitments as well as the ability to manage the monthly repayments.
What are Credit Score and Personal Loans?
Applicants should know that their credit history plans an important role at the time of applying for Personal Loan in UAE.
The Al Etihad Credit Bureau (AECB) maintains the credit information of the people which lenders can use at the time of evaluating applications.
If you have a history of making the loan as well as credit card repayment on time then it will provide you a stronger credit profile. If you will miss or make delayed payments then it will pose negative impacts on the credit worthiness.
How to Apply for a Personal Loan in UAE?
You need to know that the application process can be completed through a bank or even online depending on the lender. The general process may include:
Step 1: Compare Loan Product
Applicants should start by comparing the available personal loans. You should carefully look at the interest, profit rate as well as repayment period. You should check the fee, loan amount and eligibility requirements.
Step 2: Check the Eligibility Criteria
Applicants should make sure that they meet with the basic conditions such as minimum salary, age, residence and employment requirements.
Step 3: Prepare the Documents
Applicants are advised to keep their Emirates ID, passport, visa, documents related to income ready. There are also many other additional paperwork which you will require depending on the employment status.
Step 4: Submit the Application
Once your documents are arranged, you should submit your application to the bank or other finance institution.
Step 5: Credit Assessment
After submission, bank will begin the evaluation process. They will carefully evaluate your application, income, credit profile as well as existing financial commitments.
Step 6: Approval or Disbursement
If your data and documents are correct then loan will be approved and you will get the amount in your bank account. You should always read the loan agreement carefully.
What happens if you miss the monthly installment of Personal Loan in UAE?
Missing a personal loan payment can result to additional charges. Even more, it will also pose negative impacts on your credit record.
If you will miss the monthly payment repeatedly then it can create more serious financial difficulties which will affect your ability to obtain any other loan in future.
If you are facing any difficulty in making the payment then you should immediately contact with the bank instead of ignoring the situations. The bank will provide the available options according to the terms as well as UAE regulations.
Final Thoughts:
A Personal Loan in UAE will provide a access to financing money for personal expenses. However, the terms and conditions will differ between banks and financial institutions.
Before applying for a loan, you must check the eligibility, minimum salary, loan amount, repayment period, document requirements etc.
Applicants are advised to understand their own repayment capacity and complete the repayment in the given period of time. You can also compare various options and focus on the total cost instead of checking the advertised rate.
The loan rates, fees and eligibility criteria can always change so you should check the latest information directly with the UAE bank before submitting the application.