UAE Residents have several options to finance purchases or to meet certain expenses. Savings is probably the best option to start with, but for those who are on tight budgets there are other options such as Credit Cards and Personal loans in Dubai, UAE. While there are several other options which are mushrooming across the globe for instance, peer to peer lending and alternate finance, the most prominent and favoured one is the Personal loan which has several advantages over the rest. UAE banks offer personal loans up to AED 1 Million based on several qualifying factors.
Personal loans are generally preferred due to the following reasons:
- Easy to avail – Simple and easy documentation. Most banks don’t even need a bank statement these days as they would be able to verify your salary details from your bank thorugh your IBAN, of course based on your authorization.
- Short term generally – Payback period can generally be as short as 1 year
- With or Without Salary transfer
- No collateral required
- Clear visibility on interest that one would end up paying for the entire loan availed.
This article primarily focuses on certain key aspects of personal loans that one should be aware of prior to signing on the dotted line-
1. Compare Personal Loans
It is important that one is aware of the various loans available in the market. UAE banks offer personal loans both with and without salary transfer. The ones without salary transfer, loans are offered on higher interest rate than the ones with a salary transfer. To compare loans, best places to refer are the comparison sites which are a one stop place to do research prior to signing up.
Make sure you do the math, refer to the interest rates, fees and processing charges. You can compare personal loans offered by UAE banks here
2. With or Without Salary Transfer?
It is always wise to take a personal loan with a salary transfer as the interest rates are as low as 5%. However, you will have to also check with your HR if they are fine in transferring salary to the bank of your choice. Normally, HR has a tie up with certain banks for processing salaries and the best place to start would be to identify the banks from your HR.
A salary transfer loan would need a letter from your HR in the format as specified by the bank. A personal loan without a salary transfer is recommended as a second loan or when someone is not eligible for a top up loan on their current salary transfer loan. This type of loan does not require a salary transfer letter from your HR but might need just a salary certificate.
3. Credit History dictates your loan interest rate or cost to borrow
Most of the banks in UAE have moved to a credit score / credit history-based interest rate. A high credit score would mean a lower interest rate.
Please refer to the article to learn about credit history and how to maintain a health credit score
4. Other eligibility criteria
Apart from credit bureau, banks also look at:
Work information: Employer, Designation, Years in Work, Fixed and Variable income
Debt Burden: Percentage of liabilities (financial obligations one owes on a monthly basis like Loan EMIs, minimum dues on credit cards etc.,) against total fixed salary. The general condition is including the new loan EMI debt burden should be less than 50%.
Personal Loans are a convenient and popular method for purchasing products or services. Soulwallet recommends customers to make sure if there is a real need for a loan as any sort of debt must be avoided if possible. Having said that personal loans are also a simple and easy to avail with many banks in UAE moving to digital channels.
As a personal finance aggregator Soulwallet has analysed various personal loan features. For more details visit us on personal loan in UAE page.