Personal loans

How Do Personal Loans Work in the UAE?

Personal loans are, as you’d expect, more encompassing than something specific like a car loan. Money is borrowed from a lender and paid back slowly, often month to month, over the course of a set period of time. Much like a car loan, interest is charged for the privilege of using borrowed money.

However, unlike a car loan, the lender may not have anything to repossess in the case of payment failure. This makes this kind of loan slightly riskier for the lender, and thus more difficult to attain.

You’ll want to understand all the benefits and risks of taking out a personal loan before you apply for one.

The benefits of taking out a personal loan:

Personal loans are particularly good if you need to take out more money than you have available to you on your credit card. Once you’ve negotiated a monthly price with the lender you can add it into your budget accordingly.

One good thing about personal loans is that you have some control over your monthly payments. The best example of this is if you’re overwhelmed with payments and need to consider debt consolidation. This will help you meet your monthly obligations easier.

Lastly, a personal loan gives you the freedom to make purchases you otherwise wouldn’t be able to make. This is especially useful for businesses. However, if you plan on using the loan to purchase material goods that do not produce value, you may want to consider waiting until you have the money yourself.

The risks of taking out a personal loan:

Personal loans have plenty of risk involved with them. For one, the interest rate on personal loans is often higher than other types of borrowing options. Borrowing smaller amounts usually incurs a higher interest rate payment. Because of this, you could take out too much money and spend a longer period of time paying it off.

While it is helpful to sometimes bundle all of your debt into a single personal loan, this can also mean that it takes longer to pay it all off. You’ll end up paying MORE than you would have if you just left it as is.

Also, some lenders will add arrangement fees to the loan itself. This can increase the cost of the loan—which you’ll notice on its APR, and not its interest rate cost.

Always make sure you have the income necessary to pay off the loan in a timely manner. The longer you sit on it, the higher the interest costs will be.

Some personal loan tips

  • Always compare two or more personal loans based on their APR. Any other option will not guarantee you’re looking at the total monthly cost.
  • Negotiate! It’s critical that you shop around before you make a decision. And when you find the lender that has the best deal, see if you can make that deal irresistible.
  • Don’t simply trust that you’ll get the rate advertised on the lender’s website. This isn’t the guaranteed rate. It’s the ideal rate for those that qualify. And the bank only needs to award that rate to just over half of the people that come in requesting it.
  • You’ll have about 30 days upon cancelling your loan to repay the interest and capital.

 

Need help looking for the best deals on personal loans in the UAE? Check out our top five personal loans here!

Click here to see our favourite Top 5 Personal Loans

 

 

 
ADIB
emirates
noor
alwifaq
citibank
Provider
ADIB
Emirates NBD
Noor Bank
Al Wifiq
Citibank
Account Name
Personal Finance
Salary transfer Personal Loan
Non Salary transfer
Personal Loan
Personal Loan
Rate
3.70%
2.63%
3.45%2.70%
5.99%
Features
No processing fees, no hidden charges
Free job-loss protection
10-minute approval
Flexible repayment options
Competitive profit rate
Loans for Expats who are new in employment or new to UAE.
Free bank account and debit card.
Exclusive 7 days loan return option
Loans for Expats who are new in employment or new to UAE.
Free bank account and debit card.
Exclusive 7 days loan return option
Early Settlement Charges – 1% capped at AED 10,000
Day 1 Approval
Salary Transfer Required
No
Yes
No
No
Yes
Max Loan Amount
1,000,000 AED
3,000,000 AED
2,000,000 AED
500,000 AED
250,000 AED
Minimum Salary
5000 AED
5000 AED
10000 AED
10000 AED
8000 AED
Islamic Finance
Yes
No
Yes
Yes
No

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