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Personal Loans in UAE – What to Know

Oct 12,2020 - Last updated at Oct 12,2020

Personal loans have become a part of adulthood. There comes a time when you need a little bit of support to improve your quality of life, whether in personal or professional aspects. Personal loans allow us to get the financial boost we need at the moment. However, personal loans in the UAE are still an extensive subject, especially for expats. Here’s what you need to know about them.

Characteristics of personal loans in the UAE

First, we are going to discuss the nature of personal loans in UAE i.e., their most significant characteristics.

The primary characteristic of personal loans in the UAE is that they are unsecured by any collateral. This applies to personal loans to clients who aren’t salaried too. The term collateral refers to any economic resource of fundamental value, such as a house or car, which can be repossessed by a bank in case the client doesn’t stick to the arrangement.

Types of interest rate

A common mistake that people make when getting a personal loan is that they fail to get informed about interest rates. Sure, the whole subject is confusing to most people, but it's still crucial to learn as much as you can. Generally speaking, interest rates on personal loans in UAE are estimated in two ways:

  • Flat rate – calculated on the principal amount of the loan throughout the said loan. The interest and payable sum are calculated at the beginning of the repayment schedule. This interest rate doesn’t change until the loan has been paid off, there are no surprises here
  • Reducing the rate – calculated on the outstanding balance of the loan. Basically, this type of interest takes into consideration that after each installment, the principal amount reduces. That way, the interest percentage, which remains unchanged, is charged on the decreased amount every month. As a result, installments are different each month

Maximum amount

Every bank in UAE determines the maximum out of loan a client can get. Let’s say you are an expat and want to apply for a personal loan from a bank like First Abu Dhabi Bank, there you can immediately see that the maximum amount of loan is up to AED 2 million. On the other hand, if you're a UAE national and want a personal loan, then you may get up to AED 5 million. This is just an example to show that every bank has its own maximum amount of personal loan you can take. Of course, this is an important factor to consider when looking for personal loan. Get informed about maximum amounts and take into account your needs.

Minimum salary for a personal loan in the UAE

Minimum salary requirements for personal loans in UAE vary from one bank to another. Generally speaking, the minimum salary required to get a personal loan in UAE is between AED 3000 and AED 5000. It goes without saying that you should contact the bank and get informed about this requirement before you determine whether that’s the right place to get a loan or not. Compare personal loans from different banks to determine which ones meet your needs the most and choose the one whose minimum salary requirement is lower than your monthly remuneration.

Arrangement fee

The arrangement fee is defined as a fee charged by a bank for setting up a loan. In a nutshell, the fee is charged as soon as you take the loan, and it's included in the principal loan amount. The specifics differ from bank to bank, like everything else, though. Some banks may offer arrangement fees at 0% interest. In other banks, the arrangement fee for a personal loan of about AED 3000 is AED 1000. This is yet another important aspect you need to learn before you decide whether to get your personal loan.

Salary transfer

As you can already presume personal loan with salary transfer means you are required to switch bank accounts and start receiving your monthly salary in the bank from which you are seeking the loan. Why is salary transfer so important? From the bank’s perspective, a person who transfers a salary is considered less risky. As a result, the bank may offer loans at a lower rate. In fact, some banks don’t give personal loans to clients who won’t transfer their salaries.

Personal loan in UAE without salary transfer

Although most banks prefer giving their personal loans with salary transfer, it's entirely possible to get a loan without having to do that. But to get one such loan, without transferring salary, you do need to meet certain criteria. The criteria can be different for each bank, but in most cases, a client needs to be at least 21 years old. The maximum age to be eligible for one such loan is 60 for expats and 65 for UAE nationals. To apply for a personal loan without salary transfer, you need a steady source of income. Also, company listing is important here. Many banks don't give personal loans without salary transfer without company listing.

Company listing

In the section above, we mentioned the company listing briefly, yet another characteristic of UAE personal loans that you need to keep in mind. You'll probably see the term "company listing" everywhere, and it means that your company is pre-approved in that specific bank for various services and products ranging from credit cards to personal loans. Your chance of getting a personal loan in UAE is higher if your company is listed in the bank.

Personal loan in UAE without company listing

It's a lot easier to get a personal loan in UAE with company listing. But it's not impossible to get it without company listing either. Sure, it can be tricky to get one such loan, and you'll need to meet strict eligibility criteria set by the bank, but it's achievable. At the moment, only a few banks in UAE offer personal loans without company listing, but the times are changing as new organizations keep emerging on the scene.

Conclusion

Personal loans in UAE have a lot of characteristics that make them unique or, at least, a lot different than elsewhere. Before you determine where to get your loan, make sure to compare offerings from different banks. Opt for the option that meets your needs the most.

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