How to get a loan in UAE

Nov 5, 2021

The Central Bank of the UAE regulates the banking sector and establishes policies and regulations for granting loans to customers. Before approving a loan to a customer, banks must follow a prudent lending policy and ensure they collect proper documentation. In addition, they assess their customers\' creditworthiness by reviewing their loan repayment history.

The official credit bureau keeps a record of the credit history of customers which includes their loans, credit cards, missed payments, debts, bounced cheques, and so on. The bureau then obtains reports from various banks on customers\' credit histories for the previous two years, which are thoroughly reviewed before approving loans to them.

Personal loans, car loans, home loans, and business loans are among the various types of loans available in the UAE. Although there are different requirements for each type of loan, you should be aware of the overall procedures that must be followed to obtain a loan. These are the steps you should follow:

Rate of interest offered

Different moneylenders provide distinct credit measures at varying interest rates. You should consider various banks and their offerings to find the best terms for you when applying for any type of loan.

Know what documents are required

You will need the following documents to apply for a loan:

A valid passport or UAE National ID card.
If the applicant is an expat, a valid UAE residency visa.
If the bank requires a salary transfer, a letter of salary transfer.
Banks may have different requirements for age and employment.

Understand your creditworthiness

If you have previously obtained a loan, there will be a record of your financial history with the bank which determines whether or not you will be able to repay the loan. If you have previously missed a few due dates, your record score is likely to be lower, and banks may charge you higher interest rates or make you a small loan.

If you are a first-time borrower, your financial assessment will be influenced by your salary, age, background, and other factors. Also, each UAE Bank Account will have a minimum standard salary that you must earn in order to get a loan.

Choose between secured and unsecured loans

Banks typically offer both secured and unsecured loans. Unsecured loans, for the most part, have lower loan amounts and higher interest rates because they do not require any guarantee to be set against the loans.

Secured loans require collateral against the loan amount, which may be reallocated by the bank if you are unable to repay the loan. Determine your needs and then choose the best option for you.

The least expensive option isn\'t always the best option

Instead of blindly going for the least expensive loans, take the time to calculate the true cost of borrowing, which includes the loan amount, loan length, repayment frequency, fees, and interest charges. It is also critical to understand the financial guidelines that the bank will follow when modifying interest rates.

Do not take a large loan

Banks will sometimes offer you more cash based on your credit score. Avoid falling into these traps because you will not only increase the weight of your loans, but you will also end up paying more interest on a small amount of money.

In addition, many banks charge processing fees, enrollment fees, and so on as a percentage of the amount of money you want to get. Find out which banks offer the best deal and figure out how much you\'ll have to pay the bank, including all fees, expenses, and premiums.

Guidelines to help you get loans

The Central Bank has established the following policies that must be followed before granting a loan to any customer.

A customer\'s debts should not exceed 50% of their total income.
After reviewing the customer\'s credit report, the debt burden ratio (DBR) is calculated, which determines the borrower\'s repayment capacity.
When a customer\'s loan extends into their retirement age, banks allow a 30% deduction from their income or pension.

Policies for different kinds of loans

Personal loans

Customers repay these loans with a regular and legitimate source of income, such as a salary, indemnity, or otherwise.
A personal loan should never be more than 20 times an individual\'s annual income.
Personal loans must be returned within 48 months of approval.

Car loans

Car loans, as the name implies, are available for the purchase of a vehicle and are treated differently than personal loans.
According to the Central Bank’s guidelines, car loans should not exceed 80% of the car\'s value.
Customers must repay the loan within 60 months of receiving it.

Interest rates

The interest rates charged by banks are calculated using a formula developed by the Central bank of the UAE.
The formula is as follows: Interest amount = principal x interest rate x loan period in months +1

With BanqMart, you can find and apply for the best loan options for you, especially since our terms are often better than those offered by other traditional banks and financial institutions. Contact one of our experts now to learn more.