A personal loan is an unsecured credit provided by any financial institution based on employment history, repayment capacity, income level, profession, and credit history.
It acts as a multi-purpose loan that can fulfill a person’s instant financial needs. It does not require any collateral. The processing time of a personal loan is also very quick. Let us learn more about the benefits that one can obtain from a personal loan.
Advantages Of A Personal Loan
Applying for a personal loan is similar to applying for a credit card. You need to give all necessary information about yourself to the financial institution issuing the loan.
Personal loans offer more benefits than any other type of loan. A few advantages of availing personal loan are as follows:
- Flexibility And Versatility Of Personal Loan
Personal loans are popular for their flexibility and versatility. They can be used to pay off the balances of credit cards, establish small businesses, implement home repairs, refinance student loans, funding vacations, or any other form of large expenses. These expenditures are both necessary and discretionary.
Some types of loans are fixed for certain purposes. For example, a home loan can only finance the funds related to purchasing a home. On the contrary, personal loans can be used for multiple purposes.
A personal loan can be the best-suited option to finance a major purchase without denting the bank balance. You should always check on approved uses of the loan with the lender before you apply for the same.
- No Collateral Requirements
Personal loans are secured forms of loan that do not require any collateral to get approved. This means that you don’t have to set up any asset like a car or home in the form of a guarantee to ensure repayments of the funds.
If you have a good credit history and a strong source of income, your long-term relationship with the bank goes on a good term.
There is no need for a high guarantee or security to be given to the bank as a guarantee. Applying for a personal loan without security grabs the attention of many people who want to make big purchases but take a step down as they do not want to undergo a situation of financial instability. You might want to consider that.
- Easily Manageable
Many people have multiple credit cards. Sometimes they fail to pay back the balances of the credit cards. Personal loans in such situations help in consolidating the debt of credit cards. A personal loan with a fixed rate of monthly payment is way easier to manage than multiple credit cards with a variety of Interest rates.
The personal loans also have a fixed monthly rate which helps the borrowers easily manage the due date. Many borrowers become eligible for a personal loan with an interest rate lower than the rate of credit cards. This can help them streamline their monthly expenditure and save money in the process.
- Lower Rates Of Interest And Higher Borrowing Limits.
Personal loans are much cheaper in Dubai than in India. They also have easy availability, fast processing, and lower rates of interest. For example- CBD Loan is a type of personal loan in the UAE which provides a loan amount of AED 750,000 at a 3.03% flat interest rate.
Customers who have an excellent credit history can qualify for personal loans with these great interest rates. Not only for natives but ex-pats in UAE, the interest rate is comparatively lesser. Noor Bank Personal loan is a personal loan for expats in the UAE which offers a loan amount equivalent to 20 times the applicant’s salary. The interest rate of this loan is also 3.49%.
- Minimal Paperwork Requirement
When applying for a personal loan, the documents required are very basic. Documents required for a self-employed person are as follows:
- Loan application form
- Trading license proof
- Power of Attorney
- Memorandum of Association
- Certificate of salary or any salary transfer-proof
- Bank statement between 3 to 6 months
- Passport copy
- UAE identity card.
The eligibility criteria required for loan approval are as follows:
- Healthy credit score
- Details of annual sales turnover
- Minimum salary slip
- Length of business commencement
- Rapid Disbursals
Demand for personal loans in the UAE is exceptionally high. Nearly 50% of the population borrowed money last year. Banks with unique selling propositions tend to attract customers for personal loan applications. The principles for disbursement are very simple. They also determine the recovery of expenses that amounts to disbursement.
The time taken to process the loan amount in UAE is comparatively lesser than in India. With the availability of online services, the processing time becomes shorter. The amount is transferred to the bank account within 24 hours after the application is submitted to the issuer.
This quick disbursal helps manage the immediate large finances like medical or educational.
How To Get A Personal Loan In UAE 2024?
Personal loans in the UAE do not exceed 20 times the applicant’s salary value or the total income. The banks and other financial institutions that issue personal loans take specific notice that the limit is not exceeded. According to the Central of the UAE, an individual can apply for a personal loan secured by the borrower’s salary.
Personal loan repayment tenure does not exceed 48 months. Also, the repayment is made against a monthly deduction of not more than half of the borrower’s salary. If the repayment period exceeds the retirement age, the financial institution issuing the loan deducts only 30% of the income or pension salary of the borrower.
The banks and financial institutions issuing the loan in the UAE only take several post-dated cheques from the borrower. These cheques cover the installment and do not cross 120% of the loan value. Before approving the loan, the financial institution calculates and declares the rate of interest to be charged. The rate of interest is determined to reduce the balance of the loan on an annual basis.
Personal Loan Interest Rate in UAE
The interest rate on a personal loan in UAE is the additional charge levied from the borrower on the principal loan amount. Financial institutions in the UAE offer two interest rates on personal loans. These are as follows:
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Flat interest rate
A flat interest rate is a charge on the total amount of the loan which remains fixed throughout the tenure of the loan- the personal loan lowest interest rate in Dubai and the rest of UAE range from 2.63% to 22.22%.
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Reducing Interest Rate
Reducing interest rate is contrary to the flat interest rate. This type of interest rate reduces every time the borrower pays the installment of the loan. In UAE, the reducing interest rate on a personal loan is charged on the outstanding principal amount of the loan. Reducing interest rates can range between 5.24% to 39.99%. It is advisable to compare the interest on personal loans online before applying.
Best Personal Loans In UAE
Listed below are the top 10 best personal loans in UAE as of 2024:
- ADCB Personal Loan with a flat interest rate of 4.75% and reducing interest rate of 8.86%.
- RAKBANK Personal Loan with a flat interest rate of 3.99% and a reducing interest rate of 5.99%.
- Dubai Islamic Bank Personal Loan with a flat interest rate of 6% and reducing interest rate of 11%.
- Emirates NBD Personal Loan with a flat interest rate of 8.39% and a reducing interest rate of 14.99%.
- FAB Personal Loan with a flat interest rate of 4.99% and reducing interest rate of 9.99%.
- Mashreq Bank Personal Loan with a flat interest rate of 3.43% and a reducing interest rate of 6.49%.
- Noor Personal Loan with a flat interest rate of 3.33% and reducing interest rate of 6.29%.
- Deem Finance Personal Loan with a flat interest rate of 7.72% and reducing interest rate of 14%.
- Finance House Personal Loan with a flat interest rate of 5.45% and reducing interest rate of 9.99%.
- ADIB Personal Loan with a flat interest rate of 4.27% and a reducing interest rate of 7.75%.
The Bottom Line
Applying for personal loans can be beneficial. It can also help stabilize your financial requirements if you use them wisely. Large chunks of purchases can be done with personal loans without denting bank balance. So, it is also easy for the borrower to apply for a personal loan with low-interest rates.
It is very easy to manage personal loans rather than managing multiple credit cards. With the lowest interest rates in UAE and minimal paperwork, it is easy to access personal loans for the natives. The disbursal rate of a personal loan is also very quick, with less time for the loan processing.
