One of the most common ways of financing is loans. A loan is borrowing money from an entity, financial institution, or lender backed by collateral. Personal loans are not defined for a specific purpose, and they can be secured or unsecured. The borrower is free to spend the money in whatever way he/she likes. The only disadvantage is that the loans are for small amounts, and the interest rate of such loans is higher than secured loans.
The first and the most important thing in the entire process is to understand the need for the loan. Once you have the answer to that question, you can start doing your research and start digging for the best personal loans and interest rates.
Getting a loan is easy as long as you have everything sorted and have clarity throughout the process and afterward. Many banks in the United Arab Emirates (UAE) offer personal loans with competitive interest rates.
Criteria for a personal loan in the UAE
Getting a personal loan in UAE requires specific criteria to be fulfilled
- The minimum age limit is 21 years old, and the maximum age limit is 65 years old. The age may vary from bank to bank.
- The loan amount should exceed 20 times the salary value, but some banks are willing to offer AED 5 million.
- The person applying for the loan (Applicant) should be employed or self-employed.
- The minimum income criteria for applying is AED 5000.
- Some banks in the UAE may require that the applicant’s salary be transferred to an account held in their bank.
Ways to get a personal loan
To get a loan smoothly, there are a few steps that should be followed so that everything proceeds smoothly.
1. Bad Credit Score
A person applying for a loan should have a good credit score. This way, the bank can easily trust the applicant, and it increases the chances of the applicant getting a loan.
2. Compare interest rates
When it comes to loans sticking to one bank is not the best option. The applicant should shop around for better interest rates and the monthly payments in other banks. And it’s not just interest rates of monthly payments but also the extra charges or fees the applicant has to bear. Doing this, the applicant would get an idea as to which bank to apply for the loan.
Make sure you are eligible for the loan, and you fall in the age bracket as well. The criteria mentioned above are for getting a personal loan in the UAE.
4. Debt to income ratio
Debt to income ratio is all your monthly installment/ payments divided by your gross income. This way, the lender or the financial institution will know if the applicant is capable of paying the installment. Having a good debt to income ratio is essential, and it is considered ideal that your debt to income ratio should be less than 36%. This ratio is an important factor in the loan process.
5. Documents and T&C
Another important step in the loan process is that the applicant should have all the required documents and should read the terms and conditions carefully.
Banks usually have a long process of giving out loans, but the applicant should be prepared and has all the research done. It smooths the process to some extent.