A personal loan is an unsecured payment that you can obtain whenever you want. Moreover, you are not restricted from using the borrowed money, and you can use it according to your needs. The personal loan is not secured by any assets like a car, property, or gold. However, banks and non-banking finance companies bind you to different terms and conditions of the contract. These factors determine your loan repayment experience and comfort. Therefore, choosing the best personal loan companies is important to ensure a comfortable repayment experience without burdening yourself.
Tips for choosing the best personal loan company:
Obtaining a loan in UAE is very different from other countries like the USA. The main reason is that getting a personal loan from your local bank is tricky, with several complications. As a result, most people rely on non-banking companies as they offer a straightforward deal with no hidden conditions. Here are a few tips that can help you choose the best company for personal loans:
Evaluate the eligibility criteria:
The lending companies in UAE have different requirements to approve a personal loan application. For instance, most companies require that your credit score is 600 or higher to get approval. However, you can also find some companies with relatively less strict eligibility criteria. In any case, it would be best to note down the eligibility requirements for every banking and non-banking company when researching for one. The general eligibility criteria for most companies are:
- Age: 21 to 60 years
- Minimum Income: AED 5,000
- Salary Transfer: Some banks in UAE require salary transfers for personal loan approval.
- Employment status: Most banks only approve personal loans for listed companies for salaried individuals.
- Proof of residency: the company never offers loans to non-resident individuals
- Credit history: the credit score must be higher than 650. However, some companies also offer personal loans to people with a credit score less than 600.
- For self-employed: The criterion for self-employed borrowers is based on different factors like nature of business, annual turnover, and years in business.
Research the rate of interest:
There are two types of banking systems in the UAE, i.e., Islamic banking and conventional banking. Generally, Islamic banks offer loans at the minimum interest rates but have strict eligibility policies. Similarly, you can easily get a personal loan from a conventional bank on easy terms but with a relatively higher interest rate. Lastly, people with bad credit or no credit history can obtain personal loans from non-banking firms with strict policies and a high-interest rate. In short, it is important to check the rate of interest for each company you shortlist before proceeding with the process. Moreover, avoid rushing your decisions and take your time to choose a lender that best suits your requirements to avoid an unwanted burden on your shoulders.
Notice the flat rate:
A flat rate is different from the normal interest rate. A flat rate is the fixed amount of interest charged from the borrower on a monthly basis throughout the contract’s tenure. The flat rate doesn’t depend on the remaining loan, so you are bound to pay the credit all the time. For example, if you borrow AED 500,000 at a 10% flat rate, your monthly interest will be AED 4,167. It means that you need to pay the interest along with the fixed installment amount every month for the rest of the contract. Therefore, the best way to choose a suitable repayment plan is to evaluate your capacity.
For example, if you can repay the loan within a few months, a normal interest rate is best. On the contrary, the flat-rate plan is perfect if you want a long-term repayment plan.
EMI stands for Equated Monthly Installments; it is a concept generally used by almost every bank in the UAE. The bank or lending companies offer you the option to repay the debt in a given time period ranging from 1 year up to 5 years. In an EMI plan, the total loan and the interest rate are broken into smaller installments that you must pay every month till the end of the contract. Usually, EMIs with a short life come with lower interest as compared to the longer repayment plans. Therefore, it is best for you to evaluate your capacity to repay the debt before signing any contract with the company.
Contemplate the all-in cost:
In most cases, getting a personal loan isn’t as simple as signing the paperwork to get your money. The banks and non-banking firms charge several variable payments in the form of registration, processing, and documentation fees besides the interest rate. The all-in cost depends on the total amount of debt that you want to take. For example, if the all-in cost of your bank is 1%, then you must pay AED 5,000 to get your loan.
Ease of repayment:
The benefit of getting your loan from a bank is that they offer the easiest repayment methods. For instance, you can tie your salaried account with the loan. As a result, the bank will deduct a fixed amount from your monthly salary without requiring you to visit the bank every month. Similarly, some banks also accept international repayments from overseas accounts. So, if you live abroad, you can just send your repayment cheques without visiting UAE. Lastly, it would be best to evaluate the grace period of your lending company in case you find yourself in a problem and need some extra time.
Getting a personal loan in UAE is accessible for everyone these days. However, almost all banks and lending companies follow a set of rules to approve loan requests. Manually researching different options can be tiresome, especially for job persons. However, companies like Lendzi offer a list of the best personal loan companies based on your requirements. So, you don’t have to worry about all the hassle of finding the perfect option. Moreover, the company also acts as a guarantee to save you from scams and contract complications.