Hitting the Right Notes: Acquiring a Bank Loan in the UAE - Insane Visions

Hitting the Right Notes: Acquiring a Bank Loan in the UAE

Hitting the Right Notes: Acquiring a Bank Loan in the UAE

Whether you require a financial loan for paying tuition fees, travel, purchasing goods, mortgage financing, or business development, securing a loan in the United Arab Emirates is easier than most people think.

Banks in the UAE offer expatriates favorable credit terms, enabling individuals access to credit facilities throughout the country. Even expatriates with lower salaries than the minimum AED 5,000 can qualify for certain financing options.

If you plan to take on credit, there are certain things you need to know before a bank or credit institution will provide you with any money.

1) The basis of obtaining credit

Before any bank will consider your application for credit, you must meet certain qualifications. Conditions for the application of a line of credit or loan will vary according to each bank or credit institution, and will be subject to each institution’s legal requirements.

Still, there are certainly commonalities regarding the requirements to obtain a loan/credit. These include:

  • A passport copy
  • Having the appropriate visa or residency to obtain a loan
  • Labour card or government-issued ID card copy
  • Information on current income (income statements)
  • Bank statements (three- to six-month statements)
  • Letter of recommendation from another banking institution (UAE or foreign)

Submitting the appropriate documents is essential to confirm your request for a loan.

2) Types of loans available

Alongside presenting the correct documents to obtain credit, one should also understand the types of loans or proposed loan packages available for expats to secure. Excluding business loans or personal credit cards, personal lending instruments can be broken down into three main categories:

  • Consumer loans
  • Car loans
  • Mortgage financing

Whether it’s a loan in Dubai or in one of the other six emirates, each of these lending instruments will require the prospective borrower to fulfill certain obligations. Failure to do so will incur severe consequences. For your consideration, we’ve included several factors that will require your attention:

  • Additional services in conjunction with the loan/lending instrument (account maintenance fees, arrangement fees, insurance, etc.)
  • Current loan interest rates applied by the banking institution
  • Currency of lending
  • Terms and conditions regarding collateral and the loan in question

Certain factors (interest rates, terms, and conditions, etc.) will significantly vary according to the lending institution.

3) Eligibility criteria

Whatever the reason you may require for a lending instrument, certain considerations must be made.

Consumer loans

Unlike financing a car or mortgage, consumer loans are easy personal loans that require no collateral for approval. The minimum salary required to obtain a consumer loan is AED 3,000. How much money is disbursed will depend on your employment status and income level (self-employed or salaried).

Each bank’s individual loan policy and list of approved employers will determine the maximum amount of loan provided, and whether your application will be considered at all.

Interest rates are determined by individual institutions, and most consumer loan repayment periods last up to 48 months.

Auto loans

There are similarities associated with a car loan as there is with the consumer loan. Minimum salary requirements remain the same (AED 3,000), as does the eligibility criteria, with the addition of documentation proof of a vehicle registration card and a copy of your UAE driver’s license.

Your selected car dealer can assist with the required steps to obtain the necessary car loan (down payment requirements and a bank-issued local purchase order (LPO). Rates will depend according to the car model you are planning to buy (new or used) and the repayment period is up to 60 months.

Mortgage financing

Many expatriates seeking to own property in the UAE are turning to mortgage borrowing to help obtain their dream home. Prospective buyers will need to consider several factors before acquiring financing. From mortgage interest rates (fixed or variable) and financing duration to upfront costs, different options are available to would-be borrowers.

Unlike an auto or consumer loan, home loans require a longer term of commitment. Eligibility criteria are different for mortgage financing as well. Expats need AED 10,000 as a minimum salary requirement, and the repayment period is up to 25 years, complete with a down payment requirement.

With fees, rates, and lending policies varying according to the various banks, it is recommended that a prospective buyer seek out the assistance of a professional mortgage broker to ensure the best financing option is selected.

Whatever your reason may be for requesting a line of credit or loan from a banking institution, knowing what your options are is important to secure the right type of lending instrument for your desired purpose(s).

Knowing what you are getting into will also significantly help in ensuring you are protected from risks, and be able to budget for periodic re-payments accordingly.

Beatrice Santos

Beatrice Santos

Beatrice Santos is taking up units in business law and currently affiliated as an intern in a local law firm. She is passionate in helping those who have any queries regarding business laws and how these may affect their respective businesses.
Beatrice Santos