5 Things to Consider Before You Apply for a Personal Loan in the UAE
It might happen sometimes that you go through a compelling need of buying something; however, the purchase might not be very important. Using your credit cards for smaller transactions such as regular purchases, dining out, casual shopping etc. is fine.
For bigger purchases, such as things you cannot afford, personal loan is a good option. They are popular as they can be availed easily. The lenders do not monitor the use of the loan and you don’t even ask for any collateral.
You should never opt for a loan just because you are able to. Before borrowing, it is advised that you consider the effect of repayments on your finances. Nevertheless, it is impossible to ignore the personal loan offers in the UAE.
The disbursement of personal loan has grown at a fast pace in the past few years in the Emirates. Cutting the long story short, it has become very easy for the UAE residents to access personal loan benefits, specially the salaries borrowers. Even then, we have listed a few things that should be kept in mind before sealing the deal.
Choosing the Lender Carefully
Financial institutions and banks are carpet bombing potential borrowers with offers at what they say is low personal loan interest rate. Do not accept the first loan you find through SMS or email.
Now, we understand that it is easy for you to work with the bank you already have a relationship with. You might miss out on better deals if you do not research the market properly.
Calculating the Rate of Interest
In case of financial jugglery, you won’t be able to beat banks. The flat rate of interest is a misleading metric, as it does not consider the reduction in your loan balance with every payment you make.
Understand that when you make repayment of your loan through EMI, your interest is calculated on reducing balance rate. The flat rate does not tell the true cost of the loan.
Avoid advance EMIs
A few lenders may ask you to pay one or two installments in advance. Guess what? You end up paying more than the rate contracted. It is suggested that you do not go for advance EMIs.
Go through the Other Charges
Personal loans generally come with various other fees such as early settlement and processing fees. But a few lenders levy other charges also. Check the other fees and charges as well while you apply for a personal loan in the UAE. Also check for hidden charges, if any.
Find out About the Pre-Payment or Early Settlement Rules
The lenders may charge a fee on the early settlement of the personal loan in UAE. They charge this fee if you pre-pay your loan as making repayment on the loan prevents the lenders from earning the interest, which they would have expected from that deal.
In case the tenure of the loan is more than 2-3 years, and you are expecting an improvement in the cash flows in the near future, it is recommended that you select the loan having the lowest early settlement charges.
Do not Approach a Lot of Lenders
Looking around for the lowest personal loan interest rate can prove to be counterproductive sometimes. Every time you approach a bank or financial institution for a loan, your credit score is being accessed for understanding your loan repayment capacity.
When you approach a lot of lenders individually, they might think of you to be credit hungry and this could cause a big hit on your credit score. Hence, it is financially sensible to check a loan aggregator portal or the lenders’ official website for checking the best personal loan offers before selecting the one. This way, your credit score will not be compromised either.
In a Nutshell!
With personal loan disbursements growing at a fast pace in the UAE, it has become important that we stay aware of how to apply for the same. You need to meet the personal loan eligibility requirements and submit the required documents for availing the loan. However, there are various other things that you need to keep in mind while applying for the loan. Refer the list of the factors mentioned above to know the things that you should consider before finalizing on a personal loan.