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What Should I Consider Before Taking a Car Loan in Dubai?

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Fulfilling the dream of becoming a car owner in Dubai is easy for most residents due to the ample availability of auto loans and other financing options. Several financial institutions in Dubai offer car loans to expatriates and permanent residents with multiple benefits and lucrative offers. 

However, there are several factors that you should consider before applying for a car loan in Dubai. So, read on to learn more about them. 

Key Points to Consider Before Applying for An Auto Loan in UAE 

Here is a brief of some of the important factors that you should consider before applying for a car loan in UAE: 

  • Comparing the car loan interest rates
  • Repayment tenor 
  • EMI calculation 
  • Additional charges

Comparing the Car Loan Interest Rates

You must compare different financial institutions in UAE and settle for the one that offers a loan at the lowest interest rates. This is because the total payable rate of interest of a loan depends on a few points, such as the total loan amount, repayment tenure, the credit profile of the borrower, etc. Nevertheless, you should keep in mind that the interest rate determines your total debt, so choose accordingly. 

Repayment tenor

The loan repayment tenor plays a vital role in deciding the monthly instalment that you, as a borrower, are liable to pay. Hence, you should always assess your financial capabilities and ensure that you can make timely repayments before applying for car finance in UAE. Further, you should choose the repayment tenor wisely as it also decides the total interest payment of your car loan. 

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EMI calculation 

As an aspiring borrower, you should take help from an online Car loan EMI calculator to know your monthly instalments even before applying for a car loan in Dubai. Several lending institutions offer this customised online tool, and you can adjust the variables as many times as you want until you get their desired result. Knowing the EMIs beforehand will help you plan your monthly expenses accordingly and prevent any kind of unnecessary financial burden.

Additional Charges

When you apply for a car loan, you must pay a few additional charges to complete the loan application process. This will include processing fees, foreclosure and prepayment charges, and others. Since these costs add up to your total debt, you should consider them before proceeding.

There are some additional things that one should keep in mind before applying for a car loan in the UAE: 

  • You must be physically present when receiving the vehicle if the car loan is in your name. 
  • Lending institutions allow a grace period of sixty days for making the first instalment.
  • You should also consider the processing charges for an auto loan, approximately 1% of the total finance amount. The minimum processing fee is AED 500, while the maximum is AED 2,500. 
  • The insurance must be in line with the conditions of the financing company in UAE. 

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What Are the Documents Required to Opt for A Car Loan in Dubai?

Different lending institutions have different criteria for approving an auto loan in Dubai. Willing borrowers have to produce the following documents to get a car loan in Dubai or UAE: 

  • Original Emirates ID
  • Proof of income or salary certificate 
  • Visa or valid passport 
  • Driving licence 
  • Bank statements for the last three to six months
  • Valuation certificate of the vehicle 
  • Vehicle's registration certificate 
  • Insurance-related documents 

Expats interested in applying for a loan must validate their national driver's licence in the United Arab Emirates. If your driver's licence is invalid, you must apply for a UAE driver's licence to be eligible for a car loan. Also, expats will have to provide their home country address regardless of how long they have lived in the United Arab Emirates. Banks may also ask for referrals from friends and family to verify the details provided by the applicant. 

To sum it up, you should keep the points mentioned above before taking a car loan in Dubai. This will help you plan your loan better and save you from any future hassles.

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