Have a Bad Credit? Here’s How You Can Still Get a Personal Loan in the UAE!
These days, you can make use of the personal loan in UAE for making payment of almost everything that you require, provided you get approved for one.
From consolidating your credit card debts to covering emergency costs, from funding for your vacation to payment of educational fees, a personal loan lets you get access to cash whenever you need it the most.
Generally, you do not require collateral such as a car or a house for getting personal finance, as it is usually unsecured. This type of loan is structured as an installment loan. This means you will have to make repayment of the borrowed amount along with the personal loan interest rate. This repayment has to be made within the loan tenure as determined by the bank, with the agreed number of monthly installments.
If you, unfortunately, have bad credit, you may have only a limited choice of loans and you may also have to bear higher rates of interest. Hence, even if you end up qualifying for a personal loan, it might get expensive for you to make the repayment.
Is the Credit Sufficient to Qualify for Personal Loan?
All the lenders whether big or small will review your credit score when you apply for a personal loan. There are chances you have multiple scores, which may differ for various reasons. Here are some of these reasons.
- Different companies use separate scoring models.
- The companies for credit reporting might not have the same information about you.
- Different companies might be generating your scores at different times. This could lead to the availability of different information.
Having low or mid-range scores could make it hard for you to get your personal loan application approved from large banks and several other traditional lenders.
In case you have a little to zero credit history, you might not have any credit score. Or in case there is negative information on your credit report, your credit score might go very low to qualify.
Making late payments of your bills, civil judgements not being in favor of you, and maxing out the credit cards can lead to a reduction in your scores.
However, this does not mean you cannot obtain personal finance. In fact, there are a lot of personal loan providers that cater to the borrowers having bad credit scores, though these loans will come with high rates of interest.
In such a situation, you must be more careful regarding the lender you are borrowing from if you don’t want to obtain a loan, which adds up to your financial burdens.
Where to Look for a Personal Loan if you Have a Bad Credit?
Traditionally, personal loans can be obtained from various financial institutions, some of which are the following.
- Credit Unions
- Online Lenders
All the banks in the UAE have strict standards for lending. Credit unions may comparatively have less-strict requirements in terms of eligibility. Some credit unions may agree on offering you the loan regardless of your low scores.
Some credit unions also have special programs for the borrowers with not-so-good credit history. If you have poor credit, then credit unions can turn out to be amongst your best options for finding a personal loan in UAE as these loans come with more favorable conditions.
You can also obtain a personal loan from an online lender. A few online lenders have requirements for loan qualification and loan terms like the traditional banks. Others provide loans at high rates of interest, which usually does not need you to have excellent credit scores. These lenders might, however, have other requirements and might check your employment history or bank account.
Some online lenders who advertise personal loans for the borrowers with bad credit, levy high rates of interest. This makes the repayment of loan more difficult. But, this does not imply that you need to avoid going to online lenders. You just need to ensure that you understand the personal loan you are planning to apply for.
How to Compare the Loan Terms?
If you have poor credit, the loan you have qualified for must be costing you more, as lenders may consider you at higher credit risk. Since a personal loan is more expensive in this situation, it becomes more essential for you to compare the terms of various loans for finding the best deal.
For comparing the loan offers, here are some of the basic terms you need to keep in mind.
APR (Annual Percentage Rate)
APR refers to the total cost you pay every year for borrowing the funds, including the fees and interest. Low APR means the cost of the loan will be less. If you have bad credit, you are likely to have a high APR.
Loan Repayment Tenure
The duration for the repayment of the loan refers to the time period in which you will have to make the complete repayment of the amount borrowed. In case almost every personal loan, you need to make fixed payments monthly for a determined period of time. The longer is the duration for repayment, the higher would be the personal loan interest rate that you will have to bear. Hence, making the loan costlier for you.
Your monthly installments or payments are majorly determined by the amount of funds borrowed, your loan duration, and your rate of interest. You need to ensure that these monthly payments are affordable for you.
Loan Amount (Minimum & Maximum)
The lenders generally determine the minimum & maximum amount they are ready to lend. The loan provider who does not lend you enough money or the one that needs you to borrow more than you require, would not prove to be suitable for you.
You must also consider the reputation of the lender, especially when you are borrowing from a lender who specifically offers loans to applicants with poor credit.
Should You Opt for a Personal Loan if Your Credit is Poor?
For somebody with poor credit, getting a personal loan approved can be expensive and challenging. However, borrowing can make sense in some situations.
The Question of the Hour is:
If such a loan will be helpful for you in the long run or not. This depends upon the loan amount and the loan terms. It will also include the fact that what would you use the personal loan in UAE for.
Here are a few cases where your personal loan could be helpful if you have bad credit.
Credit Card Debt with High Interest
If you are stuck with debt on your credit card that too with a high rate of interest, you can take a personal loan for paying it off. If your personal loan helps you in reducing the interest amount you pay on the debt, it may help you saving money in the long term. Moreover, it can also let you consolidate multiple payments through various credit card providers into a single payment to a lender.
In case you have any unforeseen expenses, personal finance can be a less expensive option for borrowing in comparison to credit cards.
In every case, the borrowing cost can help you in determining if a personal loan makes sense or not. If you qualify only for the personal loan with a high rate of interest, consolidating would not prove to be worthy.
Other terms of the loan can also impact your decision. For instance, there are various lenders that have a minimum loan amount. With these lenders, you can only borrow a small amount of loan.
What Should You Do If You Get Rejected for a Personal Loan?
If your personal loan application gets rejected due to poor credit, you can go for these two options.
Search for Other Alternatives of Borrowing
If a bank has rejected your application, you can try applying for a personal loan with a credit union or an online lender. They might approve your loan request. If you are getting qualified for a credit card, go for a credit card with low promotional rates.
Improving the Credit
Your credit scores can increase with time if you keep making at least the minimum payments on the monthly bills on time. This will create a positive history of payment, and pay off the debts such that there is an improvement in your credit utilization rate. You must also check for errors on your credit report. An error on your credit report can affect your credit score.
By researching your options properly, you will be able to make a smart financial decision- look for the best personal loan available or wait to obtain a loan until there is an improvement in the credit so that you can get the one with better terms.
The Closing Thoughts!
Maintaining a good credit for qualifying for a favorable condition on your loan takes both patience and time. If you have poor credit scores and you are in need of a loan urgently, the best option you have is approaching an online lender or credit union that offers a personal loan in UAE to those with bad credit.
Ensure that you compare the terms and rates of the loan carefully in order to look for the most affordable lender who is ready to offer the loan to you. Also remember, if you are unable to look for an affordable option, which you can repay easily, it is better to wait and try to improve your credit.