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Personal Finance at Zero Processing Fee or at Low Rate of Interest- Which is More Beneficial?

Personal Finance at Zero Processing Fee or at Low Rate of Interest- Which is More Beneficial?
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Personal finance is a preferred choice for a maximum number of people in the UAE as it comes with a flexible end-use. Being an unsecured loan, you do not need to submit any kind of security or collateral for this availing it.

It also offers various other sets of benefits to the people and is easy and quick to get online through the comfort of your home or office.

Here, we have offered a breakdown of personal loan interest rate and processing fees that are offered by different banks in the UAE. This table will help you in analyzing and understanding the most suitable option for you.

Bank Name

Interest Rate (% per annum)

Processing Fee

1. Citibank

6.75- 20% (reducing)

1 percent of loan amount

2. Emirates Islamic Bank

5- 7% (reducing)

1 percent of loan amount

3. Commercial Bank of Dubai

From 5.50% (reducing)

1 percent of loan amount

4. Noor Bank

From 3.49%

1 percent of loan amount

5. Standard Chartered Bank

7.05% (reducing)

1.05 percent of loan amount

6. Emirates NBD

From 5.19% (reducing) & 2.9% (flat)

1 percent of loan amount

7. HSBC

From 7.49% (reducing)

1.05 percent of loan amount

8. Union National Bank

From 4.5%

1.05 percent of loan amount

9. Mashreq Bank

5.99- 12.99%

1.05 percent of loan amount

10. National Bank of Fujairah

5.25%

1 percent of loan amount

11. Abu Dhabi Commercial Bank

From 5.25%

1.05 percent of loan amount

12. Finance House

From 12.99% (reducing)

1 percent of loan amount

(Updated as on August 2019)

Let us now discuss what exactly does a processing fee and rate of interest mean.

Processing Fee

The loan providers or lenders charge a one-time fee called the processing fee when you obtain the loan. This fee can add up to the cost of your loan. Even if you have been charged a low rate of interest, checking and comparing the processing fee levied by various lenders is important. Also, there are lenders in the UAE that offer personal loan at zero processing fee.

Rate of Interest

The rate of interest is the amount that the lender charges for using their funds. It is expressed as a percentage of the amount of principal. Usually, this interest rate is noted on an annual basis.

If the lender feels that they are at a low-risk with the borrower, then they might charge a lower rate of interest from the borrower. On the other hand, if the borrower is considered to be at a higher risk, the rate of interest becomes higher.

There are two kinds of interest, which are charged on personal loan in UAE.

Flat Interest Rate

This interest rate does not change irrespective of the amount of repayment made by the borrower. It is easy to calculate as it remains constant throughout the tenor of the loan.

Reducing Interest Rate

This interest rate, as is clear by the name, reduces throughout the loan tenor. As opposed to the flat rate of interest, this is charged on the outstanding amount of principal.

Over to You!

The personal finance disbursals have risen at a scorching pace in the past few years. These loans assist the borrowers in meeting shortfall (if any) they are facing in purchasing a car or a house, in paying their children’s education fees, or in fact in case of medical emergencies, amongst various other things.

Now, deciding whether to go for a personal loan at zero processing fee or the one with a low rate of interest can be daunting. You must keep in mind that your processing fee is a one-time payment, while your rate of interest sticks with you throughout your loan tenor.

A low rate of interest can help you in reducing your total loan cost. Considering this, going for finance that can be availed at a low rate of interest can be a better option. However, you know your situation best- analyze and compare various options and only then make a decision which will be the most suitable for your needs.

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