Pros & Cons of Long-Term Personal Loans in the UAE
Personal Finance in the UAE has been well known for its flexibility and of course the personal loan benefits. Currently, the personal loan is amongst the most common credit products in the UAE due to this flexibility in regard to the amount of loan and repayment. You have the option to opt for any amount of loan as per the requirement and can make repayments conveniently. The tenure of the loan is 48 months usually, depending upon the discretion of the bank.
Although in many cases, the lenders offer you the privilege of selecting the tenure of your loan, you should be very careful while finalizing it. The loan tenure has a considerable impact on your loan. Personal loans with different tenures may have different impacts on you.
What Does Long-Term Personal Loan Mean?
With a long-term personal loan, you can get longer tenure for your loan like 5-7 years. Hence, it is safe to say that long tenure personal finance will run for a few years. The amount of each installment on these personal loans is lower than the short-term personal loans. There are various long-term personal loan benefits, however, the disadvantages should never be ignored. Let us now discuss the pros & cons of long-term personal finance.
Pros of Long-Term Personal Loans
Here are a few pros of personal loan in the UAE.
Enhancing the Eligibility of a Loan
When you get a longer tenure for the loan, it helps you in getting a better amount of loan. Long loan tenure leads to a reduction in the installment amount, hence, making the repayment easy. Before they sanction any type of loan, the lenders check that you will be able to make repayments on the loan or not. In the case of low installment amount, the lenders easily provide a high loan amount because the chances of defaulting are less.
Keeping Low Installment Amount
As discussed above, the long loan tenure minimizes the installment amount, which makes it easy for you to make the repayment. You can simply pay back the loan without having to make big changes in your monthly budget. Before you apply for personal finance in UAE, check the EMI amount through the personal loan EMI calculator.
Helping in Improving the Credit Score
In case you wish to use the personal loan for improving your credit ratings, then, long-term personal finance is the best option for you. Substantial improvements in your credit ratings take quite a long time. Hence, if you take a long-term personal loan and serve this loan with discipline then this helps in improving your credit score.
Being Able to Avail Top-up Loans
Personal loan benefits include the option of top-up loans. You can avail the top-up loan option only after a certain duration of the loan. In case you have a short-term loan, you may end up losing the opportunity.
Cons of Long-Term Personal Loans
Here are a few cons of personal loan in the UAE.
Bearing High-Interest Rates
Usually, the interest in the personal loan is calculated in a compounded manner. This means that the longer the tenure, more will be your interest payment. If your interest gets accumulated for longer durations, then it will make you pay a lot more than you actually borrowed.
Stay Burdened under Debt for Longer Duration
This long-term personal loan will make you stay under debt for a longer time frame and you might feel debt-burdened for a long time. You will have to remain disciplined when it comes to financial responsibilities for a longer span of time.
Lowering New Loan Eligibility
Your eligibility for a personal loan is calculated on your capacity of repayment. Until you have an existing loan, it will negatively affect your chances of being eligible for new loans. This is because you have a fixed obligation of your existing loan. The lenders check that your total payable amount monthly should not exceed a certain percent of your net income (monthly). Therefore, an existing loan may kill your possibility of availing a bigger or new loan.
Over to You!
A personal loan in the UAE can be both long-term and short-term. The tenure of your loan will decide the actual amount you will be repaying for borrowing. Making a decision regarding the correct tenure of your personal loan is crucial. Therefore, you should decide only after going through the pros and cons of long-term personal loans. While there are various personal loan benefits, there is always two sides to a coin. Hence, there are also some disadvantages of long-term personal loans. Think wisely, choose smartly!