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A personal loan is a loan for which the applicant is assessed for approval on the basis of his or her credit history and income. These loans are referred to as “unsecured loans” as there is no collateral required in order to secure a personal loan. The lenders approve a loan based on an applicant’s creditworthiness.
These loans are relatively easy to apply and qualify for as compared to loans such as home loans or auto loans. The ease of obtaining these loans makes them useful for all types of uses from debt consolidation to buying an expensive asset. You can use these loans towards any purpose but it is ideal to borrow the amount that you actually require and only for things that help in improving your finances or have a significant impact on your life.
There are certain pros and cons of everything in life – even personal loans. Some of them are briefly explained below:
When you obtain personal finance, you generally receive the funds as a lump sum, which you repay via fixed monthly payments over a pre-specified term. However, the details can vary from one lender to another.
The personal loan lenders in the market charge a one-time fee referred to as “processing fee” that can increase the original cost of a personal loan. Even if you are getting an attractive interest rate on your personal loan, it is important to check the personal loan processing fee and do a thorough comparison across the different lenders for the processing fee charged by them. In the UAE, there are very few options for a personal loan without a processing fee. There are only 2 providers and 3 options available, that are explained later in the thread.
The rate charged on your loan depends on your creditworthiness. If you hold a very good credit score, you will be eligible for very attractive rates. However, with a credit score that is not so good, you may end up paying higher rates.
The term of a personal loan typically ranges between 1 to 5 years. However, it depends on your personal loan lender. There are some providers that allow you to flexibly choose the term within which you wish to repay your loan.
There are not many institutions that offer a personal loan without processing fee in the UAE. Many of the providers charge a minimum processing fee. Only two institutions, named below are the ones that offer a personal loan without a processing fee.
ADIB i.e., Abu Dhabi Islamic Bank offers personal finance solutions for limits up to AED 3 million for UAE Nationals and AED 1 million for Expats without charging them any processing fee.
The benefits of ADIB Personal Finance are:
The Citibank Personal Installment Loan offered to the applicant at a zero processing fee. Additionally, depending on the loan amount (varying from less than AED 50,000 to more than AED 150,000) you may be eligible for cashback rewards.
The benefits of Citibank Personal Installment Loan are:
This is another type of personal loan offered by Citibank at a zero processing fee. This loan requires a salary transfer.
The benefits of Citibank Salary Transfer Loan are:
As mentioned before, there are numerous uses of a personal loan.
If you are someone with high interest payments due on your credit cards, you can pay off these outstanding dues with a personal loan that is offering you an attractive interest rate and no processing fee. This helps in eliminating debt quickly because less of your monthly payments go towards the interest charged.
If you find yourself in the need to buy something that you do not have the finances for, a personal loan could come in handy to go forward with such a purchase. However, there is always some degree of risk involved when you take up debt, so it is only sensible to borrow for things that actually help you financially or have a significant impact on your life.
If you are someone who is wanting to start a new business or develop some new skills that will go a long way in your career, you may be able to fund yourself using a personal loan. However, it is important to check if your provider you are choosing limits the use of the personal loan.
In an ideal scenario, you will have certain savings that are dedicated to unexpected emergencies in life. However, sometimes there is no other alternative than borrowing. A personal loan can come in handy in such cases.
It is very difficult to find a personal loan without a processing fee. Most of the providers charge a minimum personal loan processing fee on the finance. The only two providers in UAE with a zero fee for processing the loan are Abu Dhabi Islamic Bank and Citibank. An applicant should place the focus towards interest rates, more than the processing fee, as they end up costing more.