Which is Better a Personal Loan or Mortgage in UAE?

Which is Better a Personal Loan or Mortgage in UAE?
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UAE can be a paradise for people who are looking for a luxurious and high-end lifestyle in these well-developed and modern places. Whether you are an Emirati or an Expat, you can enjoy such a lifestyle in the UAE with the help of personal loan and mortgage.

First of all, let’s understand what exactly personal loan and mortgage are.

Personal Loan

Personal Loan or personal finance (in case of Islamic Banks) is a kind of unsecured loan which is offered to the customers for catering to their diverse personal requirements. These requirements may include purchasing home appliances, vehicle, for wedding, renovations, and more.

This loan is offered to you only after detailed verification of your ability of repayment. This particularly includes your income source and your credit ratings and history. It is important that you thoroughly check and compare personal loans between various banks before selecting the one. There are various benefits of personal loans, some of which are the following.

  1. Availability of varying options for self-employed, salaried, and locals.
  2. A lot of banks offer free for life credit cards to all personal loan borrowers.
  3. Some banks offer the initial few months as payment-free period. Your installments begin after this period ends.
  4. An option of take-over loan is available on personal loans wherein the applicant can transfer an existing loan from one bank to another bank in order to save on personal loan interest rate.
  5. You may obtain an insurance cover on your loan for hedging against exigencies.
  6. Most of the banks in the UAE offer personal loans that are Sharia-compliant.
  7. In proportion to the rise in the salary, top-up plans are available.
  8. The personal loan in UAE also provides Takaful coverage that offers financial security in situations like death or disability of the individual.
  9. You can apply for a personal loan at a low interest rate in the UAE.
  10. The applicant can enjoy fast and easy approvals on personal loans in the UAE.

Mortgage Loan

With lots of people moving to the UAE for making a future in this place full of opportunities, the thought of purchasing a property has become prominent. Being an expat, purchasing a property in a country is a huge decision. Mortgage turns out to be a good option for expats when purchasing a house. The expats can apply for a mortgage in the UAE to obtain a home to live in or for an investment property. Here are a few features of mortgage loans in the emirates.

  • When you financing the purchase of your house with a mortgage, you go in for a long-time commitment.
  • Mortgage is offered by various banks in the UAE on two types of interest rates, variable and fixed.
  • Based on your circumstances and the particular property you wish to purchase the deposit amount you have been asked to pay would alter.
  • The eligibility for such loans depends upon multiple factors including the following.
    • Minimum income requirement
    • Minimum duration of service
    • Whether the applicant works for the company that is listed with the concerned bank

There can be more such factors as specified by the banks.

  • ERC (Early Repayment Charge) is a penalty charged on those borrowers who want to settle the loan amount early. The ERC may vary depending upon the interest rate on the loan, whether it is variable or fixed.
  • LTV (Loan-to-Value Ratio) is the relationship between the amount borrowed and the property value. For example, when the LTV is 80 percent, the applicant will make a down payment of 20 percent. The application for a mortgage loan of 80 percent of the property value has been applied.
  • The borrower can re-mortgage their loan if they wish to. Re-mortgaging is the change in the lender during your loan term in order to enjoy more attractive loan options or promotion rates.
  • You can use the following methods to repay a mortgage.
    • Interest and Capital Repayment mortgage
    • Interest-only payments
    • Part interest-only and Part Repayment Mortgage
    • Down payments and deposits
    • Insurance on Loan Protection
    • Repayment on Variable and Fixed Rates

The Final Verdict!

Personal loans and mortgages have made life easier for both Emiratis and UAE Nationals in the UAE. While there are various features and benefits of personal loans, even mortgage loans are loaded with attractive benefits. It is not ideal to say which is better amongst the two. Personal loans are an ideal option if you need financing for shorter terms, for wedding, education, clearing debts and more. However, mortgages are preferable when you want to invest in property or purchase a house to live in. It might be a possibility that an individual might find a personal loan more suitable while another might prefer a mortgage. Hence, it all comes down to your individual needs and preferences.  

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