Why do Banks Reject Applications of Personal Loan in UAE?
A personal loan may act as a go-to loan for a lot of people. It can be used for planning a sudden vacation, wedding, buying something costly, or when in dire need of cash. A personal loan is a type of unsecured loan, that is, there is no need of collateral to avail this loan. The rate of interest on personal loans is calculated either on a flat rate basis or on reducing balance method. Interest rates on personal loans are comparatively high, mainly because they are not secured and involve risk up to some extent. But these rates are relatively low in the UAE, as compared to other countries.
There are various purposes for which you may visit a bank in order to borrow funds. There are also various reasons for which you may face personal loan rejection.
What can be the Reasons for Rejection of Personal Loans in the UAE
Personal loans can be helpful when there is a short term need for cash. Hence, a personal loan rejection might prove to be an unwanted surprise. In order to avoid this, you should know as well as understand the various reasons that are generally the attributes depending upon which your personal loan application is rejected.
Status of Employment
Each bank will check the status of employment and its stability before proceeding further with the personal loan application. If you have had ups & downs in the track record of your employment or an unstable history, then there can be a high probability of your loan application being rejected.
Banks may also check whether your employer is a part of their approved list of employers or companies in the UAE. This is generally done in order to check whether your income or employment is secured or not. It also makes sure if your company is doing well or not. Usually, big organizations are listed, and in case of the employees of listed companies, it becomes easy to avail the personal loan.
This is amongst the salient conditions to avail the personal loan in the UAE. Each bank has its own fixed requirement for minimum salary. The salary you earn also has an impact on your eligibility for availing the personal loan of a certain amount.
Debt-Burden Ratio (DBR)
In simple words, Debt-Burden Ratio is the effect of debts on your income or the amount of debt you need to pay out of your salary. As per the central bank of the UAE, the EMI must not exceed 50 percent. That is, your loan will not be approved in case your DBR is more than 50 percent of your income. You can use the DBR calculator for calculating the DBR.
The banks can get hold of your credit report through the Al Etihad Credit Bureau and go through your DBR. They will also get to know about the default in payments made by you (if any) and the number of credit cards you own. These factors significantly contribute to the loan application approval and processing. Your credit score is a 3-digit score given to all individuals. The higher your credit score is, the more are the chances of getting one of the best personal loan in UAE.
Usually, an eligible age for availing a personal loan in UAE is 21 years minimum, and 65 years maximum at the time of maturity. In case you do not fall under this range of age, then there are chances of personal loan rejection.
The above-mentioned factors or attributes act as the eligibility criteria to apply for a personal loan. The applicant can avail the loan only when he meets this criterion otherwise the bank rejects their loan.
How to Avoid Personal Loan Application Rejection in the UAE?
You would never want your personal loan application to get rejected. Here are a few tips on how to ensure the approval of personal loan application.
- The probability of availing a loan becomes higher when you apply with a bank where your employer is listed on the list of approved companies.
- Be clear and specific about the details as well as your requirements.
- Be aware of your credit history. The Al Etihad Bureau gives your credit report by charging a certain amount of fees.
- Try to pay off all debts possible before you apply for the loan.
- Consider your credit capacity and apply for the loan accordingly.
- Keep yourself updated about all information regarding how to apply personal loan, documentation, eligibility criteria, etc. beforehand. Try to finish all the formalities in one go.
The Final Word!
Though little, but it takes some amount of time and effort in applying for a personal loan in the UAE. However, it only takes a few seconds to reject the application. Make sure you compare all the options available and weigh all of them before you apply for one.