Personal Loan in the UAE – According to statistics published by the Central Bank of the UAE personal loans for consumption purposes totalled 137,637 in millions of AED as at June 2016. In comparison, the figure as at June 2015 was 128,080 indicating an increase of about 9.3%. These stats attest to the popularity of personal loans in the UAE. In this article, we will explore personal loans in a little more detail:
What are personal loans?
▪ According to the Regulations Regarding Bank Loans & Other Services Offered to Individual Customers issued by the Central Bank of the UAE on 23rd February 2011 personal loans are defined as:
▪ Personal Loan: Is “a loan that is given to individual customers, where repayments are made out of salary and end of service indemnity and/or any other verifiable regular income from a well defined source”.
▪ In general, personal loans are non-collateralized, unsecured cash loans that will help you finance your personal/aspirational needs.
What are the restrictions applicable to personal loans?
▪ As per the regulations mentioned above, the maximum amount that can be borrowed as a personal loan / personal consumer loan is twenty times the salary or the total income of the borrower.
▪ The repayment period for personal loans must not exceed 48 months.
▪ Debt Burden Ratio – This is the ratio of all deductions from salary or regular income for loans to regular income. This must not exceed 50% of a borrower’s gross salary or regular and if the loan extends into retirement age the DBR should not exceed 30% of the income or pension.
Is my credit report / credit score important?
▪ Your credit report provides a detailed picture of your creditworthiness to a bank or financial institution. This will help banks or financial institutions to make a decision on your loan application. You can get your credit report from the Al Etihad Credit Bureau that was set up as a Federal Government Company by the UAE Federal Government in February 2012.
▪ Your credit report is a collection of all your historical credit data from various financial institutions, utilities, government etc. This report will include:
▫ Record of current and previous credit facilities
▫ Payment history over the last 24 months
▫ Payments overdue
▫ Records of any default.
▪ You can get a copy of your credit report by visiting Al Etihad Credit Bureau Customer Service Centers in Abu Dhabi and Dubai. You will also need to provide your original Emirates ID card and passport copy. For a Short Credit Report, you will need to pay a fee of AED 70 and for a Long Credit Report you will need to pay a fee of AED 110.
Applying for a personal loan at a bank / financial institution
Once you’ve determined the amount of personal loan that you may get based upon your DBR, salary and loan tenure and after checking that your credit report is in good standing you can apply to your bank for a personal loan. Of course you will need to meet the bank’s eligibility requirements.
You may also need to have your salary account with the bank to whom you have applied for a personal loan. If not, you may get your salary account transferred to this bank (which might be cumbersome) or go in for a non-salary loan product like Citibank’s Personal Installment Loan or the No Salary Transfer Personal Loan for Expatriates from Mashreq Bank.
Personal Loan in the UAE –If you are interested in Shariah-based personal financing solutions you may check out a product like the Personal Finance or the Goods and Service Finance products from Emirates Islamic Bank.