As you know, UAE has the largest number of banks compared to other GCC countries. Apart from the conventional banks, there are some Islamic banks which follows the Islamic rules( Sharia rules) . Are you planning to take loan from a bank or non banking financial institution for your personal needs or business needs. Here are some information regarding different types of loan available in Dubai.
The Loans can be applied by a national or an expatriate for their personal or corporate needs. The bank may set minimum salary/income requirement for particular type of loan. Some banks will attach a free / paid credit life insurance with the loan in case of death or total disability of the borrower. However they may give concession to national in matters of age limit, minimum income/salary requirement, tenor (time period) for repayment, loan amount etc.
Required documents for the loans
As you know that loans are given to those who are able to repay it. For the lender to make sure of applicants capability, it may ask for the following documents to be furnished. Identification document like Passport, Residence visa for expat, Khulasat Qaid (family book for nationals), Financial documents like Salary certificate, 12 month bank statement showing the salary credit, clear repayment history of existing loans or credit cards, application form. However they may ask for further documents depending on type of loan you apply for.
Age limit for most of the loans is 21 years and maximum age 60 or retirement age (which ever is earliest) on the loan maturity date.
The central bank of UAE (CBU) has set some regulations on bank loans for more transparent and credible dealings. The bank may charge 1% of the loan amount as service charge and 1% of the remaining balance as early settlement fees. This applies to Personal and Car loan. Each bank should clearly mention the interest rate which may be flat or flexible and should be formulated according to the formula specified by CBU.
Different types of Loan
Personal loans are provided by most of the banks for a salaried or a self employed person to meet any financial needs without any collateral. Usually they charge high rate of interest on an average 25% yearly if the account is not attached with the salary. The maximum amount set by CBU is 20 times the salary of the borrower with a maximum repayment period upto 48 months. All the process will come under the department of retail banking. Loan approval is based on your salary amount, type of industry you are involved, age . It will take 4 to 10 working days for the completion of whole process. The bank may ask for the documents mentioned above along with the post dated cheques for EMI (Equal Monthly Installment) for security reasons. Please note that in UAE, cheque bouncing is considered as criminal offence.
Personal Loan with salary transfer
Banks provide personal loan at a lower interest range between 12 to 16% to customers who maintain salary account with the bank. In case of new customers an additional declaration/confirmation letter from the employer to transfer the salary should be furnished along with loan application. Some banks like RAK , HSBC bank offer this type of loan to newly relocated expatriates.
Car/ Vehicle/ Auto Loan
Car loan can be availed by individuals or business units residents at UAE. The loan can be used to purchase new or used car. For individuals minimum income should be AED 5000. As per CBU guidelines to banks a maximum loan amount can be equal to 80% of value of the vehicle. The maximum repayment period is limited to 60 months. As the bank retains the ownership of the vehicle until loan closure, approval for the loan can be comparatively easier. Rate of interest is around 5 to 10%. The loan applicant may have to produce labour card/ trade license copy, driving license copy along with the previously mentioned documents.
Home / Mortgage Loan
House mortgage loan is extended to any individual who wish to own a home in Dubai. The maximum tenor of the loan is 25years. Banks provide lender with fixed or flexible interest rate options. The rates can vary between 3.5 to 8%. The rate depend upon applicant’s employment status (salaried or self employed), tenor of loan and residence status. A minimum salary requirement is approximately AED20,000. The approval can depend on income level , age of applicant, down payment amount etc. The bank can loan up to 85% of the house value. Salary certificate or audited financial documents for 2 years, personal and corporate account details, property documents like sale agreement along with previously mentioned documents are required during loan application. It usually take around 14 to 20 working days for the evaluation of the documents. Bank may request further information or legal documents for clarification. The bank charges can include loan processing fees, insurance premium charge, property registration charge and valuation fee. Most of the builders will have tie up with specific banks. Please note that a person who is residing outside UAE can obtain loan to purchase house in Dubai, while the approval process can be more complex.
Loan against property
It is similar to Mortgage loan. The loan amount may be 50 to 65 % of property value. The approval largely depend on the incoming cash flow not on the value of property. Interest come around 7 to 10 % on reducing balance with a tenor 5 to 15 years.
Business loans are offered by most of the banks to small or medium enterprise customer. The loan amount range from 150,000 to 7,50,000 AED with a tenor of 12 to 48 months. Interest rate could vary from 12 to 24 % on reducing balance. The company turnover should be 3 million or above and should have minimum 2 years in business. For large enterprises, they can offer term loans but largely depend on your company credentials.
Some of the banks like Mashreq, Barclays, ADCB offer education loans to national / expats. The loans are offered for school fees of a child or for the students of management and business studies. The institutions will have tie up with specific bank. Interest range from 9 to 13%.
Some of the banks like RAK Bank offer agricultural/farm loan to meet agricultural needs of farmer like buying equipment, or land at an affordable interest rate. Other special categories like travel loan for holiday or hajj pilgrimage, wedding loan, goods and service loan etc can come under personal loan. Besides this, Boat loans are also offered by banks like HSBC MEFCO, NBAD, ADIB etc
For more details, please see the various package offered by major banks in Dubai.
Islamic banking is the banking activity confined to Islamic (Shariah )rules. It strictly prohibits the acceptance of any form of interest or excess fees (riba). It largely depend on profit /loss sharing concept between the lender and borrower. The Shariah Supervisory board is formed to regulate the activities within Islamic banking. Some of the conventional banks like HSBC, NBAD etc incorporates Islamic banking along with their main stream. Dubai Islamic Bank, Abu Dhabi Islamic Bank, Sharjah Islamic Bank, Emirates Islamic Bank, Noor Islamic Bank, Ajman Islamic bank are some of the major Islamic banks in UAE.
To know more about the Islamic Banking Principles ,please click here.
Online Application for Loans
Online application for personal loan, loan with salary transfer, Vehicle loan, Mortgage/ Home Loan, Business loans can be done through MoneyGulF website. There you can compare the different package offered by famous banks in Dubai. More options are found in souqalmal where you can compare and sort different loan packages.