Many of us have realized the importance of our home spaces over the past year. Extended periods of time within our homes have prompted many UAE residents to rethink their interiors. But whether it’s a refurbishment project or redesigned indoor and outdoor living spaces, chances are you’re likely to need extra cash to realize your dream home.
A small loan, typically available as a personal loan in the UAE, can help fund the purchase of new furniture or white goods, such as a bedroom suite or new kitchen appliances.
How do personal loans in the UAE work?
Such loans allow you to borrow a fixed amount of money for a set period of time, which is paid back with interest in monthly instalments. Such loans are typically unsecured, meaning they do not require any collateral.
Personal loans in the UAE are relatively easy to obtain, with most banks only requiring a copy of your Emirates ID and copies of recent bank account statements. Since they are unsecured, loan amounts aren’t as high as other kinds of finance, such as home mortgages.
Taking out a personal loan in the UAE can help bridge an immediate shortfall of funds, but there are several pros and cons to consider before making the decision to take on extra credit. Central Bank rules determine who is eligible for a personal loan in the UAE. Additionally, existing Debt Burden Ratio rules specify (for both expats and locals) that the combined monthly instalments on all your loans and credit cards should not exceed 50 per cent of your salary. So, while loans can pay for big-ticket items, they must be considered within your overall financial situation.
(Please note that every applicant is eligible for a different amount and that’s based on their credit score, monthly income, and debt ratio etc.).
It’s helpful to understand what the loan costs – in other words, the kind of interest you’ll be paying, no matter what you use the loan for.
There are two ways of calculating interest rates for personal loans:
First is a flat interest rate which calculates the interest rate based on the full loan amount and does not vary over the loan tenor/ period. Flat interest rate is not allowed for financial institutions under the local regulations.