When it comes to support your finances, a personal loan is one of the preferred options in the UAE. It can be used by people for large expenditure needs such as buying an asset, a wedding in the family, child’s education or sponsoring a trip etc.
It is an unsecured means of financing i.e. it does not require any asset as security; this increases the risk and leads to higher interest rates.
A personal loan has many benefits, few of them being.
- No collateral is needed.
- Lower interest rates compared to credit cards or credit card loans.
- Some banks offer no payment options for the first two months.
- A free debit card is offered by many banks for expatriates.
- Helps in financing planned expenses.
- Helps in managing debt by consolidation.
Against the borrowed money, the lender applies interest rates depending on the tenure of the loan. Banks in UAE charge interest in two ways: flat interest rate and reducing interest rate.
Flat interest rate, as the name suggests, is the interest calculated on the full amount of the loan for the entire tenure of the loan. On the other hand, in case of reducing interest rate, the interest rate is calculated every month on the outstanding loan amount.
Based on these rates of interest, your monthly installments are decided. However, there are certain things mentioned below to keep in mind when opting for a personal loan. These would help you in planning for the payment of your monthly installments in an organized way.
1] Plan Beforehand
It is important to plan according to your financial position. Planning for a personal loan can be done in two steps. First, you should ask yourself why you need the loan if it is an emergency or an avoidable expense; knowing why you need the money is important to manage it.
Second, it is important to know how much you can afford to borrow and payback. If you’re clear on why you need the money, next is to consider the amount you can afford realistically.
2] Shop Around & Compare
It is very important to compare all the available options and choose the best one according to your needs. It is good to take a feedback from your known ones regarding the reputation of a provider, but it is not realistic to only consider the option they have.
This is because different people have different needs. You shouldn’t blindly go for the options suggested by others, as it may not suffice your needs the way it did for the others.
The best option is to compare different loans that offer attractive interest rates across the various providers in the market such as ADCB Personal Loan, RAKBank Personal Loan, under one web aggregator and find the one that suits you.
3] Be aware of the Loan Jargons
There is a thin line between being able to make monthly payments and being able to afford the loan. It is important to know the terms of your contract before signing it.
APR (Annual Percentage Rate) is the amount you borrow along with the personal loan interest rate in uae you pay during the lifetime of the loan. Certain fees/costs are not openly shared with you, like.
- Loan processing fees.
- Failed payment fee.
- Late payment fee.
- Prepayment penalty.
We’re trying to mean that you should be attentive about various loan related jargons that may confuse you many a time. Also, make sure you’re aware of the hidden clauses/charges.
4] Credit score
Your credit score determine your loan eligibility, if it does not seem to be good, having low-interest rates can be extremely difficult. You need to know your credit scores, which can be calculated via online credit score calculator.
5] EMI Calculator
This is the most important and useful tool that can be found online. EMI aka Equal Monthly Installments are the payments you make in intervals to repay off your loan.
It is important to know the value of the EMIs before getting yourself a Personal loan; this is because you will have an idea of how much can you afford. It is also beneficial when comparing different providers, and opting for the right option.
6] Look out for Offers
It is good to keep a heads up for offers and plan your expenses accordingly. Banks and lenders often offer attractive seasonal deals for a limited period. This can be due to the competition among the providers. There are special deals/discounts launched during the festive season, which can help you save money.
YOU’RE GOOD TO GO!
Personal loans are attractive and help you meet a lot of major financial expectations. However, it also comes with responsibility: they require timely payments of installments, which is extremely important and cannot be neglected.
As you may have heard, anything can be achieved with good planning, plan your loan installments as well. If you prepare yourself well beforehand according to your financial position, monthly payments won’t be a headache for you. Becoming a little responsible, you can afford your personal expenses with no worries!