Banks in UAE compete to offer personal loans that meet individuals’ needs, as well as increase the volume of existing personal loans or transfer loans from other banking institutions. Central bank regulations also allow you to obtain a personal loan even from banks other than the one you transferred your salary too, with the possibility of buying existing loans from other banks while enjoying flexibility in repayment period.
But first, you should know some of the fundamentals set by UAE Central Bank to regulate offering personal loans for individuals. First, the maximum limit of a personal loan from a bank should not exceed 20 times the salary or the total income of the borrower. Loan period is set for a maximum of 48 months which is a sufficient period for repayment
The UAE Personal Loans’ Law regulates the relationship between banks operating in UAE and their customers by setting fees, charges, and deductions on banking services. The new law regulates offering bank loans and other services to individual customers and requires certain conditions such as:
- Banks should disclose their interest rates on loans and facilities.
- A copy of the interest rate table should be sent to the Central Bank, as it publishes all the interest rate tables of all banks. This facilitates to the borrower comparing between rates and determining the bank that offers the most appropriate rate for them.
- The installments shall not exceed 50% of the total borrower’s salary or any known income.
- In the event that the repayment period of the loan or the combined bank loans extends to retirement, the deduction from the salary can be reduced to only 30%.
- The new regulations have prevented deferred blank checks or installments checks that exceed 120% of the value of the loan or the debit balance.
- A supplementary loan shall not be granted unless the original loan has been repaid regularly for at least one year.
- The Central Bank regulates offering new facilities for the customer, such as overdrafts and the unpaid balance of credit cards.
The Central Bank has also determined several cases in which the terms of the loans cancel and become immediately due and payable with their charges and fees, including:
- Termination of the borrower’s work for any reason
- Transferring the monthly salary of the borrower or any part thereof to another party, without a written approval from the bank.
- If the borrower breaches any of their obligations in the loan contract
- If the borrower fails to pay 3 consecutive or 6 nonconsecutive installments
- Invalid client data
- The death of the borrower or leaving the country permanently.
According to the latest statistics, the value of personal loans provided by banks in UAE during the year amounted to 339.7 billion AED, with national banks accounting for 305 billion AED (%90), and foreign banks accounting for 34.7 billion AED (10%) of total loans.
Banks operating in UAE are very flexible in dealing with defaults on personal loans. They usually reschedule debt, postpone interest, accept grace periods and consider the possibility of reducing installments.