Unlike other loans, the interest rate for personal finance may be different for every borrower. This loan has fluctuating rates of interest. These rates can vary, depending upon how appropriately the borrower can meet the eligibility criteria of the lender.
This is the reason why different borrowers get different rates of interest even when you take a loan from the common lender. There are some factors, which determine the personal loan interest rate in UAE. If you plan to apply for this type of loan, it is essential that you understand the factors that affect your rate of interest. Amongst these factors, salary is one of the main things that the lenders consider.
Amount of Loan I can Avail on My Salary
There is not really a parameter of standard income for judging the loan suitability. Your lender will first review if you have ever been a defaulter in the past. And whether you have any existing loans or not, other than the one you are applying for.
You must always remember that you should directly approach the lending institution. Also, make sure you maintain at least an average credit score.
The amount of loan you can borrow is at the discretion of the lender. The lenders evaluate the income of the applicants and their potential growth before they approve the loan. In most of the cases within the UAE, you can avail a loan of up to 20 times of your monthly salary.
However, as mentioned earlier, it totally depends on the discretion of the bank. Additionally, for minimizing the default risk, the lenders try to keep your monthly installment to around 45-60 percent of the monthly income.
Other than the income criterion, there are a few other factors that affect your finance.
Following are these crucial factors and their impact.
1. More Credit Score leads to Lower Rates
Your credit rating is considered to be a validation regarding your effectiveness in the past in terms of payment of credit cards and previous loans. With each payment you make on your previous loan, points get added to your credit rating.
However, defaults or late payments, if any, may cause harm to your credit score. In the UAE, the credit rating ranges between 300 & 900. The more it is on the higher end, the better it would be. If your credit rating is healthy, you can avail finance at lower rate of interest. And, if this score reduces, your interest rate will rise.
2. More Income leads to Lower Rates
The borrowers earning a high income always prove to be a safer bet. With the increase in income, there is a rise in affordability and hence the probability of on-time loan repayment. You can avail this loan if you earn a decent monthly salary.
However, the rates of interest may differ for every borrower, keeping into consideration the other factors. There is a minimum salary for personal loan in UAE. If you earn anything below this minimum requirement, you will not be eligible for the loan in any situation.
3. Reputed Company or Employer lead to Lower Rates
If you work with a reputed company or employer, it can definitely help you in getting an amazing deal. This is because the employee working in such a company are considered to be more responsible and stable towards repayment of loan on time.
Also, it is a fact that the nature of your job has an effect on the loan’s rates of interest. A salaried worker or employee may be offered a different rate than the rate offered to a self-employed professional. The borrowers who have reached their age of retirement may have to bear high rates for getting a personal finance.
One more factor that the lender often takes into consideration before approving the loan is that if you have obtained finance from other banks or lenders too.
While all of these factors act as general guiding principles for the lenders, make sure that you have a healthy credit history as well as credit score. If in case there is any previous default, it will hamper your probability of getting the loan amount desired or favorable loan tenure and rate of interest.
The Bottom Line!
Personal finance is amongst one of the easiest finance to avail in the UAE for making sure you have the money when you require it. This credit option is unsecured, that is, most of the lenders will not need you to pledge any of your asset for securing the loan. That is why this finance comes with a higher interest rate as opposed to secure loans. Factors such as credit rating, monthly income, and your employer also affect your loan amount as well as rates.