Personal loans: lifelines in need

One of the advantages of living in a financially developed world is an easy access to credit. Need a car? There is an auto loan to pay for it now. Buying a house, mortgage can help; and in case of an unforeseen expenditure, a personal loan is always welcoming.
Lenders in the UAE have increasingly made applying and obtaining financial succour comparatively easier, involving lesser paperwork and faster approvals. Currently, the interest rates on such unsecured loans are hovering between 3.99 per cent and 8.99 per cent per annum. If you are looking to get one, we have a few pointers that can help you land a good deal.

Who to approach for a loan? The first place to check would be the bank you have your primary account with. In the UAE, a salary transfer loan guarantees the best interest rate and least paperwork. Such accounts give an assurance of timely repayments to the bank.
However, concurrently you can also do a quick research online on the interest rates charged by other banks. In case there are financial institutions that are charging lesser interest rates, you can open a new account with them, transfer your salary, and get a better rate, or negotiate with your bank on a similar rate of interest.

Company not on the approved list: Banks usually maintain a list of companies that they are more comfortable lending to. However, if the company you work for isn't a part of that list, chances are you will be charged higher - sometimes it can be as high as almost 9 per cent. This takes us back to our first advice: research. The easiest way is to get in touch with the human resource (HR) department of your company and check if they have tie-ups with any banks. If yes, you know who to go to. But in case your company doesn't have any such associations, log on to personal finance websites such as www.compareit4me.com, www.moneycamel.com, and www.souqalmal.com, for a quick idea on the lending rates and home in on the one that gives you loan on the best terms.

Read the devil in the detail: Before signing on the dotted line, do ask the bank executive about different charges or cost of personal loan. Some of the popular charges include one-time processing fee, and cost of insurance, which are usually deducted from the total loan amount. The rest is credited into your bank account.

Know the EMI date: Knowing when the bank would deduct the instalment from your account is important, especially for those who are living it up in Dubai and eagerly wait for the payday to honour their bills and liabilities. If this reflects your lifestyle, it would be good to align the date of the EMI nearer to the payday.
It is extremely important to ensure timely repayment of debt in the wake of an active credit bureau in the UAE. In a few years, banks and financial institutions would base their decisions on credit worthiness of individuals as reported by Al Etihad Credit Bureau. The reports would create a distinction between bad borrowers and good borrowers, and handsomely benefit the later with better interest rates on loan products.

Other charges: Banks expect to be repaid in time. However, if for some reason you might not be able to pay the bank on time for one of the months, it is always better to call the bank and inform. Banks have provisions that allow deferred payments, moratorium period, etc. Therefore, do not surprise the bank and let it come calling on your door for repayment, instead be proactive and take the right steps. Needless to say, these arrangements come at a cost too.

Foreclosure: Banks do not allow foreclosure of loans before six months. Thereafter, you have to usually pay 1 per cent of the total outstanding as a fine with the remaining principal amount. After closing the loan account, always get the no objection certificate from the bank. This is important for all future transactions.
In case of a natural closure, which means you paid off the entire amount in the stipulated time, banks usually take up to 40 days to issue a certificate and send. Do chase in case you do not receive.

Personal loans are extremely helpful when encountered with an unforeseen financial need. Do not shop in a rush and make the most of the ample choice available in the industry.
-suneeti@khaleejtimes.com