Getting a personal loan in UAE doesn’t end with getting the loan application approved and the finance amount getting credited to the account. The main challenge begins while paying the loan installments. A personal being an unsecured loan comes with a higher interest rate in comparison to other loan types in the market. If the loan installment payment activities are overlooked, the loan holder can end up losing a lot of money in the process. But when rightly planned and take well-informed decisions, the loan holders can not only protect themselves from paying more than the predicted installment but also save money on a personal loan.
Check: Few tips to find the best Personal Loan
Here are some tips that can help you save money on a personal loan,
Interest rates
The interest rates on a personal loan are high. These interest rates are going to be added to the loan installment throughout the loan tenure. A loan applicant with a good income, credit history can negotiate on the interest rate and get it for lesser rates.
Even before applying for a personal loan, the applicant needs to shop around and get an approximate value of monthly installment, tenure, interest rate, etc. Once these values are determined, you can opt for the one with lesser rates. This is one way that can make you not end up with the loan of higher interest rates.
Also, check: Personal loan interest rates in UAE
A point to be remembered in this case would be, the loan applicant should just do a soft inquiry of the loan this way of credit inquiry will not negatively affect your credit history.
Existing loan holders can opt for a balance transfer or debt consolidation loan that is provided on a less interest rate. They can talk to their banks and request for reducing interest rates or opt for debt consolidation. While availing a debt consolidation loan, they should also make sure the processing fees of the new loan will not be higher the amount they will be saving on interest. The processing fee on a personal loan is 1%-2% and on debt consolidation, some banks may provide some discount on this value.
Tenure
The tenure on a personal loan in UAE is for a maximum of 4 years at most of the financial institutions. Getting a personal loan for a longer tenure may reduce the monthly installment value but when the overall amount is calculated, it may go way beyond the loan amount you’ve borrowed. This may be work in the other way as well if the loan tenure is long and the interest rate is less.
So finally the loan tenure and interest rate correlation differ with each person and it can be determined only after calculating your EMI according to your loan numerals.
Timely payments
A personal loan has several charges added like late payment fees, installment deferment fees, etc. In UAE, the late payment fees on a personal loan can range from 1%-2% of the installment amount or up to AED 200(varies with banks) and on installment deferment or postponement it can range from AED 100 – AED 200 per installment.
Personal loan holders can save a lot if you pay your installments on time without any delays. You can even automate your payments. This way banks will directly debit the loan installment from your account at the time of payment. This will make you save on these additional fees.
Early settlement
Whenever you get a bonus or a lump sum of the amount it is recommended to use a part of it in clearing the loan amount partially or even fully. Reducing the loan amount in a lump sum will make you save in huge on interest rates. But financial institutions charge partial settlement fees or early settlement fees(whichever applies) which ranges from 1%-2% of the settled amount. So make sure the prior settlement fees are less than the interest rate you will be paying further.
By following the right tips and advice you save a significant amount of money of a personal loan. At the end of the day, make sure your personal loan experience don’t be painful and daunting.
About the author
MyMoneySouq helps the visitors to find the right financial product by comparing different products provided by various banks in UAE. It compares different loans, insurance, accounts, credit cards. It works with a goal to give the users a clear idea of what to expect out of their funds and what they can get from those.
