Dubai
2024/06/26
If you are looking for a chance to buy a brand new car but the only problem is the money, then consider taking a car loan. It is quite normal and common all over the globe but can be not that easy in the process. Fortunately, it is much easier to manage it in Dubai compared to other parts of the world. Dubai car loans present accommodative interest rates and flexible terms and conditions. In addition, you will find plenty of financing options that allow you to choose one that suits your car loan expectations.
However, you need to understand the various parameters required when accessing car loan financing in the city. They include eligibility metrics, interest rates, what to consider, and repayment terms, to mention a few. Read on to understand how to get a car loan in Dubai and why it is a popular way of financing your needs in the UAE.
Before getting a car loan, you can always use the car rental service from Renty.ae.
Native or expatriate residents aged between 21 and 65. So, all you need is a valid ID and an active driving license registered in the country. If you have a foreign driving license, ensure it is legally accepted by the UAE authorities.
Easy access does not mean that anyone can get a car loan in Dubai. Certain metrics must be evaluated to enhance credibility. They cover documentation, minimum age, and terms of payment, to name a few. More detailed information can be found below:
Different financing institutions in the UAE have varying document requirements when financing car loans. Nonetheless, there are commonly required documents across most banks in Dubai car loans, as listed below:
Expatriates should confirm with UAE authorities whether their driving license is accepted in the country. If not, they may be required to apply for UAE's driving license to be viable for car loan financing in Dubai. They are also required to provide their home address from their native country, despite how long they have been living in the UAE.
Car loan financing residents in Dubai must be 21 to 65 years of age. On the other hand, expatriates must be between 21 and 60 years of age. The minimum salary threshold varies from one financing institution to another. That's why you should shop across various options to get the best. Nonetheless, most banks and financing institutions accept a minimum salary of AED 5,000 and AED 8000 for new and used cars, respectively.
A key point to remember: older car models have shorter repayment periods than newer ones. Fortunately, most financing institutions in Dubai have a repayment tenure for car loans of up to 60 months. The age of the car plays a crucial role in terms of repayment.
In most instances, car loans have a maximum limit of 80% of the vehicle's value. Also, you may be required to make a down payment of 20% before getting the loan funds. Some banks in the UAE have a minimum car loan amount of approximately AED 20,000. Choosing a financial institution and getting the relevant information directly from them is a good idea.
After meeting the above-discussed metrics, there are several factors to consider before committing to a car loan in Dubai. These tips will help you get the best car loan financing, as articulated below:
Experts recommend that you shop around different banks to compare car loan interest rates. This will help you identify the one with the lowest rates. The good thing is that car loan interest rates in Dubai range between 2 and 4 percent.
There are two interest repayment modes, where you can choose to pay a fixed interest amount every month or opt for a reducing rate.
You will get a car loan in Dubai for a maximum of 60 months in most banks and financing institutions. Keep in mind that some banks require the used vehicle to be at most 10 years old when the loan repayment is completed. As such, you should have adequate funds to cater for the loan before you surpass the designated period.
Most banks require a 20% down payment based on the car loan amount offered. The maximum loan you can get is calculated by estimating 80% of the car's value. You will then proceed with normal monthly payments according to the interest rate agreed with the bank.
Pay attention to this factor when accessing car loans in Dubai. This is because the longer the repayment term, the more interest you will pay. On the other hand, shorter loan terms require you to pay higher monthly amounts. Think carefully about your financial status before deciding which option will work best for you.
It is highly recommended to keep up with the monthly repayments to avoid getting into loggerheads with the bank. This is because you will be subjected to penalties and late fee charges if you miss your payments. Moreover, the bank can claim the vehicle's ownership if you fail to keep up with repayments for several months.
The Equated Monthly Instalment applies to the principal and interest paid every month. EMI is common in car loans in Dubai and is higher for longer repayment terms and lower in short-term loans. It is normally fixed during your loan repayment period and must be lower than half your salary. The half-monthly salary calculation excludes other bills, such as credit cards or existing loans.
These are the charges required when processing your auto loan in Dubai. It varies from one financing institution to another, and you can choose to pay upfront or incorporate it into the principal amount. Some banks require a fixed arrangement fee, while others calculate using a percentage of the loan amount to be processed.
Early settlement fee applies to people who finish paying the loan before the scheduled period. For instance, if your auto car loan in Dubai was designated for 6 years and you completed it within four years. You will be required to pay an early settlement fee of 1% for most car loan banks.
Loan insurance is intended to cover unforeseen circumstances during your loan repayment period. An example is when you lose your job and cannot clear the loan. Some banks will offer insurance plans to cater to your auto loan. You can also decide to access other insurance covers besides the one provided by the bank.
Loan calculators help you to make a better decision before committing to a car loan in the UAE. Various factors are considered when using a car loan calculator in Dubai, as listed below:
The auto loan calculator will compute the EMI using the formula below:
EMI = [P x r x (1 + r)^n] / [(1 + r)^n – 1]
After you have been evaluated and viable for a car loan in Dubai, you need to execute the paperwork. This will require presenting the documents discussed in the above sections alongside the dealer's quotation. The bank will validate your documentation before liaising with the dealer to approve the Local Purchase Order (LPO). You can then make the initial payment and comply with all the loan approval protocols for the process to be a success.
Besides getting funds to cater to your financial needs, auto loans in Dubai come with extra benefits that are worth considering. They include:
Getting an auto loan in Dubai is quite easy as long as you meet the required parameters. They include minimum age and minimum salary and present the required documentation.
Car loan applicants in the UAE must be at least 21 years of age. This applies both to native residents and expatriates.
The minimum credit score for auto loans in the UAE varies from one bank to another. However, most financing options will require credit scores ranging from 651 to 900.
Car repayment periods in Dubai are dependent on the age of the car. Banks will usually allow an average maximum of 60 months for used cars.
The minimum salary when applying for Dubai car loans is AED 5000. Nonetheless, banks may evaluate and require a higher minimum salary if your car is relatively older.
These offers are not available in all car loan financing institutions. Options like Emirates NBD have 0% interest car loans that should be paid in installments. However, remember you must complete the payments within 6 to 12 months to enjoy this privilege.
You can sell a car on loan in Dubai after completing the designated monthly payments. Alternatively, you can sell a car to a buyer willing to settle the remaining loan amount as agreed with the bank.
