How to get a Car Loan in Dubai

A car is an inevitable part of a Dubai lifestyle. But once you move into the country and settle down, you will realise that you are left with very little cash to purchase a new car. The only other option is to take a car loan.

The good thing about the car loan in Dubai is that it is available at a lower rate when compared to the rest of the world. The rate varies between 2-4 per cent in most of the leading banks. Moreover, it is easy to get a car loan in Dubai, provided you meet a few of the conditions.

Who Is Eligible To Get A Car Loan In Dubai?

To apply for a car loan in Dubai, you should meet the following conditions.

• You must be a national or expat resident of the country.
• You must be between 21 and 65 years of age.
• You have a valid driving license in the country. If you do not have a driving license in the UAE, the license from your home country should be valid in this country.

A minimum salary as required by the bank, which is AED 5000 for new cars and AED 8000 for used cars.

What Are The Things To Know Before Availing A Car Loan?

Interest rate

As mentioned earlier, the interest rates for a car loan vary between 2 and 4 per cent. You should do a comparative study before availing of the loan.

There are two ways interest is calculated on loan - reducing rate and flat rate.

In the case of reducing rate, you pay the interest for the outstanding amount on the loan.

On a flat rate loan, you pay a fixed amount as interest, which is calculated on the borrowed amount. This fixed rate will be the same throughout the tenure.

The rate of interest for a reducing rate will be more than that of a fixed rate.

Maximum tenure

Car loans are provided for a maximum tenure of up to 60 months. This means that once you avail of the loan, you should repay the same within 60 months.

For some used cars, the maximum tenure can even be shorter. Some banks even stipulate that the used car should be less than ten years once the loan is completed.

Thus, you should ensure that you have enough finance to repay the loan within this period.

Down payment

A bank or a financial company would finance 80 per cent of the value of the car. This means that you need to make a down payment of the balance of 20 per cent. You can make the down payment to the bank or the car dealer, depending on the agreement.

Minimum amount for financing

For most of the bank, the minimum amount of loan is AED 20000. However, since the banks finance 80 per cent of the car loan, the total amount of the vehicle should be a minimum of AED 25000 for you to get the car loan.

EMI

EMI is the Equated Monthly Installment that you pay for repaying the loan.

The EMI you pay for the car loan should be less than half of your monthly salary minus any liabilities like a credit card.

For eg; if your monthly salary is AED 20000, your car loan should not be more than AED 10000 (half of AED 20000). If you have availed of any other loan, the same will be deducted from the salary for calculating the EMI.

Besides, 5 per cent of the credit card limit will also be deducted for purpose of calculating the EMI.

Arrangement fee

Arrangement fee or processing fee is the amount bank would charge upfront for processing the loan. You can either pay the amount upfront or add the fee to the principal car loan amount and pay along with the loan.

The arrangement fee varies from bank to bank. It can either be a fixed amount or a certain percentage of the loan amount.

Early settlement fee

If you take loan for a certain number of years and pay it before the said period, you need to pay an early settlement fee. For eg; if the loan is taken for 10 years and you settle the loan in 5 years, you will have to pay the early settlement fee which is normally one percentage.

Insurance on loan

Insurance covers the risk that arises if you are unable to pay the loan due to loss of a job or other unfortunate events. Most bank provides the offer of insurance to cover the loan. If not, you can consider going for an insurance to cover the risk.

What Are The Documents Required For Car Loans In Dubai?

There is no compulsion for salary transfer to avail loan from the bank. You can hunt around and get the finance from the bank or institution that offers the best interest rate.

But it is best to get car loans from the bank where your salary is credited as the bank finds such customers to be less risky.

Most car dealers will have bank representatives whom you can approach for comparing the interest rates. Typically, all banks and financial institutions would ask for the following documents for providing a car loan.

• Your personal documents
• Passport
• Emirates id
• Labour card
• Salary certificate
• UAE Driving license
• Bank statements for 36 months
• Car registration certificate
• Insurance policy documents
• Valuation certificate of the car.

In the case of self-employed individuals, you need to provide a trade license and bank statements.

Sometimes companies need to get a car loan to purchase business vehicles. In such a case, besides trade license and bank statement, you need to provide the list of authorised signatories and MOA of the company.

Things to do after meeting eligibility criteria from the bank for a car loan?

Once you meet all the eligibility criteria, you need to fill the car loan application form with the required documents to apply for a car loan. Along with the documents, you should also provide the dealer’s quotation.

The bank will verify all the documents and once the loan is approved they will send a Local Purchase Order (LPO) to the dealer. You should then make the down payment and complete all the formalities at the dealers end before taking the car. Refer the list of car dealers names and phone numbers having official car showrooms in the UAE.

What Are The Benefits Of Availing Car Loan In Dubai?

Apart from having ready cash to purchase your dream vehicle, you get the following benefits when you apply for an auto loan.

• The car loan in Dubai is very cheap when compared to the rest of the world. You pay between 2 and 4 per cent for availing of the loan.
• You do not need collateral for availing of the car loan as the car itself acts as the collateral.
• Once you repay the auto loan on time, it can add to your credit history. This will help you in getting other loans processed fast.

Most banks and financial companies offer different loan packages to meet your requirement. Thus, you have good control over your finance. Just compare car loans to find the best car finance options in the UAE and choose the most suitable for you.

Bottom Line

Getting a car loan in Dubai is not very difficult provided you are eligible and has all the necessary documents in hand. Since most of the car dealers have tie-up with bank representatives, they can guide you in getting the loan as per your requirement.

In case you do not meet any of the above eligibility requirements, or your car loan is rejected because of other reasons, the best option is to use public transport. All parts of the Emirate are well connected by taxi, metro, and tram. Besides, you can also opt to rent a car in Dubai which is an affordable option without any liabilities.