UAE is a rich country and to survive here is a tough task. There are a number of expenses that a person has to incur to survive here including housing, travel, food, clothes, etc. and on top of that when you decide to buy a car it only seems like a burden especially to an early settler in UAE who is unaware of the can financing rules and regulations. However, with low auto loan interest rates in UAE at 2% to 4%, some financial burden seems to be brushed off. Car financing looks like an easy way out for many Emiratis as there are around 60-70% of people who prefer taking out loans to buy a brand new car. It’s convenient as it reduces a large amount of financial burden on car buyers.
Before taking a loan there are numerous queries related to it which arises in the mind when you decide to buy a car like, whether I’m eligible to take a loan, what’s the limit, loan tenure, about the down payment, etc. So certain factors need to be remembered while you decide for car financing. Let’s go through them one-by-one:
1. Loan tenure extending up to 60 months:
- When you decide to buy a new car against the car loan then the loan tenure stands for not more than 60 months. However, for second-hand cars, the maximum tenure of a loan is relatively shorter in months and this is only because the car has been already used and is old.
2. Down payment( deposit) 20% of the total car value:
- This automatically means that a person can take a loan of about the rest 80% of the new or used car’s value. This 20 percent of the car’s value is firstly paid to the bank which further settles up the whole value of the car directly with its owner. However, some banks in UAE asks the car buyer first to settle the downpayment with the seller after which only the bank will interfere to provide the full amount.
3. Monthly installments ought to be less than half of a person’s salary:
- Excluding liabilities like a credit card, a person’s monthly installments cannot be more than half of their monthly salary. Let’s say if a person’s monthly salary is Dh8,000, then he/she can’t pay an installment of more than Dh4,000. In case you are paying off other loans as well then that amount is also deducted from the half of the total salary and you can’t pay more than that established amount.
4. Banks have a minimum loan value of around Dh20,000:
- Because banks finance 80% of the total car’s value so the car should at least have the value of Dh25,000 to be eligible for the loan. Generally, all banks in the UAE have a limit of financing cars which usually kept around Dh20,000.
5. Documents required before applying for a car loan:
- Not just the banks but one can ask for auto loans from any financial institution in the UAE. Important documents that you might need before applying for the loan includes a salary certificate, three months’ bank statements and a valuation certificate of the car you wish to purchase. In addition to these documents, you must also be a resident of the UAE and have a valid driving license of UAE to be eligible for the loan. Having a clean financial record along with a healthy credit report from the Al Etihad Credit Bureau is also must for loan eligibility.
Now, keeping in mind your monthly salary, bank’s loan tenure and monthly installments limit choose your car very wisely so that you don’t have to go through the trouble in later years while paying off your loans. Be wise and know about the do’s and don’ts of loan financing eligibility.
