We present a handy primer on understanding the various offers comprised in your personal loan.
Every person faces a financial crunch at some point in their lives. This could be necessitated by a personal or a professional situation. On the personal front, a person may require funds for a medical reason, or to finance their child’s higher education or marriage. He or she may even be looking to purchase property. On the other hand, a person may require money to advance his business interests.
For both needs, taking a personal loan proves to be a good solution. However, it is easy to take the decision to borrow a personal loan. It is more difficult to make the right choice about the lending institution and the benefits of the personal loan.
Personal loan offers in Dubai
Banks and financial institutions in Dubai are currently offering personal loans at very attractive interest rates. However, the interest rate is not the only factor you should consider when making your decision. Here is a list of personal loan offers in Dubai that you will be offered, and whether you should consider them:
- Low interest rates. You will be offered low interest rates if your salary is higher, or if your tenure is longer. For example, if you take a loan of Dh 50,000 for a period of 60 months, your interest rate will be lower compared with a tenure of say, 45 months. Also, your interest rate will be lower if your salary is Dh 25,000 as compared to Dh 8,000 per month.
- Fixed vs floating rates. Sit with a calculator and make a full list of possible monthly outlay on fixed interest rate vis-à-vis floating interest rate. A lot of personal loan offers in Dubai will propose lower rate of interest on fixed interest (normally 17 to 18%) while the floating interest rate will be higher, even 24 to 25%. However, when you calculate the total outgoing between the two, you will pay lower interest with the floating interest option.
- Charges and penalties. Get a full list of the charges and penalties levied against the personal loan, by the lending institution. You may be charged processing fees, application form fees, foreclosure charges and even transfer charges. Shop around for the personal loan that has the lowest charges tacked on to the loan product.
- Paying more for lower interest. Do not fall into the trap of taking a higher loan amount against the assurance that you will be levied lower interest on it. You will have to pay back a very high amount of money by the time your tenure ends. Another mistake you can make is to take a shorter tenure, in which case the interest charged will be higher. Explore this latter option only if you are confident that you can repay the entire loan amount within a short period of time.
- Getting insurance with the loan amount. Lending institutions offer insurance when you take personal loan, but it is up to you to decide whether you need the insurance or not. The insurance only protects the borrower against loan repayments in case he/she dies or becomes unable to repay the loan owing to accident or illness. If the loan amount is small, there is not much need to take insurance for it. If you feel that you require insurance, take a term insurance for your personal loan.