A Comprehensive Guide to Get a Car Loan in the UAE

Taking possession of a car in the UAE (United Arab Emirates) will cost you somewhere between a couple of thousands to millions of dollars, depending on the model of the vehicle. UAE has a strong line-up of some of the most expensive hyper supercars. Though regular driving cars are also available, it is not possible for individuals to buy a car with a one-time payment, as all vehicles are expensive in the Emirate. Multiple banks offer car loan in the UAE to permanent residents and expatriates with a lower car loan interest rate.  

The procedure will be different for pre-owned and brand-new cars, depending on the financial status and situation. In this article, let us give you an overview of how you can apply for a car loan in the UAE.

Requirements to Avail a Car Finance in the UAE

Requirements for getting a car loan in the UAE are as follows:

• Minimum Age and Salary

The borrower must be 21 years old or above to apply for a car loan in the UAE. The minimum required salary varies and depends upon the bank the borrower is opting for to get a loan in the United Arab Emirates. However, the minimum salary requirement generally ranges between AED 3,000 to AED 5,000. Do your research with the banks to check if the minimum requirement is less than the mentioned data.

• Tenure of Payments

In the United Arab Emirates, several banks offer a loan repayment tenure of about sixty months. The repayment can be shorter for pre-owned cars than for a brand-new car because it depends on the car’s age. To give you an idea, you are supposed to repay the loan in just 30 months for a decade-old model.

• Minimum Down Payment Amount

Several banks in the UAE finance about 80% of the car’s value, and the rest of the 20% needs to be paid by the borrower as a down payment in advance. However, in some cases, the 20% advance down payment needs to be paid to the car owner (Pre-owned cars) before the bank finances the rest, 80% of the capital. In a few cases, the bank reduces the down payment.

Additionally, many banks specify the minimum amount for car financing in the UAE at around AED 20,000. In the case of pre-owned cars, the vehicle must value a minimum of AED 25,000.

• Required Documents

Multiple banks are functioning in the United Arab Emirates and have slightly different criteria for car loan approval. However, the below-mentioned documents are usually required for getting a car loan in the UAE:

For Brand-New Car

• Original Emirate Identification
• Valid Visa or passport
• Valid driving licence
• Salary slip or Income proof
• Bank statement of the last 3-6 months
• A Pro forma or quotation invoice from the car dealer
• Security cheque

For Pre-Owned Cars

• Valuation certificate
• Insurance policy documents
• Registration of the car
• An offer/quotation from the seller

For ex-pats, it is salient to cross-check the validity of the driving license of their native country. In case of an invalid driving licence, ex-pats will have to apply for a new driving licence in the United Arab Emirates to get a car finance facility in the UAE.

In addition, foreign nationals are required to provide the address proof of their native country, regardless of how long they are staying in the United Arab Emirates.

Note: It is salient to register a pre-owned car in the UAE or renew it if needed.

Key Points to Consider

Comparison of car loan interest rate in the UAE, term of repayment and EMI calculations are a few key factors that must be considered before applying for a car loan in the UAE. A piece of brief information about these factors is mentioned below:

• Comparison of Car Loan Interest Rate in UAE

In order to get the lowest interest rate on a car loan, it is salient to compare the interest rates in the UAE. The payable interest rate for the borrower is calculated by the multiplication of 80% of the value of the car for both brand new and pre-owned vehicles. However, the higher the tenure will be, the higher the resulting interest rate will be.

• Repayment Term

The repayment term plays an essential role in monthly instalments. It is recommended that before you apply for a car loan in the UAE, make sure you are eligible for making on-time repayments. Late payments can cause damage to your credit score. If the borrowers don’t pay back the loan on the due date, they will be liable to pay the penalty and other charges. Moreover, irregular payments can cause the bank to repossess your vehicle.

• Equated Monthly Instalment Computation

The EMI is calculated on the tenure of the loan, including the principal amount and interest amount on the auto loan. However, the amount for  EMI will be fixed for the entire tenure of the loan. The long term will cost you more Equated Monthly Instalments and higher interest rates.

Loan Repayment Modes

Online and offline modes are available for the repayment of a car loan in the UAE. Loan repayment modes are as follows:

• Mobile banking
• Online banking

Note : Other payment modes are also available. Connect with the Emirate Banks for more details.

Things to Consider Before Applying

There are a few things an individual should know beforehand in order to get a car loan in the UAE hassle-free.

• Physical presence is a must at the time of receiving the car if the auto car finance is in your name.

• Sixty days is the grace period for the first instalment.

• The processing fee for a car loan is about 1% of the finance amount, with a minimum of AED 500 to a maximum of AED 2,500.

• You cannot reschedule the car loan in the UAE.

• The maximum withdrawal amount for a car loan is AED 1.5 million, with terms and conditions applied.

• Insurance must comply with the conditions of the finance in the UAE.

Benefits of a Car Loan in the UAE

• There are multiple benefits of a car loan in the UAE for permanent residents and ex-pats.
• The financed car serves as collateral for a car loan; thus, no collateral deposit is required. The amount for a car loan can be negotiated with the lenders if the borrower has a good credit history, unlike the home loans.
• The payment packages are flexible for a car loan, giving the borrower total control of the capital they spend on the monthly payments. Furthermore, on-time payments of the car loan enhance your credit score.

Different Aspects of the Financed and Leased Cars

A car loan in Dubai is ideal for both expatriate and permanent residents. However, instead of applying for a car loan, travellers are recommended to either lease or rent a vehicle. Leasing or renting a car in the UAE is easy and more flexible as you can end the service whenever you want, unlike a car loan. Instead of down payments, the lease agreement features monthly, quarterly, half-yearly and annual plans.

To Sum Up

A car loan can help you get your desired car at a low-interest rate. However, it is salient to do the research to know if they fit your budget or not. There are numerous banks in Emirate that you can connect with to get a car loan.

Additionally, to get a car loan in the UAE, it is essential to have a great credit score as it unlocks the lowest interest rates and makes you eligible for getting a car loan in the United Arab Emirates.

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