Can I change the repayment schedule on my car loan?
Yes, you can normally request a change in your repayment schedule although a small processing fee may apply.
What is the difference between Flat and Reducing Interest Rates?
Rates on car loans can be calculated in two ways - as a reducing rate or as a flat rate. With a flat rate, the rate is calculated on the entire principal amount of a loan (the full, original amount borrowed) whereas with a reducing interest rate, interest is charged only on the outstanding amount of the loan on a periodic basis. Flat interest rates are normally lower than the reducing balance rate and therefore considered misleading. When it comes to comparing loans, the best way to compare their true cost is to convert everything into the Reducing Interest Rate equivalent (click here
for more information)
Do I need to take out insurance on my car loan?
Some loan providers may provide insurance cover on your loan. If not, we advise that you take out your own insurance to cover you in the event of being unable to repay your loan due to loss of job, illness or death.
What is the maximum time period of a car loan?
This depends on the individual bank but can be up to 60 months / 4 years.
Is a down payment always required when taking out a car loan in the UAE?
Yes although the amount of down payment required will differ according to each bank. Criteria taken into account include:
- Whether you are buying a new or a used car
- Whether you are going to transfer your salary to the bank that will provide the car loan
- Whether you are taking out an Islamic product, in which case, no down payment is required.
What is an early settlement fee?
This relates to the fee applicable if you decide to pay off your loan early. If, for example, you take a car loan for three years but expect to be in a position to pay if off before then, any early settlement fee becomes an important factor in choosing your loan provider. Some banks have offers with no early settlement fees whilst others may charge 1% or more.
What is an arrangement fee?
This relates to what the bank will charge you at the beginning of the loan and can either be clubbed with your principal loan amount or paid upfront. Some banks may offer personal loans with no arrangement fee but others may charge a fixed fee or a percentage of your total loan amount.
Do I have to transfer my salary to the bank where I’m taking out a car loan?
No, you don’t always have to but doing so will often mean you get a better rate as you are then seen as a less risky customer.
What key criteria should I consider before taking out a car loan?
- New or used – For used cars, most banks impose a limit of car model they will finance
- Minimum salary requirement – UAE banks normally impose a minimum salary required to take out a car loan so select a provider from those whose minimum salary requirement is less or the same as your salary
- Interest rates – do flat or reducing interest rates apply? See below for details of how these differ
- Down payment – consider what the minimum down payment is
- Fees – consider all fees applicable such as arrangement fees and early settlement fees
- Other benefits – does the bank provide options for a payment holiday
How do I choose a car loan provider?
Compare, compare, compare! Use our smart comparison tools to choose the best car loan for you.