How to choose between Personal Loan and Salary Transfer Loan

Cash loans are a popular lending product in the UAE. These loans come in handy to service an immediate need which can be a purchase, holiday plan, school fee payment, medical expense not covered by insurance and so on. Cash loans offered by UAE banks can be classified into two categories.

Salary Transfer Loan: This is most probably the first loan one can avail from the bank where the customer holds a salary account. These loans are low in interest rates compared to the other personal loans without a salary transfer. Banks offer competitive interest rates for their customers for such loans.

Personal Loan without a Salary Transfer: These loans are offered by banks without a need of having Salary transferred. Such loans are popular and can serve the purpose when one already has a Salary Transfer loan running with a bank. Interest rates are higher for such loans and the lending amount might be lower than a Salary Transfer loan.

Here are the key points to consider while deciding upon a loan?

  1. Am I getting the best interest rate?
    Most banks offer interest rate based on a multiple criteria like your income range, employer, bureau score etc. These rates are generally available with the Sales Executive who reviews your application profile. Make sure you review the interest rates before signing up. High interest rate means higher EMI and longer repayment period.
  2. Am I getting the loan amount to suit my need? 
    Different banks offer different loan amounts, generally a multiple of your monthly income. This obviously can be customized based on certain criteria as mentioned in the previous point.
  3. Will borrowing a loan be a hassle free process?
    Loan application processing might take anything from an hour to 5 working days. Ask whether the process is simple and hassle free as this is a key differentiator between the financial institutions.
  4. Are there any Hidden Charges?
    Review if there are any charges pertaining to loan processing, early repayment penalty, late
    payment etc. Read the fine print. Or at least ask the Sales Executive. You can always go and check comparison sites like SoulWallet.
  5. What are the Payment Options?
    Understand the various payment options available to you. While a direct debit from your salary
    account is a standard process, there might be situations one would need to make a payment
    through alternate methods. These options must be easy and inexpensive.
  6. Will Top-up loan be available?
    Enquire on when one can avail a top up loan while servicing first loan. Some banks have a resting
    period of 6 to 12 months from the time the first loan has been issued.
  7. Will there be Statement and Email alerts?
    How does one get reminders on payments and loan balance? Verify this as these are important to know while servicing a loan. In today’s forgetful and fast paced life, we tend to forget the payment date. Bank might charge a penalty for late payment.
  8. Any Special Features?
    Does the bank offer a flexible interest loan which can adjust over a period of time based on EIBOR (which is Emirates Inter Bank Offered Rate).

So Salary Transfer Loan or Personal Loan Offer. Choice should be yours.

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