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Dubai: When seeking finance to either buy a home, or for when your children plan to study abroad, or for a wedding in the family, this involves a lot of research that goes into choosing banks, interest rates, term etc., before you borrow funds. But often times it’s much more than just those criteria.

“When it comes to loan eligibility criteria in the UAE, the most common eligibility is to transfer your monthly salary, a move to reduce risk for the lender in terms of any assurance of the loan being repaid back,” said Parthiv Patnaik, a Dubai-based banker with nearly four decades in the industry.

“However, considering the growing demands of customers, several banks and financial institutions have been offering personal loans in the UAE without a salary transfer for both expats and UAE nationals. So it’s always crucial to know what this entails for borrowers.”

While there is a slight difference in the rate of interest or amount to be borrowed based on the norms of each bank, non-salary transfer personal loans are still a popular source of borrowing in the UAE. But if you don’t opt for them, are you truly missing out on cost-related perks?

Who opts for loans without transferring salaries?

“Although the salary transfer variant is a much cheaper alternative for residents in the country, often it is also observed that there are times non-salary transfer loans are the only option borrowers have,” said Patnaik.

“These loans are the go-to choice for applicants who cannot commit their only source of income to the lender, or if they have an active loan with their primary bank, or when they are not eligible for a salary transfer loan due to their employer not mandating a salary transfer account.”

However, providers offering personal loan in Dubai without salary transfer often have a list of approved employers in the UAE. “It might get difficult to avail a non-salary transfer personal loan in UAE without company listing,” said Abbud Sharif, a banking industry analyst based in Dubai.

“Banks lend to those employed in firms which are not listed, but there might be different eligibility criteria such as higher income, higher credit score requirements, and so on. If your firm is not listed, you can also better your chances of getting a loan if you’ve got a long employment history.”

What decides eligibility for a non-salary transfer bank loan?
To apply for loan without salary transfer, the applicant must have a:
• Steady source of income, or be salaried or self-employed, but the minimum income requirement varies from lender to lender.
• Minimum work experience of six months at the present company to be eligible for a non-salary transfer loan.
• Job confirmation letter and salary slip from the current employer, with a bank statement of the last three to six months.
• Aside from the above eligibility criteria requirements, finally submit UAE residence visa (for expats), passport, and Emirates ID.

How much interest will I be charged for a non-salary transfer bank loan?

“The non-salary transfer personal loan in the UAE can be availed at a rate of interest not much different from a normal personal loan,” explained Sharif. “You can choose between two types of rates, based on the need.

“This includes, flat interest rate, which is calculated on the full loan amount, ranging between 4.83 per cent to 7.9 per cent, and reducing interest rate, which will decrease with each loan payment and is calculated based on the latest unpaid amount. It ranges between 8.99 per cent to 20 per cent.”

Also, another key factor to keep in mind is that all non-salary transfer loans fall under the category of ‘unsecured loans’, which are loans given on the basis of your income and expense behaviour and does not require any collateral. But isn’t that risky?

“Such loans may not offer terms as good as ‘secured loans’, which is backed by an asset you own – and therefore decreases risk for the bank – they still offer flexibility to choose the repayment tenure between one and five years and better loan rates for those repaying in five years,” he added.

Key questions to help you decide between secured and unsecured loans
Here are the key questions you should ask yourself when choosing the kind of loan you opt for – be it secured or unsecured. It should be decided on factors like:
• Which type of loan has a lower rate of interest?
• Do you have any asset to mortgage?
• What is your repayment capability?
• What is the end use of the finance you need? Is it commercial or personal?

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Verdict: Are you missing out when borrowing without transferring your salaries?

The short answer is, yes, you are likely to miss out on perks when borrowing without transferring your salaries. Regardless of the type of loan, it’s crucial to remember that you can avail of high loan amounts based on your monthly salary and employment tenure.

“Like any loan, a non-salary transfer personal loan in UAE can enable you to borrow more than the credit card limit, but at a lesser repayment tenure going up to 48 months, with a life insurance cover up to the outstanding loan amount is available with most banks,” added Patnaik.

“But depending on your financial circumstance or any constraints in budget, it would help you to know that the non-salary transfer personal loans are available for both expats and UAE nationals. However, you need to furnish proof of a minimum monthly salary for a loan of Dh5,000.”

As the name indicates, while you do not need to transfer your salary to get this loan, and this in turn makes the salary-related conditions related to the personal loan considerably more flexible, you do miss out on better loan offers when you are not able to transfer salaries to the bank you are applying at.