UAE banks offer reduced interest rates on personal loans in 2024

Since mid-January, banks in the country have initiated promotional campaigns offering discounts on interest rates for personal loans.

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These campaigns encompass various benefits, including lower interest rates, exemptions from insurance fees, and the provision of a three-month grace period before the commencement of the first installment.

Over the past two years, the main interest rates have experienced an upswing, leading to increased financing rates. This rise was a consequence of the financial tightening policy implemented by the US Federal Reserve to curb inflation. Many central banks, including the Central Bank of the Emirates, followed suit due to the peg of the dirham to the US dollar.

Banker Medhat Ibrahim noted that banks typically launch campaigns and promotions on personal loans at the beginning of each year to stimulate sales. These campaigns offer multiple advantages, with a key highlight being the waiver of insurance fees. Additionally, borrowers are granted a three-month relief period from debt burdens, and they have the flexibility to postpone installments twice a year.

A noteworthy aspect of the 2024 campaign is the reduction in interest rates. After a series of increases in the past two years, the rate now starts at a fixed 3.2%, compared to approximately 4.2% to 4.5% in the last quarter of the previous year for citizens. Expatriates begin at 3.5%, about 1.3% lower than the percentage in the last quarter of 2023, contingent on the loan applicant's company being included in the bank's lists.

Banker Mahmoud Muslim highlighted that the offers from banks generally feature a 1 to 1.3% reduction in interest rates compared to the previous year. However, certain conditions must be met, such as a minimum salary requirement of around 20 thousand dirhams and a credit rating not less than 650 out of 700.

Banker Rifaat Ali emphasised that the reduced interest rate is tied to the customer's salary, with different levels categorised based on income. The competition among banks is intense due to record levels of liquidity, leading to attractive offers. Customers can cancel transactions at any stage without incurring fees, while transaction fees can reach up to 2,600 dirhams, spread across loan installments.

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