How to get a car loan in the UAE: Eligibility, down payment and application steps

Dubai: Buying a car is an important milestone for most individuals. Fortunately, the UAE gives residents access to a broad selection of not just vehicles, but also flexible auto financing options that let you own your dream car, without the burden of paying the entire cost up-front. The process of acquiring a car loan is straightforward, but requires some preparation before you’re ready to sign the papers. Here’s what you need to know when applying for a car loan in the UAE: Rules and regulations The Central Bank of UAE (CBUAE) regulates car loans via its Regulation No. 29/2011 — Regulation Regarding Bank Loans and Other Services Offered to Individual Customers. It outlines the following legislations regarding car loans extended by banks or finance companies to customers: Car loans are treated as separate from personal consumer loans , and must not exceed 80% of the value of the financed vehicle. The maximum period for repayment of the loan must be 60 months. The loan should be secured by a mortgage over the car. The total monthly debt repayments cannot exceed 50% of your gross salary and regular income. The loan can be extended, based on an application by the customer and approved by the bank or the finance company. Early settlement is capped at 1% of the outstanding balance, or Dh10,000, whichever is less. The conditions for granting a car loan must be included in a standard agreement, drafted in both Arabic and English, and written in an easily readable font, in accordance with texts drafted and approved by the Emirates Banks Association. How do car loans work? According to Al Futtaim Automall car loans typically extend from 12 to 60 months for new cars. When it comes to used vehicles, banks will usually have shorter repayment periods and may have vehicle age restrictions in place. While auto loans work similarly to personal loans, in that they involve the bank lending money to a borrower, and receiving monthly instalments over an agreed-upon period of time, there are certain additional considerations applicants must be aware of. Down payment: Under Article 3 of CBUAE Regulation 29/2011 (Car Loan), a car loan cannot exceed 80% of the vehicle’s value. This means the remaining 20% must come from the applicant in the form of a down payment – a condition that applies to new cars. For used or old cars, which face faster depreciation, individual banks reduce this loan-to-value (LTV) percentage to 70%, which means you would need to provide a 30% down payment. Vehicle age limit: Vehicle age caps may also apply, based on your bank. Many financial institutions, like RAKBank and Mashreq, do not finance cars older than five to seven years at the time of purchase, with the vehicle’s total age at the time of loan maturity usually capped at 8 to 10 years. EmiratesNBD, on the other hand, finances used cars up to 12 years old. Eligibility criteria In order to apply for a car loan in the UAE, applicants must meet certain key criteria established by lending institutions and banks. These criteria might vary based on the bank, so it’s best to check with them personally, before applying. Here are the standard requirements, based on bank websites in the UAE: Minimum age: Applicants must be at least 21 years old to apply, although some banks set a minimum age limit of 18. The maximum age is 60 (for expats) and 65 (for UAE citizens) at the time of loan maturity. Salary requirement: Banks require applicants to have a minimum salary ranging from Dh5,000 to Dh8,000 per month, depending on the financial institution. If you’re buying a used car, the salary requirement may be lower, at Dh3,000. Credit score: The applicant must have a good credit score . UAE residents’ credit score is a three-digit number between 300 and 900 that indicates your creditworthiness. The Al Etihad Credit Bureau (AECB) classifies a score of 700 and above as ‘good’; this shows you have made bill payments on time, and been on top of your credit card expenses. Banks will require a credit report to check your credit history, and to assess if there are any other active loans under your name, before authorising your car loan. Documents required When applying for a loan for a new car, you may be asked to supply slightly different documentation than if you were buying a used car, based on the bank’s requirements. Here are the standard documents that are typically required, according to Abu Dhabi Commercial Bank: For new cars: Valid passport with valid UAE residence visa Emirates ID Valid driving licence Salary certificate Three-month (or in some cases, six-month) bank statements for your salary account. This is not usually required if your salary is already being transferred to the same bank. Security cheque A quotation or pro-forma invoice from the dealer for new vehicles For certified or used cars: Aside from the above documents, you may be required to provide these additional documents to the bank: A valuation certificate issued by an approved dealer An ownershi