Dubai: Financial emergencies can happen at any time – from unexpected car and home repairs, to unforeseen medical expenses. In such cases, if you don’t have enough money in the bank, a personal loan may be your best option.
We break down the rules and regulations, the requirements you need to be aware of, and how to apply for a personal loan.
What is a personal loan?
A personal loan, as per the Central Bank of the UAE (CBUAE), is a loan that is given to individual customers, where repayments are made out of salary and end-of-service gratuity, and/or any other verifiable regular income from a well-defined source.
When you have big purchases or expenses coming up, a personal loan can be a useful way to spread the cost. The process is simple: Borrow a fixed amount of money from a bank, then pay it back in agreed-upon instalments.
In the UAE, most banks will charge you an interest amount on top of the loan. If you opt for Islamic personal finance, you will be charged a flat rate without any interest, or a Shariah-compliant profit rate.
Rules and regulations
The UAE has clear, transparent legislation when it comes to loans, and the rights of borrowers and banks. Here are regulations to be aware of, outlined by the CBUAE, before applying for a personal loan:
- The CBUAE has set the amount of the personal consumer loan at 20 times the salary or total income of the borrower. Banks and financial companies are under strict obligations to ensure this limit is not exceeded. Taking this rule into consideration, most banks will prescribe a limit on your personal loan based on your income and ability to repay.
- The repayment period for the loan must not exceed 48 months, as per CBUAE. The monthly deduction for such loans must not exceed 50% of the borrower’s gross salary.
- If the loan period extends to the borrower’s retirement age, banks and finance companies must schedule a reduction of the loan to allow a deduction of only 30% of the borrower’s income (or pension salary in the case of UAE citizens).
- Banks and finance companies may only take postdated cheques from the customer that cover the instalments, with a value not exceeding 120% of the value of the loan or debit balance.
- Banks are obliged to calculate and declare the interest rate charged on the loan, by determining the reducing balance of the loan on an annual basis.
- The conditions for granting personal loans must be included in a standard agreement by the bank, 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.
What are the different types of personal loans?
Personal loans in the UAE are structured differently, depending on how they are used.
Salary transfer loan vs. non-salary transfer loan: A salary transfer loan is one in which, your repayments are made from the account your salary is paid into. A non-salary transfer loan is one where the payments come from a different account, called a payment account. The salary transfer loan is the most common type of personal loan in the UAE, and lending banks often offer lower interest rates and higher approval limits, with faster processing durations, if they host your salary account.
Islamic personal finance: These are Shariah-compliant alternatives to conventional loans. Instead of charging interest (riba), they use concepts like Murabaha or Ijarah to finance personal loans. The applicant repays a predetermined fixed profit over the tenure of the loan. Here’s how Murabaha and Ijarah work:
- Murabaha: Instead of lending money, the bank buys an asset or commodity on your behalf and sells it to you at an agreed-upon fixed total price, which is the original cost plus the bank’s profit margin. If you require cash, the bank immediately sells the commodity in the market on your behalf, providing you with the funds you need – you will make the repayment based on agreed-upon deferred payment terms. With Murabaha, the profit rate or mark-up is fixed at the start and does not fluctuate.
- Ijarah: The bank purchases a specific service, like school tuition fees, or medical treatment, and then leases the right to use this service to you for a predetermined period. You would then pay regular, fixed instalments to the bank, instead of paying back a loan with interest. The bank maintains ownership of the asset or service agreement throughout the lease term.
How do interest rates work?
Conventional banks offer one of two interest rates, so it’s important to understand the difference before locking in. You can determine how much you would pay over the full duration of your personal loan, by understanding how the different interest rates work.
- Flat rate: A flat interest rate is calculated on the complete loan amount for the whole term, and it is set at the beginning of the period. It remains the same throughout the payment cycle, and doesn’t take into account that payments over time reduce the amount borrowed.
- Reducing interest rate: This rate is calculated every month on the outstanding loan balance. The equated monthly instalment (EMI) that you pay every month contains interest that is payable for the outstanding loan amount plus principal repayment. The principal amount reduces with each payment, so the interest you pay also reduces gradually.
Some banks use flat rates when promoting loans, as they appear much cheaper, but in reality, they may end up being more expensive than reducing rates. However, if the flat rate is significantly lower than the reducing interest rate, it could be a more viable option.
You can avail of interest rate calculators on your bank’s website, which can help you compare both methods, understand the difference in EMI payments, and help you decide which rate is best for you.
How does repayment work?
In the UAE, you can typically choose to repay a loan over a period of time that suits you, between six to 48 months. Repayments are usually made monthly. Once your loan is approved, you can arrange a Direct Debit option with your bank, whereby you can automate the payment of the same amount on the same day of each month.
The CBUAE has capped repayments so that total monthly payments cannot exceed 50% of your gross salary. If the loan extends into your retirement, this drops to 30%.
Early settlement: If you would like to pay off your personal loan early, it is possible to do so, however be aware that banks have the right to charge you an early settlement fee.
The CBUAE regulates early settlement fees for personal, auto, and home loans, by capping it at 1% of the outstanding principal amount. This fee is a one-time penalty, and it’s worth noting that the fee is charged on the outstanding principal balance at the time of closing the loan, and not the original loan amount.
Eligibility criteria
When applying for a personal loan, there are specific criteria or conditions you must first meet, in order to qualify:
- Age requirements: Applicants must be at least 21 years old to apply for a personal loan, with the maximum age as 65 for UAE nationals and 60 for expatriates at the time of loan maturity. Some banks may allow applicants 18 years and older to apply.
- Income requirements: In 2025, the UAE removed the Dh5,000 minimum salary requirement for personal loans. Banks have since set their own income thresholds, ranging from Dh3,000 to Dh10,000, depending on the financial institution and the amount you are applying for. Sometimes, banks may require you to ensure your salary is transferred to the same bank.
- Employment status: Applicants will be asked to show proof of employment, at the time of applying for a loan. Most banks require you to work in a steady job for at least three to six months, with a history of salary transfer to the same bank.
- Credit score: UAE residents’ credit score is a three-digit number between 300 and 900 that indicates your creditworthiness; the system is centralised under the Al Etihad Credit Bureau (AECB). A score of 700 and above is generally considered good, and 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 personal loan.
Required documents
Most banks require a standard set of documents, although some may ask you for additional information for verification purposes. Here are documents to keep ready before applying for a personal loan:
- Copy of valid passport with UAE residence visa
- Emirates ID
- Bank statement (for the last three or six months, depending on the bank)
- Staff ID or labour card
- Salary transfer letter or salary certificate
- Security cheque (a requirement by some banks)
How to apply for a personal loan
Once you have understood the laws around personal loans, checked your eligibility, and gathered requisite documents, you are ready to apply for the loan. You can do so by visiting your selected bank’s branch, in-person, or by submitting an initial application or loan request via the bank’s website.
Here are the steps to start the loan process:
- Visit your bank’s website. Click on ‘Loans’ in the menu bar, and select ‘Personal Loans’.
- Here, you will have the option of clicking ‘Apply Now’ or ‘Request Callback’ based on your bank’s website.
- Fill in your basic personal information, including whether you are a UAE national or an expat, your customer ID number (if you are requesting a salary transfer loan), your full name, mobile number, email address, and nationality.
- Once your information goes through, a representative from the bank will get in touch with you and inform you of the next steps.
Processing times typically range from one day to a week, based on document verification, credit checks, and approvals.