Auto Finance
Auto Finance
When the time comes to buy that dream car and you realize that the only thing standing between you and pure driving bliss is the lack of money to buy the car, it’s time to head in for a car loan. A car loan makes sure you get the opportunity to make your dreams come true in such a way that you can enjoy the car today and pay for it tomorrow. Some of them may make the repayments even easier on you by reducing the instalments for the first year just so that you don’t experience too much of a financial burden in the initial days of owning the car.
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Features of Auto Finance
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Loan Amount: Car loans in the UAE typically start at AED 30,000 and can go up to AED 900,000, depending on the lending bank.
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Repayment Period: Most car loans offer flexible repayment periods ranging from 12 to 60 months, allowing you to choose a term that suits your financial comfort.
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Interest Rates: Interest rates vary between banks, with flat interest rates as low as 2.35% per annum, though rates may differ from one bank to another. Borrowers can opt for either flat or reducing balance interest rates.
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Loan-to-Value Ratio: Car loans often cover 80% to 100% of the car's purchase price.
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Eligibility: Car loans are accessible to UAE residents and expatriates working in the UAE.
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Benefits of Car Loans: Waiving Minimum Balance Clause: Some banks may waive minimum balance requirements in current accounts when you take a car loan from them.
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Free Credit Cards: Many banks offer free credit cards for the first year as an additional benefit.
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Car Variety: Car loans can be used to finance various types of vehicles, including sedans, saloons, 4x4 vehicles, and more.
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Car Insurance: Some banks offer competitive car insurance rates bundled with car loans.
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SIP (Staggered Investment Plans): Car loans may come with SIP options, allowing affordable installments that gradually increase over the loan tenure.
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Easy Processing: Car loans are processed quickly by leading banks in the UAE, saving time and effort.
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Low Minimum Salary Requirements: Depending on the bank, the minimum salary requirement for car loans can be as low as AED 5,000, making it accessible to a wide range of individuals.
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Convenient Car Ownership: Car financing provides an easy and low-interest means to own a vehicle, eliminating the long waiting period required to save for a car's purchase.
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Flexible Repayment: UAE banks offer flexible repayment options, allowing customers to tailor their EMI tenure and amount to their preferences.
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Used Car Financing: Most UAE banks provide financing for used cars, although with slightly higher interest rates. Vehicle age and condition are determined through inspection.
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100% Financing: While the standard car financing approach in Dubai is 80-20 (financing and down payment), some banks offer 100% financing options.
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Builds Credit History: Car loans are an effective way to establish and improve your credit history, making future loan applications smoother and more likely to be approved.
Eligibility for Auto Finance
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Nationality: Banks in the UAE extend car loans to UAE nationals, resident visa holders, and expatriates. However, the nationality of the applicant may influence the loan amount available in some cases. It's important to note that car loans offered to UAE citizens, residents, and long-term expatriates are subject to additional eligibility criteria
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Income Requirement: You need to demonstrate a minimum monthly income, often set at AED 5,000, to qualify for most types of car loans. Keep in mind that income requirements can vary depending on the bank or financial institution providing the loan.
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Down Payment: In accordance with the UAE Central Bank's regulations, you are required to make a down payment equal to 20% of the car's invoice cost. The remaining 80% of the amount will be covered by the bank on your behalf.
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Credit Score: While your credit score is a secondary criterion, financial institutions in the UAE frequently consider it when evaluating your car loan application. A favorable credit score not only increases the potential loan amount but also makes you eligible for preferential car loan interest rates. Conversely, banks may reject or limit your loan application based on your credit score and credit history.
Documents Required for Auto Finance
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Salary certificate : Document from your employer detailing your income.
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Bank Statement for the Last 4 months: Record of transactions to assess financial stability.
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Passport and Visa copy: Identification and legal status verification.
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Emirates ID: Mandatory UAE resident identification card.
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Driving License: Confirms eligibility to drive and serves as identification.
Islamic Car Loans
Islamic car loans adhere to the principles of Islamic banking, offering a unique approach to auto financing. These loans are typically structured around the concept of Ijarah, a Sharia-compliant leasing arrangement. In this arrangement, the bank acts as the purchaser of the vehicle on behalf of the customer. Subsequently, the customer enters into a lease agreement with the bank, allowing them to use the vehicle for a predetermined period by making regular payments. Once the agreed-upon term is completed, and all payments are made, ownership of the car is transferred to the customer, aligning with Islamic financial principles that avoid interest or riba. This alternative approach to car financing provides a Sharia-compliant option for individuals seeking to acquire a vehicle without compromising their religious beliefs.
Used Car Loans
While new cars are the preference for many, some individuals opt for the purchase of used cars. For those looking to acquire pre-owned vehicles, banks in the UAE offer used car loans that operate on a similar premise to new car loans. However, there is one key distinction with these loans. Used car loans are typically restricted to vehicles that fall within a specific age range, a criterion determined by the lending bank. This age restriction ensures that the used cars eligible for financing are not older than a certain number of years, providing potential buyers with the financial support they need for their preferred used vehicles, while also upholding the standards set by the bank.