Top of main content

Quick guide to personal loans

Whether you’re paying rent, funding education or have something else in mind, a personal loan can be a useful way to spread the cost.

You can borrow a fixed amount of money, then pay it back in instalments, plus interest.

How do personal loan repayments work?

You can typically choose to repay a loan over a time period that suits you – usually between 6 and 48 months.

If you take a fixed-rate personal loan, the interest rate will stay the same throughout the repayment period.

You typically make repayments monthly and can arrange a Direct Debit to pay the same amount on the same day of each month.

There may also be the option to overpay, or repay the full loan before the end of the repayment period. If this is something you want to consider, it’s important to check the terms of your loan agreement and see if there are any fees or charges for doing this.

How should you choose a personal loan?

One way to compare loans is by their Annual Percentage Rate (APR), which is the cost of borrowing over a year, including the interest rate and any arrangement and other standard fees.

It’s important to note that the representative APR advertised may not be the interest rate you’ll get. The interest rate you'll get will depend on your financial circumstances, including your credit history. You should also check how much you can afford in repayments before applying.

Use our personal loan calculator to help.

Banks will also check your personal financial circumstances, including your Debt to Burden Ratio (DBR) and your credit history, before deciding if they’re willing to lend to you.

In the UAE, you’ll either have a salary transfer loan or a non-salary transfer loan. A salary transfer loan is where your repayments are made from the account your salary is paid into. You may need to provide a letter from your employer when applying for a salary transfer loan.

A non-salary transfer loan is where the repayments come from a different account (also known as a payment account).

Deciding how much to borrow

It’s good to be clear on the costs you need to cover before applying for a loan. For example, the total cost of rent or education, or the overall cost of home improvements.

You should then work out how much you can afford to pay back each month. Taking out a personal loan for a longer period of time may give you lower monthly repayments and a lower interest rate. However, it may mean you’ll pay more in interest over the full term of your loan.

Personal loans are usually unsecured, which means they’re not backed by an asset. This is different to home loans, which are secured against your property, meaning lenders can repossess your home if you fail to keep up with repayments.

Jargon buster

What is APR?

Annual Percentage Rate (APR) is the cost of borrowing money over a year. It takes into account the interest charged as well as any other costs involved.

What is an interest rate?

This determines how much you’ll be charged as a percentage of the amount you borrow. For example, if you borrowed AED 10,000 for one year at an interest rate of 5%, you’d pay AED 500 in interest as well as repaying the amount you borrowed.

What is DBR?

DBR (Debt to Burden Ratio) takes into account your income and expenses to see if you can comfortably afford any loan repayments.

What is a fixed rate personal loan?

A fixed rate personal loan is where the interest is fixed – meaning it doesn’t change during the term of your loan.

What is a payment holiday?

This is where you can agree in advance with your bank to postpone a loan repayment until the subsequent month. Not all loans or banks offer this.

Explore more

Learn how to improve your chances of getting accepted for a loan with our guide.
From education loans to rent loans, learn more about each type with our guide.

Learn about what to consider before taking out a loan, and find out if it's right for you.