How to Manage A Car Loan in UAE

Buying a car is often ticking off an item on the bucket list for most individuals. However, the cost associated with a vehicle can be too expensive sometimes. In such a situation, a car loan can come to the rescue. However, if you decide to obtain a car loan without prior discussions or research, you could end up in a debt trap. This can significantly affect your finances and credit score.

If you are worried about falling into such a trap, then keeping a few car loan tips handy can be a great solution.

Top 5 Car Loan Tips to Manage Your Loan Better

Here are some tips that can help you to manage your car loan better –

1. Decide which car loan to choose

Typically, lenders offer two types of auto loans – for used cars and new cars. As the name suggests, you can utilise a new car loan to purchase a new vehicle. Meanwhile, a used car loan can be used to buy a second-hand vehicle.

First, you must decide whether you want to purchase an old or new car. After deciding the type of car loan in UAE you want to apply for, consider knowing the interest rate, loan tenure and loan amount offered by the lender. This will help you determine the overall cost of borrowing. Next, you can use a car loan calculator to know the monthly EMIs you will have to pay throughout the tenure. With this, you can find a loan offer that meets your suitability.

Additionally, do not forget to assess the loan’s terms and conditions in detail. Read through the additional charges and fees, as these can significantly affect your loan’s cost.

2. Make a substantial down payment

This is the avenue where most borrowers make a mistake. It may seem like choosing the car loan with the most LTV will be easy on your savings, but it can cause several issues in the future. Such a decision can affect your loan amount and rate of interest. On the other hand, if you pay a substantial amount in down payment, your loan quantum will get reduced automatically. Thus, in the long run, you can make savings through lowered interest payments. This way, you can save a substantial amount of money in the long run. Consider following this car loan tip when you take a car loan in Dubai.

3. Choose the loan amount and tenure efficiently

This is one of the most important car loan tips you can apply while obtaining auto finance. However, before making a decision, it is recommended that you have a thorough discussion with your lender regarding the rate of interest, tenure and loan amount. 

You may think an extended loan tenure is the best way to combat high EMIs. However, note that with a longer tenure, you will pay more as an interest payment. At the same time, a shorter tenure increases the EMIs and reduces the interest amount. Thus, consider ramping up your savings by creating an effective savings plan, and stick to it.

4. Opt for debt consolidation

Opting for debt consolidation is one of the best car loan tips if you have multiple credits on you. This facility allows you to combine all your credits into a single loan. Moreover, you will just have to make the loan repayment once a month. This process is highly convenient, as you do not require to keep track of all your loan accounts. This eases the process of repayment and reduces chances of loan default.

5. Transfer your loan

If you are facing difficulties repaying the loan amount within a specific tenure, you can ask your bank to either restructure or ask for a loan transfer. In the restructuring, the bank will alter the rate of interest, loan tenure and EMI according to your repayment capacity. Nowadays, you can find this option across several banks and financial institutions in the UAE. However, note that opting for loan restructuring can hamper your credit Score substantially.

Alternatively, you can opt to transfer your loan to another lender offering a lower rate of interest and better terms and conditions. This can help you manage your loan better and make way for more savings.

So, if you are on your way to get a loan to buy a car, the above-mentioned car loan tips can help you substantially to make a knowledgeable decision. At most, consider calculating the cost of the loan beforehand to experience a seamless credit experience.