How COVID- 19 Has Affected Lending and Borrowing of Personal Loans in the UAE

COVID- 19 pandemic has made people witness complete lockdown in the UAE for over a month. The pandemic has impacted the personal finances of both employees and employers in the country in different ways. The personal loan borrowers who need to pay their monthly instalments face a financial crisis during these tough times. The earning borrowers face financial issues like salary cuts, unemployment, delay in salaries, unpaid leaves and more. On the other hand, non-salaried people have their own financial challenges as they no longer have a stable source of income.

Personal loans are one of the most convenient ways of meeting your financial needs. If you are someone, who is struggling to pay for your expenses, loans, credit cards and other debts, you can opt for a personal loan. Most banks in the UAE are offering easy personal loans for their potential customers. But before you apply for one, let us help you understand how coronavirus affects personal loans in the UAE.

How Coronavirus Affects Personal Loans?

Coronavirus affects personal loan interest rates and other factors such as credit reports, monthly income and more in different ways. Make sure you check with your personal loan lender if they are offering some kind of relief from repayments. The existing personal loan borrowers can delay their personal loan repayments for a maximum of three to four months. Banks and other financial institutions in the UAE are not levying any interest on the deferred personal loan EMIs. Once you get a clear picture and schedule for your personal loan repayment, apply for a personal loan to pay your EMIs on time. 

Bad Personal Loans Ratio

The coronavirus pandemic is responsible for unemployment and workforce cuts due to various industries bearing the brunt of a slow economy all over the world. As a result, the rise in personal loan non-repayment has contributed to an increase in the ratio of bad loans. Most borrowers are unable to make their loan instalment payments on time and are likely to default. Not making loan repayments on time due to unemployment or salary cuts is affecting the borrowers’ credit Score. Some of these defaulters are also opting for other personal loan options to meet their repayment needs.

Interest Rates

Most personal loan lenders, banks and other financial institutions in the UAE are offering loans at lower interest rates. These banks have reduced their personal loan interest rates to provide potential customers with financial relief during this pandemic. 

Related Article: Top 6 Factors Influencing Personal Loan Interest Rates in UAE

Eligibility Criteria

Usually, the personal loan lenders and other financial institutions in the UAE offer personal loans at lower interest rates for eligible applicants no matter even if they are new to the firm. The banks used to offer personal loan interest rates based on their credit report and other pre-personal loan analysis. The applicants meeting the eligibility criteria with a good credit score used to get lower interest rates and vice versa. 

However, with the pandemic affecting the banking industry, most banks in the UAE had to reduce their eligibility criteria for lower interest personal loans to existing banking customers only. The applicants must have a salary account with a stable job to get a personal loan with a specific bank in the UAE.

Banks Offering Personal Loan Repayment Deferrals in the UAE

Most banks in the UAE are offering convenient delays on loan EMIs keeping into consideration how coronavirus affects personal loans. The list of banks providing financial support in Dubai includes Emirates National Bank of Dubai, Commercial Bank of Dubai, Emirates Islamic Bank, Dubai Islamic Bank, Mashreq Bank and more.

On the other hand, in Abu Dhabi, the banks introducing financial relief measures include First Abu Dhabi Bank, Abu Dhabi Islamic Bank and Abu Dhabi Commercial Bank.

Sharjah Islamic Bank, Commercial Bank International and RAKBANK at other locations in the country are also offering financial support for their customers in these critical economic times.

The Bottom Line

If you are considering opting for a personal loan to meet your financial needs, keep in mind that the financial crisis you are facing is temporary. So take a personal loan only for the amount that you need and avoid increasing your debts.

You can visit the personal loan section on our website to find the best personal loan options with attractive interest rates. You can also give us a call if you need assistance. Our financial experts will help you find the best fit personal loan based on your financial needs.