Whether you’re an Emirati or an expatriate, having your own car in Dubai is like a dream come true. However, not everyone can pay upfront, as buying a car is a huge investment, and due to the wide price range of prices for new and used cars, And that’s where car loans come in to help you out. Though Dubai has an outstanding metro and bus system, owning a car gives you the freedom to drive anywhere, anytime. A bank auto loan is the most widely used method in Dubai to secure a car for you without putting any financial burden on your pocket.
In this guide, we’ll take readers through the car loan process in Dubai, and shed some light on various aspects like eligibility criteria, the different types of loans, required documentation, and the whole process.We’ll ensure you’re well-prepared to hit the road in your dream car.
Whether you’re a first-time buyer or you’re seeking refinancing options, understanding the car loan in Dubai process will empower you to make a decision that works for you so you can drive off with confidence
Benefits of Car Loans
In Dubai, buying a car is no less than a dream. Having a car loan can help you make this dream come true. It gives you many benefits which are worth mentioning:
- Budget-Friendly Freedom: Dubai offers flexible repayment plans for car loans. You can choose a loan term that aligns with your financial comfort zone.
- No Collateral Needed: Banks in Dubai don’t ask for additional collateral for car loans because the vehicle itself serves as security.
- Convenience at Your Fingertips: Dubai’s vast infrastructure makes car ownership a game-changer. The banking sector and other officials are highly professional and ready to serve in the best possible ways.
- Improved Credit Score: We hope you already know that your credit score increases if you pay EMIs and complete loans on time.
- Negotiable Loan Amounts: Unlike the other loans (home loans), you can negotiate the car loan amounts, especially if you have a very good credit history.
- True Ownership: Unlike renting or leasing, a car loan empowers you to truly own your vehicle. This gives you long-term benefits, like building equity as you pay off the loan.
Understanding Car Loans in Dubai
There are two primary types of car loans available in Dubai – conventional car loans and Islamic car financing (Sharia-compliant). Conventional car loans generally follow standard financing practices with an interest component, while Islamic car financing operates on Shiara principles, avoiding interest and instead involving profit-sharing or a buy-and-sell arrangement.
Eligibility criteria for car loans in Dubai will differ based on whether you are a UAE national or an expatriate. UAE nationals usually enjoy more lenient requirements due to their status as citizens, while expatriates need to meet certain prerequisites, such as a minimum monthly income. Expatriates are frequently also required to have valid residence visas and employment contracts to secure automobile financing.
Both types of borrowers must also provide some essential documentation, including proof of identity, proof of residence, employment and income verification, and details of the chosen vehicle. Expatriates may also need to furnish additional documents to satisfy the lender’s requirements.
Understanding car loans in Dubai is essential for anyone planning to purchase a vehicle in this dynamic, fast-paced city. Dubai’s automobile market is renowned for its diverse selection of cars – from luxurious brands to more practical, everyday models.
Selecting the Right Car Loan
For car buyers to ensure they make a financially sound decision that suits their personal interests, selecting the right car loan is crucial. Here are some essential tips to follow throughout this process:
- Assessing Finances – Before diving into the myriad loan options, car buyers should evaluate their financial leverage. Determine a realistic budget that accounts for monthly loan repayments, insurance, and any necessary maintenance costs.
- Compare Loan Options – Thoroughly research several different lenders and loan products throughout the market. Compare things like interest rates, loan tenures, down payment requirements, and other fees or charges. Try to find lenders that offer flexible terms and competitive rates.
- Loan Amount and Down Payment – Determine the loan amount required for the type of vehicle you want and the down payment you can afford. A higher down payment will typically result in lower monthly payments and reduce the overall burden of repaying.
- Loan Terms – Choose a loan term that suits your financial circumstances. A longer-term may necessitate lower monthly payments, but it could also mean paying more interest over time.
- Seek Professional Advice – If unsure about anything, consult with financial advisors or loan experts who can provide personalized guidance based on your specific situation to help you find the most suitable loan.
By following these simple steps, car buyers can make informed choices and select the right car loan tailored to their circumstances.
How to Apply for a Car Loan in Dubai?
First, you must know that getting a car loan in a country like Dubai is lengthy but very well-structured. There are some eligibility criteria, basic requirements, and bank options for finding a loan.
Once you’re eligible to get a loan for your car, you need to be very cautious about choosing the right interest rate and EMI options for the payments. All right, now let’s see what requirements you need to follow.
Basic Requirements for a Car Loan
1. Minimum Salary & Age
Whether you’re an expat (temporary residence) or an Emirati, you must be at least 21 years old to buy a car in Dubai on a loan. Your minimum salary should be at least AED 5,000. However, the age and salary requirements may vary in different banks. You need to check on it carefully.
2. Required Documents
While applying for a car loan in Dubai, banks will ask for some documents to verify your identity and eligibility. Also, different banks may ask you for different documents. So make sure that you have the following documents with you:
- Original Emirates ID :Bring Emirates ID to establish your valid identity as a borrower.
- Salary certificate or proof of income:Payslips or salary certificates are necessary to demonstrate a stable income source. Expatriates may also need to submit their current employment contracts.
- Valid passport and visa
- Driving license
- 3-6 months of bank statements :in addition to payslips (or perhaps listed of), some lenders may request bank statements for the past few months to assess your financial stability and repayment capacity
- Valuation certificate for the car
- Insurance policy documents
- Car registration
- Proof of Residence: Any official or legal documents that can confirm your current legal address such as a utility bill or tenancy agreement will help lenders verify your residential address.
- Trade License : For self-employed individuals, you may be required to furnish a trade license or business registration documents.
If you’re an expat, be extra careful to cross-check whether your home country’s driving license is valid in the UAE or not. If the license is invalid, you must apply for a new one in Dubai for further procedures.
Ensure all documents are up-to-date and accurate to expedite the loan approval process. As different lenders may have different requirements, it’s essential to verify the necessary paperwork you’ll need with the financial institution beforehand.
3. Repayment Tenures
In Dubai, you can get a car loan with up to 60 months of repayment tenure only for new cars. However, if you’re going to purchase a second-hand or used car, you get a comparatively shorter repayment tenure. In this case, the tenure depends on the car’s age.
For example, if your car is 10 years old, you’ll get a repayment tenure of 2 years. Hence, you should be careful when judging a used car in terms of its age, parts insurance, and other necessary things.
4. Minimum Amount for Car Loans
Many banks in Dubai offer car finance up to 80% of the car’s value, depending on the vehicle and some necessary conditions. However, you must pay at least 20% of the car’s total price. Banks may collect this down payment directly from you. Moreover, in some cases, you can pay the amount to the car owner, and the remaining 80% will be paid through EMI.
Apart from this, most banks set a minimum amount for car financing, which is around ADE 20,000. However, it’s worth mentioning that the car you want to purchase through finance must have a minimum value of ADE 25,000.
4 Things to Consider Before Acquiring a Car Loan in Dubai
1. Car Loan Interest Rates:
In Dubai, the interest rate for car loans varies depending on various factors, such as the borrower’s credit score, banks, types of loans, loan amount, repayment tenure, and others. The more time you need to repay, the higher the interest rate you will pay. However, the interest rate mostly hovers around 3%. If you have a good credit score, you can secure a car loan with a 2% interest rate. Similarly, if your credit score is very poor, the interest rate can go up to 5%.
Besides, it’s always a good decision to compare the rates of different banks. This will help you save a huge amount of money while buying your dream car.
2. Repayment Terms:
In the monthly EMI option, the repayment term plays a vital role in the car loan interest in Dubai. It works in a very simple way. If you opt for a longer repayment tenure, your monthly instalment will be less, but the total amount will be high. On the other hand, if you choose a short-term repayment option, it will cost you a comparatively lower total with higher monthly instalments.
Hence, when selecting the repayment terms, choose the one you’re comfortable paying without a financial crisis.
3. Pay Installments with No Bounce:
Once you’ve finalized the repayment term for your car loan, you’ll have to keep it up until the entire tenure ends. If you fail to maintain the repayments, the bank can seize your vehicle and put it in custody until you pay the installments and fines (if applicable).
Hence, you should always select the repayment options that are easy for you to continue.
4. EMI Calculations:
Calculating your EMI (Equated Monthly Installments) is one of the most important things you should do to secure a car loan. Now, you can calculate your EMI based on the loan tenure, which includes the principal amount and the interest paid.
Here’s the equation for calculating the EMI with the variables:
EMI = [ P x R x (1+R)^N ] / [ (1+R)^N – 1 ]
The principal amount of the loan, which is the total amount borrowed,
R: Monthly Interest Rate.
N: Loan Tenure in months or the number of installments.
Undoubtedly, this equation will sound quite complicated to you. But there’s nothing to worry about since the bank will help you understand the calculation and how much EMI you’ll have to pay.
Which are the best banks to offer car loans in Dubai?
Banks are the primary aspects you should be careful about when applying for a car loan in Dubai. Your load installments, repayment terms, minimum downpayment, and other important things depend on the banks. Hence, make sure to compare the facilities you get from different banks in Dubai.
Now, here are the best banks in Dubai that offer car loans:
Emirates NBD Bank
Website: https://www.emiratesnbd.com/en
Phone: +971 600 54 0040
Dubai Islamic Bank
Website: https://www.dib.ae/
Phone: +971 460 9 2222; 111-786-342
RAK Bank
Website: https://rakbank.ae/
Phone: +971 421 30 000
First Abu Dhabi Bank
Website: https://www.bankfab.com/en-ae/
Phone: +971 268 11 511 600 52 5500
Mashreq Bank
Website: https://www.mashreqbank.com/en/
Phone: +971 442 44 444
ADIB
Website: https://www.adib.ae/en
Phone: +971 2 6100600
Emirates Islamic
Website: https://www.emiratesislamic.ae/en
Phone: 600 599995
Interest Rates For Different Banks
Different banks give different interest rates for new and used cars according to your resident status. Please note that this information is for you to have an idea and is publically gathered information. For accurate interest rates according to your situation, contact the relevant bank.
| Bank | Flat Rate | Minimum Salary | Down Payment |
| Emirates NBD-Auto Loan For Used Cars | 2.99% | 4000 | 20% |
| Dubai Islamic Bank-Al Islami Car Finance | 2.35% | 3000 | 20% |
| RAK Bank | 2.55% | 5000 | 20% |
| First Abu Dhabi Bank-Car Finance For Expatriates | 2.59% | 7000 | 20% |
| Mashreq Bank | 3.19% | 7000 | 20% |
| ADIB—New Car Finance—Murabaha | 2.59% | 5000 | 20% |
| ADIB: Used Car Finance, Murabaha | 3.25% | 5000 | 20% |
| Emirates Islamic: Auto Finance | 2.65% | 4000 | 20% |
Crucial Tips for First-time Car Buyers
Buying a car and securing a car loan can be a stressful undertaking, especially for first-time car buyers. Fortunately, however, there are several steps you can take and things you can be proactive about to ensure the process goes as smoothly as possible.
Firstly, you’ll want to establish a budget to understand what you can afford. Next, it’s best to research your options thoroughly – consider factors like fuel, maintenance requirements, and registration fees, as well as what kind of vehicle would suit your lifestyle and commuting needs.
Once you’ve found a vehicle that you want to purchase, take it for a test drive to evaluate its performance, comfort, and handling firsthand. You’ve researched the vehicle’s fair market value; use that information to assess the quality of what you’re paying for.
Ultimately, you want to secure a good car loan with sensible terms that you can afford. By following these steps and general tips, first-time car buyers can confidently navigate the process and make informed decisions about procuring a vehicle.
Conclusion
In the end, we’d say that acquiring a car loan in Dubai is quite easy and hassle-free. If you’re eligible, you can take advantage of the benefits. However, you must be extra careful when choosing the right bank and repayment terms for financial stability.
Obtaining a car loan in Dubai requires careful planning and consideration. Understanding the types of car loans available, including conventional and Islamic financing, is vital to select an option that aligns with your preferences.
To secure the best loan terms, first-time buyers should assess their financial capabilities, research extensively, and compare loan options from different lenders. Additionally, it helps to organize all the necessary paperwork before coming to the table to ensure a smooth car-buying experience. By following this brief guide, car buyers can confidently approach the car loan process in Dubai.
FAQ
What should my credit score be to get a car loan in UAE?
In UAE, there’s no single credit score requirement, but generally, banks prefer a score above 600 for better loan terms.
What should be my minimum salary for a car loan in Dubai?
The minimum salary can vary by bank. However, it typically starts at around AED 3,000–AED 5,000 for salaried individuals.
Can foreigners get a car loan in Dubai?
Yes, foreigners or expats with valid residency visas can apply for car loans in Dubai. However, you’ll have to provide proof of address in your home country.
How much do I have to pay for the down payment on a car loan in the UAE?
Down payments typically range from 20% to 40% of the car’s value, depending on the bank and your credit score. But, typically, the minimum amount is AED 20,000.
What car is a good option for a loan, old or new?
Newer cars generally have better loan terms due to lower risk for the bank. However, a well-maintained used car can be a good option if it fits your budget.
Can you get approval for a car loan in Dubai without a driving license?
Is there any processing fee for a car loan?
Processing fees are around 1 % of the loan amount, approximately.
What is the average interest offered by different banks in 2024?
Different banks offer different rates for new and used car loans, with interest rates ranging from 1.99 to 3.99 per cent per year.
What will happen if the customer does not pay back the car loan?
In case of non-payment of the loan, the bank will repossess the car, and there will be a court case.