Global Compliance

Obtaining Private Loans for Expats - UAE

Introduction

UAE’s population consists of a large number of expatriates. They form an integral part of the economy, though, in the end, they aren't nationals of the country. As such, the processes they are required to go through to obtain loans varies from Emirati nationals. The amount banks will loan to the foreigners is likely to be lower than that available for nationals, and this is partly because of the fact that the positions of foreigners in the UAE is less guaranteed than that of locals. Nonetheless, the process is one which is easily manageable for all, and the steps and documents required are simple enough. Banks in the UAE are governed by the Central bank of the UAE (set in place through the Union Law number 10 of 1980). Its role is to implement the necessary policies that all banks are to follow including its working and functions as set out under the Central Bank Law of 1980. On top of this, the UAE Civil Code, under Articles 710-721 and similarly in Articles 849-871, provides for an overview of the loans provided within the UAE.

Obtaining a loan
Requirements:
For a foreign individual to obtain a loan in the UAE, they can begin by going online and accessing their chosen bank’s website. The website should list all the documents an individual would be required to provide to qualify for a loan. In general, the documents necessary for the most part are: 

• Passport copy.
• Visa copy.
• Emirates ID copy.
• Salary Certificate and a specified amount of pay slips (could be around 3-6 months).
• A specified amount of bank statements.
• Credit card copy and credit card statements.
• A security check.

These are the basic requirements that the bank will need, though they may have their own personal requests. These could range from a minimum salary requirements or more. When the concerned bank is provided with all of the documents, they can then begin to consider whether to provide the loan.

An individual should look at these questions and requirements, and if they qualify for a loan from their specific bank of choice; then they should then proceed to begin the application processes. There are often multiple paths along which one can apply for a loan. These can include filling out an online application form, visiting a local branch of the bank, calling into the bank, or other similar methods of communication such as email. 

Once the communication between the individual and the bank has commenced, there is not much more that can be done. The bank may require personal information about the individual, though not much else. They will then consider the application and the loan can then either be issued or rejected.

Types of loans:
The first thing to consider is what kind of loan you would be looking to obtain. There are different types of loans for the purchases of cars, which are covered in Article 3 of the RRBLSOIC, including credit card loans which are covered under Article 5.
Things vary depending upon the type of loan. For example, in a car loan, the security will be made against the car itself; if the payments cannot be made, the bank will have the right to take away the car and sell it to recuperate what is remaining of the loan.
Interest:
When considering which bank to procure the loan from, one could look to the interest rates. Islamic banks, on the one hand, will not have compound interest as they follow Sharia law. Islamic banks are mentioned under the Federal Law Number 6 of 1985. They do have to comply with the RRBLSOIC rules, except in the areas of interest where Article 13 exempts it. Instead, when they provide a loan, they will have a charge which would be a specified percentage of the total loan value.
Other banks usually compete on interest rates. Interest rates are calculated according to a Central Bank formula, and a flat rate is what will be charged.
The formula is as follows:
Principal x interest rate x loan period (in months) +1       
2             X          100              X          12
From here, the monthly interest value is calculated using the formula:
Loan balance at the beginning of the month × Interest rate           
12   ×                                       100
The contract:
Once the loan has been approved of, a contract is drawn up between the individual and the Bank. This contract would outline the start and end dates of the loan, the monthly payback amount, and other details such as penalties for failed payments. The contract would be covered under UAE Contract Law and is also covered in more depth in the RRBLSOIC. This is once again covered under Part 1 of the UAE Civil Code.
For the installment payments, the RRBLSOIC mentions under Article 7, that they are to be deducted from an individual's salary, and it cannot exceed 50% of that individual's monthly pay.
Choices:
There are many banks which can be approached when one is looking to secure a loan in the UAE. In an attempt to draw people in, many of these banks offer attractive incentives such as varying loan sizes. While some banks allow loans of around AED 250,000, many offer far higher caps. The most substantial amount a bank is entitled to the loan to a foreign individual is around AED 1 million. The cap for local Emiratis is usually around three times higher.
Banks may also offer insurance to foreigners in the unfortunate event of them losing their jobs. Insurance of this kind is especially helpful as jobs in the UAE are more uncertain, and if the loan is of a large quantity and is payable over multiple years, it might be in the bank’s best interest to have an insurance option for potential clients.

In the end, though, the process of obtaining a loan in the UAE as a foreigner is one that is reasonably quick and simple, though it is one that is relatively different to acquiring one as a local. There is a good deal of paperwork that is required, but so long as one has that in order, there are a variety of choices of loans with banks competing with one another and offering an assortment of insurance packages and competitive interest rates. The primary piece of legislation for the system is the Central Bank of the UAE Regulations Regarding Bank Loans and other Services Offered to Individual Customers (RRBLSOIC) of 2011, which applies to all banks, whether they are Islamic banks or not, with the primary varying point interesting.

Glossary

• Private loan: these are loans which are given to private individuals (as opposed to business entities) for purposes that are specified and is secured by assigning salary and end-of-service indemnity or any regular income from a well-defined source.
• Loan security: a loan is secured by security to safeguard the bank that issues it. An asset belonging to the individual would secure the loan. In the UAE, bank loans to non-nationals cannot be made against private houses.
• Central Bank of the UAE: the UAE central bank is the governing bank within the country. It monitors the other banks and ensures the economy grows in a controlled manner.
• Union Law Number 10 1980: the law which established the Central bank of the UAE and set out its responsibilities and duties.
• Islamic Banks: Islamic banks follow Sharia Law.
• Federal Law Number 6 1985: legislation that covers Islamic banks and their requirements.
• Regulations Regarding Bank Loans and other Services Offered to Individual Customers (RRBLSOIC): This is the Central Bank legislation of 2011, which regards loan regulations within the Country.