Your credits should remain unaffected by the corona virus pandemic in the short-term.
If you already have a loan, continue meeting your monthly repayments as usual. Should you face financial difficulties that impact your ability to meet your credits repayments, we advise you to make contact with your lender.
The Central Bank of the UAE (CBUAE) has rolled out an AED 100 billion economic stimulus package in response to the corona virus pandemic. In the circular announcing the package, it was noted that many customers may have become “exposed to the risk of temporary shortfall of their cash flows due to the outbreak of COVID-19 pandemic”. In response the CBUAE has ordered that banks grant temporary relief for a period of up to six months to their customers.
For those of you who are in the process of completing on a property purchase with a loan , we anticipate that this will continue as normal as banks are still operating. If you have any issues or concerns, please feel free to contact our team for advice.
What is the difference between a flat rate and a reducing rate of interest?
Flat and reducing rates of interest are two methods of how interest can be calculated on borrowings.
A flat rate of interest is where the rate of interest to be paid remains the same for the duration of the loan as it is always calculated against the original amount borrowed (principal).
A reducing rate of interest is where the amount of interest to be paid takes into consideration the repayments that have been made, so it is calculated against the remaining loan amount or outstanding balance, rather than the original principal amount.
On occasion, a flat rate of interest may be advertised at a lower, more appealing rate than its equivalent reducing rate. When taking a loan It is important to establish with the bank or your financial broker whether a flat or reducing rate has been applied.
Why do banks require a security cheque when getting loans?
Security cheques are required by banks in the UAE as they are used in instances where the borrower fails to meet the repayments for borrowings. Should this happen, the bank will present the cheque and when it bounces they will then be able to initiate a legal case to take possession of the property to repay the outstanding debt.
This is not very different to other countries where the bank will have it written into their contract that they can repossess the property where the client defaults on the loans .
Can my housing allowance be taken into account for my loans?
Where your employer pays you a housing allowance, this can be taken into account when you are applying for a new loan.
For example, if you currently live in company provided accommodation and it is stipulated in your contract or salary certificate that you will be paid a housing allowance should you leave the provided accommodation, then the allowance you will be paid can be taken into account for your credits.
You will still be required to have the necessary down payment, but the allowance can contribute to your affordability and therefore can, in some cases, increase the amount you are able to borrow.