Obtaining a personal loan can be a tedious process, with many potential pitfalls. Banks are very good at disguising harmful or disadvantageous terms in the fine print. Below are some tips to follow if you are ever in the market for a loan.
Shop Around at Different Banks
Shopping around at different banks for the right loan and interest rate is a key first step. More often than not, your regular bank will not give you very good terms as they are keen on selling expensive products to their existing client base. Therefore, shopping around could give you the upper hand in finding the least expensive loan on the market. Using bayzat to find a personal loan will help you compare and understand the different rates and terms offered by banks in the UAE.
Watch Out for the Type of Interest Rate
There are two types of interest rates that are applied to loans known as the flat rate and reducing rate. A flat interest rate means that the amount of interest paid is fixed and does not reduce as time moves on. This is an unconventional method used by banks to make the interest rate seem lower than it actually is. For example, if a bank says a personal loan has an interest rate of 4.25% on a flat basis, this is equivalent to a 7.92% reducing interest rate. So make sure you are comparing apples with apples; bayzat makes this easy as we convert all interest rates to make sure they are calculated on the same basis. To learn more, read our article ‘Don’t be Deceived by Flat and Reducing Rates’.
Review and Compare the Terms & Conditions
The terms and conditions of a loan are just as important as the interest rate. Some terms and conditions include hidden fees or penalties. It is also important to note the terms of repaying the loan back early. Steve Gregory, Managing Partner at Holborn Assets, had this to say, “Reality is that more than half of people, in my 30 years experience, have no idea what they are paying in interest and when the loan will be repaid and what happens if they want to repay early.”
Be Mindful of Added Products
Some banks automatically register you for credit or payment protection insurance once you become a borrower. Reviewing the terms of the insurance can help you identify whether you should continue with the it or seek your own cover.