In recent times, many debtors are juggling between many loans like home loan, car loan, personal loans and credit cards. The high cost of living, especially in the UAE region and the upscale lifestyle causes people to spend beyond their means. When the debt goes beyond control, they approach banks or financial institutions for a debt consolidation loan.
Imagine managing 3-4 loans and paying different installments for each one of them. These loans can be different rates of interest and also with different banks. Debt consolidation loan is a product offered by most banks and financial institutions which help consolidate all your loans into one single loan. The tenure, rate of interest and benefits can vary but the consumers believe it helps them begin their journey of a debt-free life.
- Better tracking and management of finances – Since you have only one loan to repay, the number of installments come down to one too. This saves you a lot of time, effort, and money, involved in making multiple payments. This gives you a better view of your finances and helps manage them effectively.
- Lesser interest to be paid– Usually, banks and financial institutions offering debt consolidation loans offer a lower rate of interest. So, by consolidating various loans, you can be assured of saving money which was being paid as interest.
- Credit rating– When you are juggling between multiple payments for different loans, chances are that you might miss or delay certain installments. This can adversely affect your credit rating and cause problems for availing further loans if required. Debt consolidation in UAE helps you by reducing the chances of missing or delaying payments thereby improving your credit score.
- Stress-free- We live in a world full of stress. A loan is probably the biggest contributor to stress in our lives. By consolidating your debts you will feel a drop in your stress levels since all your installments would be merged into a single payment every month.
Every bank and financial institution have its own eligibility criteria which needs to be checked individually. However, some basic requirements are as follows:
1. Debt to Burden ratio [DBR] should not exceed 50 percent
2. Most banks have a requirement of salary transfer
Fees and charges are usually similar to normal personal loans but they must be checked before applying.
Abu Dhabi Islamic Bank [ADIB] Debt Consolidation Loan
- Minimum salary requirement of AED 8000.
- Special profit rates
- First installment payment grace period up to 90 days
- Two free installment postponements every year
- 100% processing fee waiver
- Quick approvals
- Job loss protection
- Pre-approved ADIB Visa cashback card
- Original and copy of valid passport (with valid residence visa for expatriates)
- Original and copy of valid Emirates ID
- Bank account statement (last 3 months)
- Liability Certificate
Mashreq Bank Debt Consolidation Loan
- Minimum salary requirement of AED 5000
- Lower monthly payments
- Salary transfer mandatory
- Higher Loan amount – AED 1 Million for Expats and AED 3 Million for UAE Nationals
- Maximum repayment tenure of up to 48 months
- Last 3 months bank statement
- Salary Transfer Letter as per Mashreq format
- Passport Copy with Valid residence visa
- Valid Emirates ID
National Bank of Abu Dhabi [NBAD] Debt Consolidation Loan
- Only available for UAE Nationals
- Debt to Burden ratio [DBR] higher than 50 percent
- Competitive interest rates
- Salary transfer mandatory
- Liability Letter
- Salary Transfer Letter
- Bank Statements (6 months)
- Completed and signed branch application form
- Copy of valid Passport / Visa / Emirates ID (Originals must also be presented)
You will also have to prove that your outstanding credit was granted before May 2011 and your DBR is higher than 50 percent of your monthly salary.
Debt consolidation is a tool to help you get your loans under control. It can help you minimize the number of installments and in certain cases reduce the interest rates too. However, it does not make your debt disappear. You have to repay what you have borrowed and with 100 percent dedication, you can use this tool to reach a debt free existence.
Debt consolidation is a long drawn process. Consumers with multiple credit cards and no savings to repay them should primarily consider debt consolidation as this can significantly reduce the interest rates. Debt consolidation requires an unwavering commitment to new repayment structure and persistence to follow it throughout the tenure of the loan. If this is you, then debt consolidation loan can help you become debt-free.
Remember: if you start taking more loans/credit cards, then debt consolidation will not work for you.