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5 Factors To Consider Before Getting A Car Loan In The UAE

New car sales in the UAE is expected to reach 267,000 by 2020, analysts say. Such growth is credited in part to the ability of the population to afford to buy their dream vehicle. Although for many, a car loan is still the smartest method to acquire new wheels. But before you apply for a loan and enjoy your brand new car, find out first if you are truly car loan eligible and consider these important factors.

1. Requirements - It is mandatory to have a UAE driver’s license and residence visa. According to the Dubai Government, if you have a valid driving license from any of the following countries, you can easily convert it into a UAE license without the need to take a driving test:

·         Australia·         Austria·         Bahrain·         Belgium·         Canada·         Denmark·         Finland·         France·         Germany·         Greece·         Ireland·         Italy·         Japan·         South Korea·         Kuwait·         The Netherlands·         New Zealand·         Norway·         Oman·         Poland·         Portugal·         Qatar·         Romania·         Saudi Arabia·         South Africa·         Spain·         Sweden·         Switzerland·         Turkey·         United Kingdom·         United States

Depending on where you plan to get a car loan, the basic requirements are quite similar to those of a personal loan, with the addition of a driver’s license and vehicle registration card. Ask your chosen lender about their requirements and check if you are able to provide the specific documents needed to get a car loan approval.

2. Type of Car - There are thousands of cars you can choose from in the UAE, so you must determine which car features can make or break a car deal for you. Are you looking for practicality, safety, comfort, or full options? How will your standards fit in your budget? If you are open to the idea, there are also pre-owned vehicles you can buy from private sellers. Right after you select your car, the dealer can help you with the next steps to take. For a used car, remember to check on the minimum car age that your bank or lender will accept.

3. Loan Terms - Most banks have a prepayment penalty and may oblige you to pay a portion of the remaining interest amount if you settle the loan early. For instance, in the event that you lose your job shortly after getting a loan, you’ll need to sell the car and pay the loan completely together with the interest. Typically, cars depreciate faster than you can pay off loans. You may end up in a difficult situation where you can’t even break even. Make sure to shop around for flexible rates and the best bank terms and conditions for easy loan repayment.

4. Maintenance and Insurance - A car is not only an asset; it’s also a liability. If you are getting a new car, have you factored the maintenance and insurance costs into your budget? A new car may be under a warranty for a few years, but if it’s a pre-owned one, you should consider insurance, maintenance and repair costs. You must take all current and future car expenses into account before deciding to get a loan. After all, it’s not a good idea to commit to a car loan that you can’t afford especially if you have other financial matters to settle.

5. Commitment - How committed are you to your current location and job? The decision to buy a car and get a loan must be according to your current situation in life. Even if a car repayment is affordable, getting out of a loan may be too costly and impractical if you plan to relocate in the near future. If you have a stable source of income and have no plans to move to another location, then go ahead and get a car loan with minimal costs. But if you’re new to a job and your life situation is still evolving, it may be a wiser idea to lease a car and avoid unnecessary costs until you are financially stable.

Once you’ve decided which bank to get a car loan from, prepare your passport, salary certificate, driving license, Emirates ID and repayment schedule plan. Keep in mind that the longer your repayment schedule is, the higher your rate of interest will be. When deciding to get a car loan, you need to take into account your job stability, additional costs, good rates and terms, and check-out prepayment penalties. And once you’ve decided, you need to think every step through to ensure you get a great ride that gives you the best value for your money. Always make sure to work within your budget to avoid repossession and late fees.

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