Personal Loans in UAE – Fast, Flexible & Trusted

Personal loan interest rates in the UAE vary as per the bank, your credit profile, income, and whether the salary is being transferred to the lending bank. In the UAE, personal finance rates can be divided into two categories –

Flat Interest Rate –

A flat rate is estimated on the principal amount throughout the repayment period, irrespective of how much of the loan has been cleared. This results in higher total interest paid compared to reducing the balance rates. Flat rates are often lower, but the actual cost can be higher when compared with reducing rates, especially if you don’t settle the loan early.

Illustration
If you borrow AED 100,000 at a 4% flat rate for 4 years, the total interest would be AED 16,000 (4% of AED 100,000 × 4 years), and your total repayment would be AED 116,000. In this case, the monthly instalments would be around AED 2,417.

Reducing Interest Rate –

A reducing personal loan interest rate is applied to the outstanding balance, meaning the interest payable decreases as the principal is repaid. This results in lower overall interest payments compared to flat rates.

Illustration

If you borrow AED 100,000 at a 7% reducing rate over 4 years, the interest is calculated on the decreasing balance, not the full amount. The first month’s interest would be higher, but as the principal reduces, so does the monthly interest portion. 

Over the loan tenure, the total interest paid would be significantly less than a flat-rate loan with a similar percentage, particularly if you choose to repay it before completion.