History of Islamic Financing in UAE
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In UAE, when people a decent amount of money in their hands, first thing that they think of is to pay-off their old debts, without realizing the fact that paying off personal loan in dubai early can actually cost you more. This article will help you understand the pitfalls that you should have in mind while thinking of paying the loan off early, as it is not usually a straight-forward process.
The maximum penalty allowed by the UAE Central Bank that banks can charge their customers if 1%. Which means if you have an outstanding balance of let`s say 100,000 AED, you will pay the bank extra 1,000 AED to pay off your loan earlier than the committed time-period. This 1% is the maximum for both Personal and Auto Loans in UAE.
Another thing that may affect how much you owe the bank in case you want to pay-off your loan early is the amount of time that has passed since you took the loan from bank, as the market rates may have changed. This is exactly why it is always a great idea to get a new loan to pay off your previous loan in Dubai, as that way you can reduce the interest rate to a great extent. If you want to go this way, you should also keep the possibility of paying an extra arrangement or upfront fees that you might have to pay, which are typically 1% as well.
If you want to opt for a new loan, you must find out whether the loan is flat or reducing rate, as it can play a great role in determining how much you would really have to pay.
Here are few things that you must do before thinking of clearing off your loan early:
Speak to your bank and ask for exact numbers regarding how much interest you are paying right now, and how much you will pay if you decide to pay off the loan early.
Ask the bank of any possible penalties and list of all the charges that will be applicable to you in case you pay it off early.
After getting the figures from the bank, do your calculations in details and find out whether going for paying-off the loan is actually beneficial for you or not.
Your aim should be to ease up your financial situation by paying-off your loan early, so just ensure that you don’t end up putting yourself under more burdens by opting for this option.