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Whether you are searching for a personal loan or financing for a home or vehicle, you can take advantage of many financing opportunities in the UAE. Having said that, we want to use this post to discuss one type of financing category. That category is Islamic loans.

While Islamic finance only constitutes 1% of global financial assets, it is a rapidly growing area of finance—particularly in the UAE. Specifically, Islamic loans in the UAE are a fantastic way to accomplish some of your financial goals. Also called Sharia loans, these loans, as you can guess, comply with Sharia law. While they work slightly differently than “traditional” loans, Islamic loans can be a great option to finance major purchases in your life.

Sharia Loans: Some Basics

Islamic loans are unlike other types of loans for several reasons. However, the main differentiating factor is that they must comply with practices and prohibitions under Sharia law. One of the most notable restrictions for Sharia loans centers on paying or charging interest. Sharia law says that interest is usurious, meaning that it is strictly prohibited. To put it another way, with Sharia loans, there are no fixed or floating interest rates or fees.

There are many other restrictions on traditional financial instruments under Sharia law. For example, an investor or borrower under Sharia law cannot invest in businesses involved in prohibited activities, speculate or gamble, or purchase derivative contracts or engage in short selling. In the personal finance context, however, this prohibition on interest is the most striking difference with Western finance.

That said, lenders underwriting Islamic loans in the UAE still need to make money. So how do they do it? Ultimately, it comes down to Islamic banks buying a desired product or commodity on the borrower’s behalf. After doing this, Islamic banks can lease the underlying product to the borrower. They can also re-sell that product on installment at a fixed price. This price, however, is often higher than the traditional market value.

Islamic loans in the UAE offer these types of arrangements. Even though Islamic banks aren’t necessarily charging interest, they are being compensated for the initial risk of purchasing the underlying product or commodity.

The Best Islamic Loans in the UAE

With this basic understanding in hand, you may be curious about how you can obtain Islamic loans in the UAE. The good news is that there are plenty of opportunities to capitalize on the best Islamic loans in our country.

For instance, there are some great FAB Islamic loans. First Abu Dhabi Bank is one of the most renowned financial institutions in our country. It not only provides capital and services to large corporations, but to individual borrowers like you. These FAB Islamic loans are specifically tailored Sharia-compliant solutions that can help you purchase everything from a home to a car. If you intend to purchase a new home, you can obtain up to AED 20 million in financing and can leverage flexible payment periods (up to 25 years). If you’re in the market for a new car, you can get financing of up to AED 1.5 million and up to 80% of the car’s value. There are eligibility requirements for all of these FAB Islamic loans, so you’ll want to read the fine print before proceeding.

FAB Islamic loans are just one example of some of the best Islamic loans available in the UAE. That said, you will probably want to start looking for opportunities with your current bank. See if they offer Sharia loans for your intended purchase and feel free to reach out to your bank as necessary. In all likelihood, you will find an Islamic loan in the UAE that best suits your financial circumstances and your intended purchase.

Finding the Best Sharia Loans in the UAE

Sharia loans can be a great way to finance a large purchase in your life. Even if you can pay for your purchase in hand, Islamic loans can relieve financial pressures in your life. Therefore, we encourage you to complete your due diligence. If you have any questions, don’t hesitate to contact your banker. Doing this, we’re confident that you will be satisfied with your next Sharia loan.

Soulwallet is a personal finance comparison portal in the UAE. With a team of “out of the box” thinkers and a deep understanding of the UAE consumer banking industry, we help customers make the best choices while shopping for financial products such as credit cards and loans.

Planning to set your financial goals right at the beginning of the year is a great way to start in 2020.

Review your financial position, check where your money goes, review your debt, cut down on extra expenses and plan efficiently. This will help you stay on savings course and prevents you from getting into any money hurdles.

Here are a few ways to help you do that:

1: Revisit your mortgage loans.

Home loans are one of the biggest financial responsibilities that require regular revisits. Look for better options to save your money or get other benefits when there is a change in your financial situations, bank’s loan terms or interest rates.

Check if refinancing can help you save money. Compare your loan interest rates with the current rates because even half of a percentage point drop will give you substantial savings.

Lower interest rates help in reducing your mortgage term because here you can raise your monthly payments and prepare to clear the loan early. For example, paying off the loan in 10 years instead of 20 years offers great savings incentive to the homebuyer.

2. Get a personal loan

A personal loan is a viable money-saving solution in many situations when you borrow it for the right reasons. With personal loans, you can settle higher interest loans, create a good credit score, pay off credit cards or consolidate debts with more manageable fixed EMIs.

For instance, when you want to consolidate debts on your different credit cards, taking a personal loan can help pay off all the charges in one monthly payment. You benefit from lower loan interest rate compared to the annual percentage rates (APRs) on your credit cards.

However, before taking a loan, calculate your repayment capacity using an online app, select repayment tenure that is within your reach and carefully review all the fine print.

3. Select the right credit card

A properly selected card can help you make savings on purchases, but the choice of the card should be based on your use and habits.

For instance, a frequent traveler will make savings when his card offers discounts and rewards on air tickets, hotels or lounge access.

The choice of the card also depends on whether you carry a balance each month or pay off dues before time. When you take forward a balance on credit, select a card that has a low annual percentage rate (APR).

Knowing your credit scores always helps you to apply for a card that is more likely to get approved. Lastly, compare the annual savings you make on the card against the card’s annual fee to see if it is right for you.

4. Find a balance transfer scheme

A balance transfer can help you make substantial money savings. Transferring high-interest debt from credit cards or loan to a card with a lower interest rate gives saving on interest and helps in clearing off the debt faster.

However, check if any balance transfer fee is levied to carry the balance to your new card. Another critical factor is the new card APR rate; check the introductory APR offer and price after the promotional period ends.

Always evaluate the terms carefully and put a debt repayment plan in place. Remember your debt doesn’t disappear when you do a balance transfer, but effective planning can help make good money savings.

5. Work out your monthly budget

Make a note of your cash flows to curb all unnecessary spending. Different apps come as a handy tool to do all the calculations for you.

Feed-in your monthly income and your expenses and the app will give you a clear picture of how to plan yourself well.

These tools help you consolidate all your bills, track the spending pattern and get an alert message when the due date of any statement is nearby to avoid late fees. Money management is a vital step to rein spending and get finances under control.

6. Review your subscriptions

If you are a Netflix and Amazon Prime addict, ask yourself if you need all these subscriptions and if you have the time to watch them?

Most people pay more on subscribing too many services but hardly use that entertainment and reading channels they have.

It’s the time to evaluate the spare time you have at hand to use these services and the cost you are spending monthly on subscribing to these. This helps you track the service you can do without and make money savings.

Besides entertainment, your current telephone and mobile plan also needs to be reviewed. Check your bills to study your usage patterns. If you are not using the full service, try considering another package. And if you are paying extra after the service amount, see if you can sign up to a new scheme that serves best to your needs.

Tag: home loan

All You Need to Know About Islamic Finance