Loans by collateral, such as gold, real estate, deposits, or equity, offered by some banks in the UAE, offer three major benefits to customers, and the size of their benefits varies between citizens and residents.These advantages are represented in the low interest rate on these loans by up to 1.4% annually compared to personal loans Conventional or auto loans, next to the length of the repayment period, the loan value is high.
Bankers told Emirates Today that the reason for the low interest rates on these loans is that the lender carries a lower risk compared to the rest of the loans.
The main advantage
In particular, the main advantage offered by mortgages on assets such as gold, real estate, deposits or equity is that they provide finance at an interest rate less than 1 to 1.4% per annum, according to Emirates Today's monitoring of Emirates Bank. NBD, Emirates Islamic Bank and First Abu Dhabi Bank, through their bank accounts and loans, or by contacting them.
The second advantage is repayment periods over five years, and the third is the loan amount of up to AED 5 million.
The Emirates NBD Gold Loan or Gold Certificates provide instant liquidity of up to 36 months, with a gold valuation at the current market price. This valuation is free of charge, while the property valuation is subject to additional charges that vary from bank to bank. Abu Dhabi First offers loans against real estate or rental yields, while Emirates Islamic Bank provides equity financing.
"The interest on the loan is determined by the customer's risk," said banking expert Majd al-Maaytah. "The bank determines these risks based on the collateral it receives from the client," he said. He explained that the bank takes the salary as collateral in case of granting a personal loan to the customer, and that the car becomes a guarantee in case of financing the purchase of cars.
He stated that if the client applied for a loan against the mortgage, gold, jewelry or even shares, he could not dispose of the property until the loan was repaid. He explained that the risks related to these assets, especially real estate and gold, are considered limited, and thus reduce the bank interest rates on these loans.
At the same time, he advised the client, who is going to obtain this loan, to review his financial obligations and make sure that he is able to repay the loan installments, so as not to lose the asset he pledged, and that the purpose of this loan is to pay obligations that he cannot obtain from other sources; For investment purposes, provided that the investment return covers the loan and its interest.
Banking expert Mohamed El Shazly said that the main advantage of secured loans such as gold or real estate is the length of the loan, which can last up to 10 years, while personal loans or auto loans do not provide financing for that period.
He explained that the interest on loans secured by assets may be about 1% less than the interest on personal loans if the equal repayment period of the loan.
The banking expert, Awatif Al-Harmoodi, said that obtaining loans against mortgage mortgages requires long and complicated procedures, especially in loans granted for mortgaging real estate or land. Mortgaging the property or land itself was an additional cost to the borrower.
She added that there are some dealers prefer to get loans that are easy to process, which does not require many procedures and complicated, pointing out that there are individuals prefer to get a personal loan, despite the high interest of obtaining a car loan because of these procedures.
The interest rate of loans against the mortgage of assets is not fixed, especially in long periods of loans, as they are often linked to the price of EIBOR (inter-bank borrowing interest in the UAE) plus a fixed rate, pointing out that the bank can not afford the risk of interest rates on long-term loans that It may sometimes exceed 15 years.