Private money lending without the required license is illegal in the UAE. Lenders and borrowers are equally held guilty and punishable for such conduct.
Private lending has become common these days. The reason for their growth is the increase in the number of borrowers. When borrowers fail to get loans from banks, they sort to approach private lenders in the UAE.
The thing about private lending that makes it more desirable than bank loans is that there are fewer restrictions in the process of loan approval. Unlike banks, most private lenders do not require minimum salary requirements and other details. Let’s understand what exactly are the parameters of loan approval from private lenders in the UAE.
Eligibility and Requirements for Private Loan
There are basically no eligibility criteria or any kind of requirement for getting a loan from private lenders.
- minimum salary
are not taken into consideration. You can get instant loans from private lenders.
However, there are certain disadvantages of getting loans from this kind of lender. The interest rates are very high and it keeps on increasing if you fail to repay the loan on time. On top of that, these people go to the extent of threatening you to get the repayment on time.
Is personal money lending legal in the UAE?
Private money lending without the required license is illegal in the UAE. Lenders and borrowers are equally held guilty and punishable for such conduct. There have been cases where borrowers had to submit their passports as collateral to the lender. These activities are considered a crime by the law in UAE. That is why private lending and borrowing is risky in the UAE.
However, there are legally established companies that are authorized to offer private loans.
Legal Private Lending companies
These are government-registered companies and borrowers have to go qualify and go through a documentation process to get loans from these companies. Two such companies that currently operate in the UAE are Finance House and Mawarid Finance.
Established in the year 2004, Finance House is one of UAE’s first finance companies to be independently operated. This company has helped a lot of businesses and individuals overcome financial hurdles. It is a personal loan type facility which offers private loans to professional executives to meet their immediate cash needs.
With a reducing interest rate, starting as low as 20% , this company gives short term loans for a maximum period of 36 months.
- Should have a minimum salary of 5000 AED per month.
- Should be UAE residents or expatriate residents of the UAE
- Minimum age of borrower should be 21 years and maximum age at loan maturity is 60 years.
- Six months service confirmation from current employer or job confirmation
The following documents are required:
- Original Passport
- Latest 3 months bank statements
- Current dated salary certificate
- Direct Debit Authority
With an easy credit approval in just one day, Finance House charges only 1% processing fee with extra benefits of free for life credit card, Auto Insurance, Balance Transfer Facility etc.
Mawarid Finance is a private finance corporation in the UAE providing Sharia-compliant financial services. It is particularly helpful for small and medium-sized businesses (SMEs) and individuals who are looking for loans and other financial services.
It offers ‘Floosi’ which is a short-term & hassle-free private money lending option for UAE nationals & expats. This finance is easily managed with post-dated cheques or bank transfers.
- Agreed contract between lender & borrower
- Good credit rating
- Passport with Visa page
- Emirates ID
- Bank Statement of last 6 months
- Salary Certificate
- Liability Letter
Features of Floosi Finance
- Facility limit up to AED 100,000.
- No salary transfer required.
- Get your finance within 3 working days.
- 30 days grace period.
- No early settlement fees.
Private Loan for Business
The majority of small-scale business owners borrow money from private lenders for short-term purposes. But the hassle starts if the payments are delayed or if the tenure is exceeded.
Getting a personal loan from a private lender is not recommended for business purposes if you are not knowledgeable about the business. If the business occurs losses it is almost impossible to pay back to the private lender. It is even not recommended if the interest rates are higher than what you can afford.
An alternative option is Crowdfunding. There are various crowdfunding investors who invest in your business for shares in return or some profits.
You can get some investors by registering your business in these platforms
How to get a Good Credit Score in the UAE?
Here are few tips to help you get the money from private companies faster –
• Paying bills timely — This is a very common yet important way everyone suggests with regards to credit score improvement. Even a one-day late payment also will be added to the credit report and can have an impact on the credit score.
• Full Credit utilization — Despite the credit limit, it is important to utilize the provided credit wisely. It is recommended to use only 30 per cent of your credit limit.
• Pay credit card bills in full – Credit cardholders are given a provision of paying only 5 percent of the credit bill monthly. But this can have a negative impact on your credit report. Therefore pay the bills in full on time.
• Manage your debts — Try clearing the loans that are consuming high interest rates. Have fewer debts in your pocket. Don’t apply for a loan that you don’t need.
• Credit card accounts — There is often a misconception that having too many credit cards will have a positive impact on the credit score. The number of credit cards has nothing to do with the credit score. The way these credit cards are utilized plays a major role.
Getting a private loan in the UAE is very easy. You can get a loan in a matter of minutes. In some cases, you will have to submit your passport or other important documents to the lender as collateral. Once you do this, you are offered the loan without any questions. However, considering the risks involved and the law against this kind of activity, you might consider staying away from this kind of money-lenders.
There are various other alternatives to get a loan for personal use and businesses. You can apply for a loan from registered finance companies which are mentioned in this article. You can also get a loan from your close friends, acquaintances and family members. These are safer options and there is no collateral damage in the process. If you are taking a loan for business reasons, you can opt for crowdfunding. It is much more reliable and safe.
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Other private money lenders in the Emirates