The UAE is home to some of the best banks in the world, offering incredible features that can be availed when a customer signs up for them. Some of these banks also offer products based on Islamic financing structures for customers who would prefer an alternate form of banking that respects their religious or ethical beliefs.
The key question is how is Islamic banking different from its conventional counterpart when it comes to personal finance?
Unlike a regular personal loan, Islamic banks that offer personal finance purchase the product on the borrower’s behalf and allow him/her to use its benefits. The borrower keeps paying the bank a pre-agreed amount on dates decided beforehand. Since Islamic banking forbids interest, it charges a processing fee instead for the services offered.
How do you decide which one is better for you?
When it comes to choosing whether to opt for Islamic personal finance, your reasons for doing so must be carefully considered.
Since the principal amount has to be paid along with a profit rate and the duration of payment is already fixed, the borrower feels less burdened providing an added incentive to purchase Islamic personal finance.
Moreover, Islamic banking is not confined to Muslims. Muslims as well as Non-Muslims, living in the UAE can enjoy benefits of the Shari’ah compliant form of banking.
Some options to consider
While looking for personal finance under Islamic banking, UAE residents have a wide range of options to choose from. The EIB Personal Finance for UAE Nationals offers salaried and self-employed individuals maximum finance amount of up to AED 3,000,000 and tenure of 4 years. Profit rate is as low as 3.20% and the minimum salary required is AED 5,000. Salary transfer is not mandatory and with all the relevant documents approval is granted within 24 hours.
Expats living in the UAE can benefit from the DIB Al Islami Salam Finance for Expats that allows them to access cash up to AED 1,000,000. Expats with a minimum salary of AED 3,000 per month are eligible for this loan. Similar to the EIB Personal Finance for UAE Nationals this offers 4 years of tenure too. Salary transfer not required if the borrower commands a salary between AED 6000 to AED 8000. After providing the bank with all the required documents, approval can be gained within 48 hours of application.
There are a number of Shari’ah compliant personal finance structures apart from these two in the UAE. Compare and choose the right one for you here.