Personal loans are the most popular form of short-term credit that is available for people in the UAE. However, not a lot of people know

How personal loan is calculated in UAE.

how personal loan is calculated

how personal loan is calculated


Read the article to find out!

Introduction to personal loans

Personal loans are often unsecured loans that are issued to people without any collateral or guarantor. These loans are given to people to help them achieve their personal financial needs at different times in their life. For some, a personal loan might be required to renovate a property, pay off their credit card debt and/or meet higher education goals. Personal loans might also come in handy when a person wants to travel internationally but lacks the funds to do so at the present moment.

Usually, the amount that is issued to an individual through their bank or financial institution is around 20 times their monthly salary in the UAE. This amount that is given to the individual must be repaid in a time period of around 48 months. The personal loans interest rate in the UAE and the personal loan amount that is given to the individual depends on a variety of other factors. Some of these factors may include the source of income, credit history, employment status of the individual, previous history with debt, assets, job security, etc. It is after evaluating all of these and other factors that banks and/or financial institutions decide the amount that is to be issued to the individual and the rate of interest that has to be levied on the personal loan.

What is a personal loan interest? 

Personal loan interest in the UAE is an additional amount that is often levied on individuals who have gotten themselves a personal loan. When they get their principal, they are given two options. These options for personal loan interest might differ from bank to bank and financial institution to financial institution:

  • Flat interest – The interest rate remains constant and the total loan amount (inclusive of the interest) remains constant throughout the timing of the loan
  • Reducing interest – Reducing interest is an interest rate that keeps on decreasing each time the individual makes a payment or funds an instalment. Hence, the more the individual keeps on paying towards the personal loan, the less interest they have to pay in the end.

How is Interest Calculated on a Personal Loan?

Your personal loan interest rate depends on the bank’s product offers, but major banks have a range of interest rates and its calculated based on the below factors ;

  • salary,
  • employer company,
  • credit score,
  • repayment history,
  • monthly income,
  • the amount being borrowed, and others.

Lenders usually prefer applicants viewed as low credit risk with high credit scores – those who have repaid their previous loans and bills on time

How a Personal Loan EMI is calculated?

Personal Loan EMI, (Equated Monthly Instalment) consists of the principal portion of the loan amount and the interest. Therefore,

Loan EMI = principal amount + interest paid on the personal loan.


Mathematically, EMI is calculated as under:


P = Principal amount of the loan

R = Rate of interest

N = Number of monthly instalments.

If you are applying for a personal loan in UAE, Use MoneyMall Loan EMI calculator for easy calculation.

How is the loan repayment period calculated in personal loans?

Have you ever wondered how the loan repayment period will be calculated if you get a personal loan for yourself? If not, here we are with some amazing information!

Personal loans can be classified into two categories depending on their loan repayment period: short and medium-term. Personal loan periods usually vary from 6 months to a maximum of 48 months in most of the cases. Usually, individuals who are new to the world of loans and credit get loans for a shorter period of time. Since the principal remains the same in both the cases, individuals who opt for a shorter repayment period have to pay larger instalments. However, people who opt for longer repayment times have to pay smaller instalments for a long time.

The loan repayment period also has an impact on the interest rate that is charged by the person taking the loan. Hence, depending on different banks and financial institutions, the interest rates for personal loans may vary from 8% to 34% in the United Arab Emirates.


Hence, this is all you have to know about the calculation of the loan repayment period for personal loans in the United Arab Emirates. However, we do have some advice. Before you get yourself a personal loan, make sure you have researched well and conducted a careful study of the market to find out which option suits you best. Good luck!