How to use the calculator
- Enter the loan amount in AED and the annual rate from the lender's quote.
- Choose whether the rate is flat or reducing. The quote and the Key Facts Statement say which one it is.
- Set the term in months. Add your monthly salary if you want to check the loan against the limit of 20 times salary for personal loans.
The result updates as you type. Open the year-by-year balance to see how much of each year's payments goes to interest and how much is left to repay.
How the instalment is worked out
Flat rate
A flat rate charges interest on the full loan amount for the whole term, even though you repay part of the loan every month.
Interest = loan × annual rate × months ÷ 12
Instalment = (loan + interest) ÷ months
Reducing rate
A reducing rate charges interest each month only on the balance you still owe, so the interest part of each instalment shrinks and the repayment part grows.
Instalment = P × i ÷ (1 − (1 + i)−n)
P is the loan, i is the annual rate divided by 12 and n is the number of months. At a rate of 0% the instalment is the loan divided by the number of months.
For a flat-rate loan the calculator also shows the equivalent reducing rate: the reducing rate that gives the same instalment. It is the fairer figure for comparing offers, and a bank that advertises a flat rate has to show it. The difference is explained in flat vs reducing rates explained.
Flat rates come with the effective rate
Effective rate shown
Any bank advertising a flat interest rate must show the equivalent effective (reducing-balance) rate next to it.
- Applies to
- Banks and finance companies licensed by the CBUAE (conventional and Islamic), lending to individuals
- Source
- CBUAE Regulation No. 29/2011 Regarding Bank Loans & Other Services Offered to Individual Customers, Article (6) Interest, Central Bank of the UAE
- Checked
The Central Bank's clarifications also say that interest on personal and car loans is calculated on the reducing balance over a 365-day year. The calculator uses twelve equal months, so a bank's figure can differ by a few dirhams.
Worked example
Worked example
AED 100,000 over 48 months at 5%, flat and reducing
The loan amount and the 5% rate are illustrations, not market rates.
- Flat: interest = 100,000 × 5% × 48 ÷ 12 = AED 20,000. Instalment = (100,000 + 20,000) ÷ 48 = AED 2,500.00.
- Reducing: i = 5% ÷ 12 = 0.4167% a month. Instalment = AED 2,302.93, total interest AED 10,540.61.
- The flat loan's equivalent reducing rate is 9.24%.
At the same headline rate of 5%, the flat loan costs AED 197.07 more a month and AED 9,459.39 more in total.
UAE limits that apply
The Central Bank caps how long a personal loan or a car loan can run. The calculator flags a term above either limit.
Longest personal loan
48 months
The repayment period of a personal loan must not exceed 48 months.
- Applies to
- Banks and finance companies licensed by the CBUAE (conventional and Islamic), lending to individuals
- Source
- CBUAE Regulation No. 29/2011 Regarding Bank Loans & Other Services Offered to Individual Customers, Article (2) Personal Loan, Central Bank of the UAE
- Checked
Longest car loan
60 months
The maximum repayment period of a car loan is 60 months.
- Applies to
- Banks and finance companies licensed by the CBUAE (conventional and Islamic), lending to individuals; private cars
- Source
- CBUAE Regulation No. 29/2011 Regarding Bank Loans & Other Services Offered to Individual Customers, Article (3) Car Loan, Central Bank of the UAE
- Checked
Two more rules decide how much you can borrow. A personal loan cannot be more than 20 times your monthly salary or total income, and all your monthly repayments to banks and finance companies together must stay within 50% of your gross income: the debt burden ratio. For the wider rules see personal loans without salary transfer, car loan rules and used car loans.
What the result does not include
The result covers interest only. Processing fees, insurance and other charges are not in it. Lenders must disclose the annual percentage rate (APR), which includes the interest and other fees over a year, and give you a Key Facts Statement before you sign.
Tip
Compare offers on the APR in each Key Facts Statement, not on the headline rate. Two loans with the same rate can cost different amounts once fees are added.