Buying a second-hand car in Dubai, especially with a loan, can be very beneficial for your financial stability. Obviously, you can spend that money on something else that won’t become a liability. However, if you take the loan from a lender with complicated terms (especially hidden ones), it can seriously harm both your mental and financial well-being. That’s why we did some research and interviewed people in our network who have taken advantage of second-hand car loans. Based on these interviews and reviews, we’ve compiled a list of banks that offer second-hand car loans in UAE or Dubai.
Understanding Second-Hand/ Pre Owned Car Loan In the UAE
Second-hand car loans are simply loans you take out to buy a used car. Instead of paying the full price upfront, you can spread the cost over time with monthly payments. This makes owning a car more affordable, especially if you’re working with a tight budget.
Opting for a second-hand car loan has several benefits. First, used cars are generally cheaper than new ones, so your loan amount will be smaller. This means lower monthly payments and less interest over time.
Plus, you avoid the steep depreciation that new cars experience. With a second-hand car loan, you can also preserve your savings for other needs or emergencies. However, it’s important to note that some loans may have an early settlement fee, which is a charge for paying off the loan before the agreed term ends. This fee can vary between lenders, so be sure to check the terms of your loan agreement.
When considering an auto loan, there are a few key terms to understand:
- APR (Annual Percentage Rate): This is the interest rate you’ll pay on your loan, shown as a yearly percentage. A lower APR means you’ll pay less interest over the life of the loan.
- Down Payment: This is the amount you pay upfront when you buy the car. A larger down payment can reduce your loan amount and monthly payments.
- Loan Term: This is the length of time you have to repay the loan. Common terms are 36, 48, or 60 months. A longer-term means lower monthly payments but more interest paid over time.
Also, Check: A Guide to Getting a Loan without a Job In Dubai
Best Second-Hand Car Loans Banks In The UAE
| Feature | Emirates Islamic Bank | Dubai Islamic Bank | Abu Dhabi Commercial Bank (ADCB) | RAK Bank |
|---|---|---|---|---|
| Interest Rate (%) | 3.19% p.a. (flat), 5.98% p.a. (reducing) | 0.75% p.a. (flat), 5.19% p.a. (reducing) | 1.99% p.a. (fixed), 3.65% p.a. (reducing) | 2.85% – 3.55% p.a. |
| Loan Tenure (Months) | Up to 60 months | Up to 60 months | Up to 60 months | Up to 60 months |
| Down Payment | 20% AED | 20% AED | 20% AED | 20% AED |
| Max Loan Amount | 1.5 million | 80% of car value | 1.5 million | 500,000 |
| Key Features | No salary transfer required, minimum monthly salary, 60 days grace period, minimal documentation. | Very low flat rate, long loan tenure. | Low fixed rate, high loan amount. | No minimum salary requirement, transfer required, competitive rates, easy process. |
Second-hand car loans are a practical solution for purchasing a used car without paying the entire amount upfront. Here are some easy second-hand car financing and loan options in Dubai.
1. Emirates Islamic Bank
Features and Benefits:
- Loan Amount: Up to AED 1.5 million
- Interest Rates: 3.19% p.a. (flat), 5.98% p.a. (reducing)
- Flexible Tenure: Up to 60 months
- Grace Period: 60 days for the first installment
- No Salary Transfer Required: Simplifies the process for applicants
Cons:
- Requires comprehensive Islamic vehicle insurance
- Processing fees apply
I found the process straightforward, and the terms were very flexible. The customer service was excellent! – Sarah A.
2. Dubai Islamic Bank (DIB)
Features and Benefits:
- Interest Rates: 0.75% p.a. (flat) or 5.19% p.a. (reducing)
- Loan Tenure: Up to 60 months
- Maximum Financing: Up to 80% of the car’s value
Cons:
- Higher reducing rate
- A higher down payment may be required
Dubai Islamic Bank offered me the best rate, and their service was exceptional. Highly recommended! – Ahmed K.
3. Abu Dhabi Commercial Bank (ADCB)
Features and Benefits:
- Interest Rates: From 1.99% p.a. (fixed) to 3.65% p.a. (reducing)
- Loan Amount: Up to AED 1.5 million
- Tenure: Up to 60 months
Cons:
- Interest rate may increase with reduced terms
- Requires good credit score
ADCB’s loan was perfect for me. The low fixed rate helped me manage my finances better.– Fatima M.
4. RAK Bank
Features and Benefits:
- Interest Rates: 2.85% to 3.55% for salaried customers
- Loan Amount: Up to AED 500,000
- Tenure: Up to 60 months
- Down Payment: 20%
- No Salary Transfer Required
Cons:
- Higher rates for self-employed customers
- Comprehensive insurance required
RAK Bank made it easy to get a loan for my car. The car loan interest rates were good, and the process was quick. – Mohammed S.
Key Factors to Consider Before Getting Second-Hand Car Loans In UAE
When considering getting a second-hand car loan in Dubai, it’s important to ensure that the bank or loan provider meets your needs. Here are some key factors to consider:
Flexible Financing Options
Everyone’s financial situation is different. Some people might want to make loan repayments on their loans quickly, while others need more time. A good loan provider will offer various options to suit different budgets and preferences.
Check if the lender offers multiple repayment plans, allowing the same bank and you to choose the one that best fits your financial situation.
Ability to Finance Direct Purchases from Owners
Buying a car directly from the owner is often cheaper than going through a dealer. Some banks make it easy to get a loan for these direct purchases.
Ensure the lender supports loans for cars bought directly from private sellers, not just dealerships.
Competitive Interest Rates
Lower interest rates on auto loans mean you pay less money on a principal loan overall. This makes the loan more affordable and saves you money in the long run.
Compare the interest rates offered by different lenders. A lower rate is more affordable, and interest rates are generally better.
Transparent Loan Terms and Conditions
Clear and straightforward loan terms help you understand exactly what you’re agreeing to. This builds trust and prevents surprises later on.
Look for lenders that provide easy-to-understand loan documents and explain all the terms clearly.
Quick Approval Process
No one likes waiting around for maximum car loan amount approval. A fast approval process means you can get your car sooner and with car loan interest rate and less hassle.
Find out how long the approval process takes. A quicker process is more convenient.
Acceptance of Older Vehicle Models
Not all banks finance older cars. If you want to buy an older model car finance it, make sure the lender is willing to finance it.
Check if the lender has restrictions on the age of the car they will finance.
Minimal Documentation Requirements
Simplifying the documentation process reduces hassle and speeds up loan approval, making the whole process smoother for you.
Look for lenders requiring fewer documents and a straightforward application process.
Financing Available for Both Expatriates and Locals
Dubai has a diverse population, including many expatriates. A lender that offers financing to both locals and expatriates is more inclusive and caters to a wider audience.
Ensure the lender provides loan options for expatriates as well as locals.
Efficient Customer Service and Support
Good customer service can make a big difference. Helpful and responsive support ensures you have a smooth experience from application to the loan repayment.
Look for lenders with positive customer service reviews and readily available support channels.
By considering these factors, you can make sure you choose a second-hand car loan provider that meets your needs and provides a smooth, affordable, and convenient borrowing experience.
Steps to Securing Second-Hand Car Loans In UAE/Dubai
If you’re looking to buy a new or used car here in Dubai and need a bank car loan, it’s important to ensure the bank or loan provider suits your needs. Here are the steps you should follow:
1. Check Eligibility
Different banks have different requirements for loans. Make sure you meet the basic criteria before applying. Check the minimum salary requirements, which typically range from AED 3,000 to AED 5,000 to 7,000 per month. Ensure you have a stable job and a good credit history.
2. Gather Necessary Documents
Having all your documents ready can speed up the loan approval process.
What to Prepare:
- Passport Copy with Visa Page
- UAE Driving License
- Emirates ID Card
- Salary Certificate Addressed to the Bank
- Bank Statements for the Last Three Months
- Down Payment (usually 20% of the car’s value)
3. Choose Your Car
Knowing the car you want helps you get the car loan amount, details, and approval faster. Find a car that fits your budget. You can buy from dealerships or directly from car owners, too. Ensure the car is in good condition and has a valuation certificate if buying from an owner.
4. Apply for the Loan
- Choose Your Bank: Compare interest rates and terms from banks like Dubai Islamic Bank and First Abu Dhabi Bank (FAB).
- Fill Out the Application: Complete the loan application form, which is available online or at the bank.
- Submit Required Documents: Ensure you have all necessary documents ready (see next section).
5. Wait for Approval
Knowing how long the approval takes can help you plan better. Most banks take 4 to 7 days to process the loan application, but some offer quick approvals in as little as 4 hours.
6. Review Loan Terms
Understanding the terms helps avoid surprises later on.
What to Look For:
- Interest Rates: Compare flat and reducing rates.
- Loan Tenure: Typically up to 60 months.
- Monthly Payments: Ensure they fit within your budget.
7. Complete the Purchase
Finalizing the purchase correctly ensures a smooth ownership transfer. Once the outstanding loan amount is approved, the bank will issue a cheque to the new car owner. Complete the registration and transfer of ownership at the RTA (Roads and Transport Authority).
Can You Get a Car Loan When Buying Directly from an Owner?
Yes, getting a car loan is possible even if you buy directly from an owner and not through a dealership. However, the process might involve a few additional steps:
1. Verification of the Car: The bank may require an inspection and valuation of the car to ensure it meets its financing criteria.
2. Documentation: Ensure that all necessary documents, including the car’s registration and proof of ownership, are in order. You will need to provide these to the bank.
3. Transfer of Ownership: Once the loan is approved and disbursed, the ownership of the car will be transferred to you, and the bank will hold the car’s title as collateral until the loan is repaid.
FAQs
What is the difference between flat and reducing interest rates?
Flat rates are calculated on the entire principal amount of the loan, whereas reducing rates are calculated on the last remaining loan balance, meaning you pay less interest over time as the principal of outstanding loan decreases.
Can expatriates apply for second-hand car loans in UAE?
Yes, many banks in Dubai offer car loans to expatriates. Make sure to check specific eligibility requirements with banks like Dubai Islamic Bank.
What is the typical loan tenure for second-hand new and used cars now?
Loan tenures for second-hand cars can range from 1 to 5 years, depending on the age of the car and the lender’s policies. For example, an existing loan for a 10-year-old car might have a maximum loan tenure of 2 years.
Do I need to take out insurance for my car loan?
Yes, insurance is typically required when taking out a car loan. Some auto and loan providers and providers include insurance in their packages, but it’s advisable to check and ensure you have adequate coverage.
I’m Bander, a financial analyst focusing on the Middle East markets. I simplify tricky financial ideas into practical tips. I love helping you understand your money better, so you can make smart choices that fit your own situation.