The credit score is a marker that allows a financial institution to ensure you are eligible to opt for a loan. Credit reports verify your reliability in paying off debt on time.
If you are looking to apply for a student loan in India, the minimum CIBIL score required is 685. However, a few Indian financial institutions might accept credit card applications for a CIBIL score of less than 685 but not for a student loan.
Taking an education loan is a great opportunity for students to pay off their education debts without depending on their families. Opting for these loans also helps students to build a robust credit history and profile, which helps them to get cheaper loans in the future.
Wondering how to get a student loan in the UAE? As you know that credit score is a significant criterion for loan eligibility. This article will help you understand the ideal credit score needed for a student to apply for a loan in UAE and how a student loan affects one’s credit score.
Why Do You Need an Education Loan in the UAE?
Let us start with a piece of information from research done by HSBC recently published in Gulf News, “Education cost, including tuition fees in the UAE, is proportional to nearly half of the gross domestic product per capita. UAE surpasses advanced economies such as Canada, Singapore, Japan, and Germany in terms of combined education and live-in expenses. UAE is among the top five most expensive countries to study and stay in.”
Within the UAE, education expenses vary according to emirates. Dubai is the most expensive place to pursue higher education, with tuition fees ranging from AED 37,500 to AED 70,000 per annum for undergraduate programs and AED 55,000 to AED 75,000 per annum for Post Graduate programs. In addition, you should also consider an extra AED 1200 for living expenses in the city.
In the UAE, some universities charge students annually for taking 12 to 16 credit hours. Above that, you need to pay per credit hour. To help out with all these educational expenses, universities offer scholarship programs and student loans. Banks and financial institutions also provide attractive student loans with easy repayment options.
Therefore, financial consideration is the core reason people consider education loans in the UAE. While applying for a student loan for yourself or your child, financial institutions consider your credit score, a report card of your financial activities, spending behavior, existing liabilities, etc., based on which your loan approval application is approved.
Importance of Good Credit Scores for Student Loans in the UAE
- Minimum credit score for loan in UAE is above 700.
- A good credit score will help lenders feel confident about borrowers’ repayment capacity.
- A credit score reflects your financial transactions, spending patterns, existing debts, etc.
- It also shows a desirable debt-to-income ratio. In the UAE, your monthly loan payments should not exceed 43 percent of your income. Monthly loans include student loans, car loans, personal loans, etc.
- A desirable loan-to-income ratio and a decent financial track record ensure the most promising student loan offers.
- In addition to helping your child get a student loan, a good credit score helps you get other loans in the future. Therefore, it is highly advisable to always maintain a healthy credit score.
How to Improve Credit Score in UAE?
Let’s get to learn how to improve credit score in UAE:
- Maintain and schedule payments for utility, credit card, and other loan installments. Avoid partial payments and always pay in full.
- No dues in payment improve your credit score.
- Do not defer payments or improper funds while sending checks for clearance. Bounced checks attract penalties and lead to poor credit scores.
- Avoid too many hard credit inquiries; if necessary, make soft inquiries.
- Keep yourself updated about your credit score and maintain above 700 for a better loan quotation and approval for a loan amount seamlessly.
Factors that Affect Credit Scores in the UAE
The credit score holds the utmost importance, specifically when you want to apply for a loan. It is a tool to measure your creditworthiness. Remember, the eligibility for all loans, credit cards, and other products is solely based on your credit score. You won’t be able to get any loans if you have a bad credit score.
Therefore, it is imperative to know whether student loans affect credit scores. Let’s check out all factors responsible for affecting credit scores in UAE:
1. Bill Payment History
You might be glad to know that timely payments of your bills will decide 35% to 40% of your credit score. So, once you opt for a loan, try not to miss out on a monthly payment, as it could negatively impact your credit score.
2. Credit Usage
All financial institutions determine the credit score before lending money to a borrower. The debt you carry is measured by the credit utilization ratio, implying the lower your credit utilization ratio, the better your credit score is.
Credit utilization determines 30% of your credit score. You can maintain a healthy credit utilization ratio by using fewer credits or increasing your credit limit.
3. Age of the Credit History
The age of the credit history also plays a pivotal role, contributing between 15% and 20% to the credit score. The period decides how old your credit score account is. The older the credit account, the better.
4. Types of Credit
The type of credit you have opted for controls the credit score, including installment loans, credit cards, store accounts, or mortgages. Having any of these types of credit in your credit score will improve your credit history, signifying that you have vast experience managing credit without any fail in payments. This factor adds up to 10% of your credit score.
5. New Credit Applications
Credit inquiries and new applications make up 10% of your credit score. Every time you apply for a loan, an application for a credit check is sent to your credit file. These inquiries may reflect badly on your credit profile if you do not get approved during the hard pull, as those inquiries will cost you some points from your credit score.
How Do Student Loans Affect Credit Scores?
A good credit score ensures hassle-free and faster loan approval and processing. Conversely, a student loan also significantly impacts the credit report. Suppose you took a student loan of AED 20,000 with a fixed equated monthly installment, interest rate, and loan tenure; there could be two repercussions:
If you fail to pay a couple of installments or some of your check/s get bounced, it will impact your credit score adversely. Your credit score and the possibility of getting loans in the future will go southwards.
You continue to pay equated monthly installments and finish the due loan amount as per scheduled dates and timelines. It will boost your credit score and improve your chances for future loan approval. In addition, with timely loan closure, banks and financial institutions can provide you with higher loan amounts.
Elements in Public Records That Impact Credit Score
You must know about all crucial elements that may affect your credit score. So, make sure all these aspects are taken care of to maintain a good credit score:
- Debt Settlements
- Liens
- Cases and Judgement Against You
- Lawsuits
- Foreclosure
- Bankruptcies
- Charge offs
What is a Good Credit Score in UAE?- Credit Score Categories
So, what is a good credit score in UAE? This table will brief you about all the categories
| Credit Score | Categories |
| Score of 300 to 619 | Poor |
| Score of 620 to 679 | Fair |
| Score of 680 to 730 | Good |
| Score Above 730 | Excellent |
Now, let us look at student loan eligibility, documents, and leading student loan providers in the UAE in 2023.
Eligibility Criteria for Student Loan Application in the UAE
You must fulfill the below eligibility criteria to apply for a student loan for your child in the UAE:
- Be a National resident of The United Arab Emirates.
- The applicant must be a minimum of 21 and a maximum of 65 years old.
- The applicant must earn a minimum monthly salary ranging between AED 7000 to AED 10,000. However, some banks and financial institutions might vary in salary range.
Leading Banks for Student Loans in the United Arab Emirates
- Mashreq Bank
- Abu Dhabi Commercial Bank (ADCB)
- HSBC
- Emirates NBD
- RAK Bank
- Abu Dhabi Islamic Bank
- Barclays
- Dubai Islamic Bank
- Sharjah Islamic Bank
- National Bank of Abu Dhabi
Scholarships and Education Loans from Universities
The United Arab Emirates hosts several national and international universities, out of which several offer education loans and scholarships to help students in advanced studies.
Middlesex University provides education loans. Abu Dhabi University, American University in the Emirates, and United Arab Emirates University offer financial aid and loans.
Check the institution’s policies regarding loans/scholarships/financial aid.
Documents Required for Student Loan Application in UAE
- Residence visa and passport (original and copy) for ex-pats.
- Bank account summary of the previous three to six months.
- A loan quotation addressed to the bank from your educational institution.
- An identity card or enrolment card from the respective university.
- Security check documents against the loan amount.
Student Loan Offers from Leading Banks of the United Arab Emirates
Let’s dive in to know the most renowned banks in UAE that can offer you student loans:
1. Mashreq Education Loan from Mashreq Bank
- Mashreq Bank offers education loans in partnership with Murdoch University.
- It is available for all students or parents of students with an income of AED 7000 or more.
- The maximum loan amount threshold for application is AED 5,00,000.
- Mashreq Bank transfers the education loan amount directly to the university account. It covers your tuition fees, and the process is fast and hassle-free.
2. National Bank of Abu Dhabi
- The National Bank of Abu Dhabi offers a dedicated bank account for students and provides personal loans to cover their financial requirements.
- The minimum age should be 18, and the maximum is 24 to apply for a loan.
- If you are below 21, the bank will request your guardian’s consent before processing your application.
- The minimum salary requirement is AED 3000, and the maximum loan amount is AED 250000.
- You can study at any university across the UAE with this loan amount.
3. Abu Dhabi Islamic Bank
- Education finance loans are customized for primary, secondary, and university education.
- The minimum age to be eligible for the loan is 21, and the minimum salary should be AED 8,000.
- This loan product from Abu Dhabi Islamic Bank covers complete education such as books, school elements, transportation, library fees, tuition fees, and so on.
- It is tailored for families seeking to provide a bright future for their kids.
- The maximum loan amount is AED 2,50,000 with a repayment tenure of 48 months.
4. RAK Bank
- RAK Bank offers education loans with interest rates starting at 4.99 percent.
- The maximum loan amount for application is AED 3,00,000, and a loan repayment tenure of up to 48 months.
- Dual currency prepaid card.
- The minimum salary should be AED 10,000.
- Bank provides a free credit card for the student or applicants. If a student is above 15 years, they can avail of a supplementary card.
5. HSBC Bank
- Loan tenure is up to 48 months, and interest rates start from 5.99 percent per annum.
- HSBC offers a top-up loan facility, and applicants need to have a current account with the bank.
- The minimum salary requirement is AED 7500 with a mandatory condition of salary transfer into the bank account.
To Sum Up
This detailed guide will help you in the application and approval process to opt for a student loan in the UAE. If your child meets the student loan eligibility criteria and maintains a minimum credit score for loan in UAE, getting their application approved shouldn’t be a problem!
FAQs
1. Do student loans affect credit scores?
Yes, it does. Scheduled equated monthly installments and timely loan repayment improve your credit score. In case of defaults, delays, bounced checks, etc., you will experience an adverse impact on your credit score.
2. Can ex-pats apply for education loans in the United Arab Emirates?
Yes, ex-pats can apply for education loans and pursue their higher education in the country.
3. What are the leading banks that offer education loans for international students in the UAE?
Several banks and financial institutions offer attractive education loans for ex-pats and citizens of the United Arab Emirates. The top ten lenders are HSBC, Barclays, Mashreq Bank, Abu Dhabi Commercial Bank, RAK Bank, Dubai Islamic Bank, Emirates NBD, Sharjah Islamic Bank, National Bank of Abu Dhabi, and Abu Dhabi Islamic Bank.
4. What’s the minimum credit score for loan in UAE?
While 580 is considered the low range credit score in UAE, some banks still accept the application for personal loans. However, to apply for a student loan, financial institutions usually look for a healthy credit score of 700 or above.
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