Best age to apply for a loan: Can I be refused a loan because of my age?
Dubai: Financial contingencies can arise at any time, and to arrange finance quickly and quickly, people often resort to loans.
With the increased progress made by banks in the loan application and approval processes, the loan amount usually only takes 2-7 days to reach you. However, you must meet certain eligibility standards to be eligible for the loan.
Some important factors that determine your eligibility for a personal loan are your credit rating, your monthly income, job stability, age and finally, the age limit required for the loan you are applying for.
How does age affect your loan eligibility?
It can be said that there is an inverse relationship between the age limit of a loan and loan eligibility. The younger you are, the more likely you are to go through the loan approval process smoothly.
However, this may not always be true. Letâs look at three aspects of a personal loan where the age of the applicant plays an important role.
â¢ Relationship between age and loan duration
For short-term loans, the term typically varies from a minimum year to a maximum of 5 years, or even more. A younger candidate is considered to have more employment and income opportunities compared to an older candidate.
Therefore, if you are in your twenties, you are more eligible for a longer term loan than someone in your fifties. Likewise, the loan term can also be extended in the case of a younger applicant.
â¢ Relationship between age and loan amount
Just like seniority, the loan amount approved is also based on the age factor. A younger candidate with a similar profile may get a higher loan amount than an older candidate.
â¢ Relationship between age and interest rate
The age of the applicant has an indirect impact on the interest rate offered by the lender. The interest rate offered depends on a few essential factors like credit score, income etc.
A very young candidate may not have a good income as he or she may be new to a job or may not have a good credit rating due to a lack of credit history which can have a negative impact on the interest rate offered.
On the flip side, those with 5-10 years of professional experience are known to have well-established credit histories which can work in their favor when negotiating interest rates.
Time to check your loan eligibility?
It is important to choose a loan at a reasonable rate of interest. However, it should also be ensured that you fully meet all the eligibility criteria of the respective financial institutions in order to avoid untoward inconvenience afterwards. So, before you embark on a loan, check all the eligibility conditions.
What age is best to apply for a loan?
When it comes to buying a home or a car, most people don’t really have the luxury of owning a home or vehicle with a full down payment.
The loan must be repaid over a period of time; usually within 5 years for a car loan and within 20 years for a house (or more, depending on the lender), in which you have to pay monthly payments. As such, it is a good idea to go for the loan when you are employed.
The right time to buy the house or a car actually depends on the individual buyer; when it is comfortable with supporting the expenses of the loan.
Generally, it is best to go for the long term loan when you are in your mid-twenties or early thirties, as this is the time when you are well employed and able to pay monthly installments from. of your monthly income.
Plus, you are able to complete your loan repayment before quarantine, and you can think about buying a second property, car, or investing in retirement, if you want.
That being said, you can also take out a loan later in life, when you feel you have saved enough to make a larger down payment and pay lower interest rates. Lenders usually set different age limits for loans; from age 24 until borrowers in their fifties.
Why do your chances of getting a loan decrease with age?
However, data from UAE banks showed that around 50 percent of its borrowers are in the 30-40 age bracket, nearly 30 percent are in the 40-50 group, and nearly 20 percent are in the 40-50 age group. one hundred are over 50 years old.
These figures suggest that there is a certain market for older borrowers in the UAE, but younger loan seekers are often favored over older ones when it comes to loan terms and risk to the lender.
For example, a mortgage is a long term loan that often extends up to 25 years. Unlike shorter loans with terms such as three or five years, a mortgage taken out later in life may have a real chance of continuing past retirement and a regular salary – an increased risk for the lending institution.
Previously, the UAE Central Bank imposed an age limit for the last repayment: 65 years for employees of a company and 70 years for the self-employed. However, the cap no longer applies since 2018 in the United Arab Emirates.
That meant any employee looking for a 25-year mortgage had until their fortieth birthday to get the financing. Getting a mortgage after 40 years meant considering shorter-term loans, increasing the cost of each monthly repayment, and having a significant impact on any affordability controls.
Why is age an important eligibility criterion for obtaining a loan?
Although the loan repayment tenure differs, an applicant who is at his young age has the option to select the repayment term, but things are not the same with the older applicant since banks or lenders become mindful of the repayment terms. applicants who are in their advanced years.
In such situations, the only possible option left is to increase their monthly payments (EMI). However, an increase in IMEs can be difficult to manage, especially when you have a fixed source of income or when you have many responsibilities.
A younger applicant will have more time to repay their loan while an older applicant will have less time to repay the funding. The reason behind this is very simple and straightforward.
A borrower in their twenties or thirties has enough time to earn more than a borrower in their fifties. In addition, lenders tend to believe that the income of the young candidate will continue to increase in the years to come, and therefore are ready to grant a young candidate an extension of his financial tenure.
Although the former applicant may not get an extension of the repayment term of his finances, as he is approaching his retirement age and the chances of increasing his income are very low (in the case of salaried persons) .
Also, the loan amount of a younger applicant is usually not high. That said, they might want to borrow money to finance a trip abroad, make a down payment for their vehicle, take it for a medical emergency, or to buy something expensive.
However, the priority of older applicants changes, they take it for their children’s marriage, setting up a new business, or making a down payment on their home loan, etc. This is why the lenders become very careful with the older applicant as the risks are high with the older applicants.
Key points to remember
1. Age is one of the most important factors in taking out consumer credit in UAE as lenders take this factor into account when checking your repayment capacity.
2. If the repayment period of a loan or bank facility extends to retirement age, in accordance with the standards of the UAE Central Bank, banks and financial companies must reschedule reducing these loans or financing facilities so as to allow a deduction of only 30 per cent from post-retirement income or retirement salary.
3. Now, when you finally decide to opt for the loan, do not focus only on the interest rate of the loan but also check that your age is in your favor or if it is a hindrance to your loan application. .