UAE: Are you planning to get a salary advance? There may be more cost-effective options

Financial Planners

Dubai: It is widely recommended to save 20% of your monthly income for urgent needs. But what if the money you save doesn’t meet your immediate needs? So, to meet this urgent need, you can use your credit card or borrow from a friend to get immediate personal help. Would you like a loan?

“Most financial institutions offer instant personal loans for a minimum of 12 months. However, it is difficult to get an instant personal loan in the early stages of your career without high interest rates,” said a Dubai-based wealth adviser. says Mohammad Shaan of

Most financial institutions offer instant personal loans for a minimum of 12 months.But it’s hard to get an instant personal loan early in your career without high interest rates.

– Mohammad Shaan

“It is around this time that the concept of paying in advance against a salary has been gaining popularity for quite some time. Payroll advance apps also eliminate the tedious and lengthy paperwork associated with bank-approved loans. I did.”

Now that you have the simpler option of payroll prepayment loans, when should you choose payroll prepayment? And when is it better to take a personal loan? Let’s find out. But first, let’s understand its features.

What is a payroll advance? How does it work in the United Arab Emirates?

A payroll advance loan is a new age borrowing option for those who provide unsecured loans to salaried workers. This means borrowers take out small, short-term loans, often near the end of the month, and pay them back in low-interest installments to cover their expenses.

“Each bank in the United Arab Emirates has different terms, but in some cases you can take advantage of the scheme for up to 90 percent of your salary,” said Andrea Barber, a financial planner based in Abu Dhabi. “However, in most cases the minimum salary should be 5,000 dirhams for him.”

“Bank customers can apply for the scheme monthly, but not more than 12 times a year, and if they take the prepayment option, they must repay in full by the end of each month. There is a fee, the minimum charge is Dh300, but this varies from bank to bank in the UAE.”

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How are immediate personal loans different from payroll advances?

Payroll advance loans are short-term loans offered to payroll professionals. It can be used for everything from paying medical bills, covering large expenses, to other emergencies.

A personal loan is an amount borrowed for long-term financial needs, i.e., a debt that is repaid over a long period of time. Loans serve a variety of needs, such as investing in cars, housing, education, and more. On the other hand, immediate advances on salary are used for short-term financial needs.

This amount is deducted from the salary itself by the employer if it is utilized by the company. However, if the bank offers a salary advance loan, the maximum repayment will be one year for him.

“To authorize an immediate personal loan, banks will look at your credit score and financial profile. Interest rates may still be unfavorable,” Shahn added.

“However, payroll loans have very low interest rates. They are also great for cash-strapped people who want a quick loan for urgent expenses until their paycheck is credited.”

To approve an instant personal loan, the bank will look at your credit score and financial profile.Interest rates may not be good

– Mohammad Shaan

What are my other options for payroll prepayment loans?

Whether or not a salary advance is a good option, it’s not the only option. There are other ways to get money for unexpected expenses.

However, before choosing any of the means below, it is important to consider the interest involved and plan to pay off this debt as soon as possible. Other alternatives include:

• personal loans

A personal loan is a loan offered by a bank or other financial institution with a scheduled repayment date. The advantage of personal loans is their length of term. It may take years to pay off the money you borrowed.

Interest rates on personal loans also tend to be lower than credit cards. However, getting a personal loan usually has strict credit requirements. Also, many lenders require you to borrow at least a few thousand dirhams, so it’s not suitable for low sum requirements.

• credit card

Credit cards can be an amazing option to cover unexpected expenses. The benefits of credit cards depend on how smart you use them. For example, let’s say you have an available balance for unexpected expenses.

My salary is due next week, but my credit card is two weeks away. This means you have time to pay your expenses and pay off the balance with your next paycheck while avoiding high interest rate charges on your credit card.

Description image.

Image credit: Shutterstock

What are the risks I should be aware of before getting a salary advance?

However, a paycheck upfront isn’t always the most effective way to get cash quickly. Borrowing money from future paychecks has several disadvantages.

“Most of the advance pay is paid back on the next payday. No,” Barber warned.

Another key risk of prepaying salaries is that short-term loans can put you in a debt cycle.

“Salary advance loans are still a form of credit. So if one advance cannot cover all your financial needs, you will have to take advantage of another. We’re going to have to do that and the debt will continue,” Shahn explained.

How do I choose a salary prepayment plan?

If you decide to opt for payroll advance, salaried workers can take advantage of the payroll advance feature in one of the following ways:
• Log into your online banking and pre-submit your salary application.
• Use dedicated bank terminals
• Send SMS from your registered mobile number
・Application at ATM
• Visit a bank branch and submit a salary application in advance.

What else do I need to keep in mind when getting a salary advance?

“Consider your previous repayment history with the bank, why you’re requesting an advance payment, and how you expect to be able to repay the loan in the future,” Barber added.

“If you are unsure about any of these factors, please explore the alternative options above for obtaining the funds you need. If you can, please move on.”

So think about your overall financial situation before you start the process of requesting a payroll advance, financial planners reiterate.

“A payroll prepayment loan is a good alternative to a credit card if you need cash quickly,” added Shaan. “Before asking for an advance payment, you should understand the borrowing requirements, repayment terms and fees that may be incurred.

“This will help you decide if a payroll prepayment loan is right for your financial situation. But no matter how high the salary, keep that in mind.”

Image credit: Shutterstock

The Verdict: Are Payroll Advances Better Than Instant Personal Loans?

Salary loans are easier to process than personal loans, and the amount and interest rate can be set flexibly.

“Payroll prepayment loans are usually deducted from subsequent paychecks, making it easier to repay,” Barber said. “You don’t need to save extra money for the early repayment.”

“Getting a loan approved by a bank can take weeks or months and can be tedious with excessive paperwork. Loans require more paperwork. Yes, it will take time.”

Also, it may take 7-15 business days for your bank to approve your personal loan and transfer the amount. “However, since the entire process is handled online, advance payments against salaries do not require a lot of time or paperwork,” he added.

“Salary loans are also a quicker option because they don’t go through intermediaries.

The latter is more favorable than the former when it comes to personal loans against salary advances if your ability to take on more debt is unaffected.

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