Loan agreement in the UAE: Template, Key Clauses and Local Law (2026)

What a loan agreement is in the UAE A loan agreement records that one party lends money to another and sets out how and when it is repaid. In the United Arab Emirates the hard part is not the structure but the interest. Interest is bound up with the prohibition of riba in the Civil Code, and the rules differ depending on whether the loan is commercial, between individuals, or involves an Islamic financial institution. Get the interest clause wrong and a UAE court may strike it out even if both sides agreed to it. A written loan agreement is still worth having for any amount that matters. It proves the sum, the repayment dates, the security and what happens on default, and it turns a private understanding into something a court can read. This page is general information, not legal advice. UAE rules on interest and riba are nuanced and have been updated recently, so confirm the live position with a UAE lawyer before relying on any interest clause. ## What UAE law requires on interest - Commercial loans can carry interest, within limits. Under the Commercial Transactions Law (Federal Decree-Law No. 50 of 2022), parties to a commercial transaction may agree an interest rate. Where no rate is agreed, commentary reports the statutory fallback cap was lowered from 12 percent to 9 percent per year. In practice some onshore courts have applied a lower default rate, so the agreed contractual rate is what you should rely on.

• No compound interest. The law does not allow a creditor to claim interest on interest, so avoid any compounding mechanic.
• The riba principle for ordinary loans. The Civil Code treats a loan term that gives the lender a benefit beyond repayment of the principal with suspicion. For non commercial loans between individuals, an interest clause can be vulnerable, so a simple personal loan is safest structured without interest, or with a clearly commercial character if interest is intended.
• Islamic financial institutions. Article 473 of the Commercial Transactions Law prohibits an Islamic financial institution from charging or paying interest or benefit, including delay interest. Recent court rulings have applied this broadly. Conventional lenders are treated differently from Islamic ones. The safe reading: if you want enforceable interest, make the loan clearly commercial, state the rate expressly, do not compound, and keep the rate reasonable. For a simple favour between individuals, consider a zero interest loan with a clear repayment schedule. ## The clauses that differ in the UAE - Interest and riba. State the rate and that it is simple, not compound. For a personal loan, think hard about whether to charge interest at all.
• Currency. UAE loans are often in dirhams. If in another currency, say how conversion and exchange risk are handled.
• Security. A post dated cheque or a promissory note is commonly taken as security, though enforcement practice has tightened, so do not rely on a cheque alone.
• Language and governing law. Arabic prevails in UAE courts. State the controlling language and whether the onshore courts or a financial free zone forum apply. ## A UAE loan agreement template you can adapt ``` LOAN AGREEMENT Date: [date] Lender: [full name / company, licence or ID, address] Borrower: [full name / company, licence or ID, address] 1. LOAN The Lender lends the Borrower [amount in figures and words] (the "Loan") in [currency]. This is a [commercial / personal] loan. 2. PURPOSE The Loan is for [purpose], and the Borrower will not use it for any other purpose without the Lender's written consent. 3. INTEREST [Option A - no interest: The Loan carries no interest.] [Option B - commercial loan: The Loan carries simple interest at [rate]% per year on the outstanding principal, not compounded, calculated from [date] until repaid in full.] 4. REPAYMENT The Borrower repays by [lump sum on [date]] / [[number] instalments of [amount] on the [day] of each month from [date]]. Payments go to [account details]. 5. EARLY REPAYMENT The Borrower may repay early [without penalty / with [terms]]. Early repayment reduces interest accrued after the repayment date. 6. SECURITY The Loan is secured by [promissory note / guarantee / none]. [Describe the security and how it is enforced.] 7. DEFAULT If the Borrower misses a payment by [number] days or becomes insolvent, the whole outstanding balance becomes due. [State any default interest within legal limits.] 8. COSTS Each party bears its own costs, except [reasonable recovery costs on default]. 9. GOVERNING LAW AND DISPUTES Governed by the laws of the UAE [and the emirate of [name]]. Disputes go to [the courts of [emirate]] / [arbitration]. The [Arabic] text prevails. SIGNED Lender ____________ Borrower ____________ Witness ____________

- Compound interest. The law does not allow interest on interest.
- Relying only on a post dated cheque as security. Enforcement practice has tightened.
- A vague repayment term like "when able". Use figures and dates.
- No Arabic version or no stated controlling language, which slows any UAE court claim. ## Keeping a loan and its paperwork in step A loan does not end when it is signed. Instalments fall due, a borrower asks to vary the schedule, security has to be tracked, and a default triggers a cascade of dates and notices. The work that outlasts the signing is keeping the current terms, the repayment record and the key dates in one place, and knowing which clause matters the moment a payment is missed. That is the same problem a company has across all its contracts, only a loan makes it concrete. Drafting from a clear template, spotting a term that will not hold under local law, editing a clause in plain language and holding every version with its date can live in one AI workspace tuned to how your company contracts. [Adira](https://adiralaw.com) is built around that single workspace idea, deepest today on Indian corporate law, with UAE coverage on its roadmap rather than fully built, so treat its UAE depth as developing. For this loan, the template and the local law points above stand on their own; the idea worth borrowing is that a contract and the records around it are easier to trust when they live together.