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What is Debt Burden Ratio?

What is Debt Burden Ratio? | Dhanguard

The Debt Burden Ratio (DBR) is the percentage burden of your liabilities on your income. In layman's terms, it's the ratio of your debt (loans) to your income (salary). Individual DBR is frequently calculated. Another ratio called Debt to Equity is determined for businesses and corporations. DBR is also known as IIR (Instalments to Income Ratio), DIR (Debt to Income Ratio), or DSR (Debt Service Ratio) (DSR). However, it is most commonly referred to as DBR. In this Blog, Dhanguard is going to explain you the concept of Debt Burden Ratio in UAE.

Why DBR is Calculated?

In their most recent laws, the Central Bank of the UAE established a maximum DBR of 50% for people, whether UAE nationals or expatriates. The DBR for retirees in the UAE is 35%. This means that your total monthly EMIs plus 5% of your credit card payments should not exceed 50% of your monthly wage.

There was no explicit guideline in the UAE till 2006, so banks ended up raising their risks by overexposing themselves and maintaining a high DBR limit of up to 65 percent. While banks were delighted to lend more, this generated market instability, as individuals seeking loans and credit cards sought them from a variety of banks and finance businesses in the UAE.

Why DBR Calculation is Important?

Let's take a look at a hypothetical situation. A particular applicant's monthly income is AED 10,000, and the EMI is AED 7,000. The question that arises in such a situation is how they will survive if all of their earnings are used to pay EMIs. Situations like this wreaked havoc on banks. Eventually, banks began enforcing harsher guidelines and began examining the applicant's debt-to-burden ratio(s).

In the current scenario, the applicant must submit a complete set of documents, including a salary certificate, bank statements, and any other evidence requested by the bank for a personal loan in the United Arab Emirates. Banks use these documents to assess the borrower's ability to repay the loan and, as a result, determine the sanctioning power.

The filing of these records by banks in the UAE is becoming more exact. They calculate the debt to burden ratio using these documents; if the ratio is less than or equal to 50%, the loan is accepted; otherwise, the loan is rejected

What is the proper Debt Burden Ratio for obtaining a loan?

Your DBR must be less than 50% to qualify for a loan in the UAE. Previously, the top limit was 65 percent, and people took advantage of this by taking out numerous loans, increasing their cost of living and forcing banks to incur losses and arrears in payment collection. At the moment, the ratio is 50 percent. The debt-to-burden ratio should ideally be zero, but in practice, it should be kept as low as feasible.

Why should one Calculate Debt to Burden Ratio?

Personal loans are only given out after banks have checked the debt-to-burden ratio of the loan applicants. It analyzes the applicant's ability by looking at his or her cash flow to see if he or she can repay the loan on time. The incoming cash flow is compared to the outgoing cash flow to determine whether or not an additional payment may be accommodated on the list. Banks do not want to jeopardize the applicants' or their own safety. As a result, if the DBR is greater than 50%, banks will reject the application.

It's better to calculate your DBR rather than requesting for a loan and being turned down. Even applications that are denied can have a minor impact on your credit score.

How can DBR be reduced?

Here are some helpful hints for maintaining a low DBR:

  • Pay your monthly interest on time and aim to gradually pay down your loan balance.
  • Try using a debt consolidation service to consolidate your debts into low-interest transfers.
  • Make an effort to increase your monthly revenue.
  • Pay off any outstanding debts as soon as possible.

These are a few methods for lowering your DBR while maintaining a solid credit score.

Debt Burden Ratio was created not only to keep banks secure by giving out fewer loans, but also to deter consumers from overspending and getting into debt. “A bad debt means forsaking your future requirements for your present”


A bank's primary goal is to safeguard its assets, which are loans. To protect their assets, banks prefer to limit their exposure to a single individual, as mandated by the UAE Central Bank. The DBR offers banks with a good indicator of a person's ability to service loan repayments or EMIs. For more information connect to our experts at Dhanguard.


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Frequently Asked Questions

Personal loans that are taken from banks are automatically insured at a nominal fee and in the event of any premature demise the partner insurance company covers the entire loan amount, protecting the family from any financial risk.

Assets are not required as security against your personal loan.

Normally, the only advance costs pertaining to a personal loan are dispensation and insurance fees.

According to the issuer's policy, some lenders enable the borrower to 'defer' or postpone a month's payment once every few months. To take advantage of these benefits, the borrower must make timely payments. Deferred payments do not reduce the principal amount, and hence will not lower the lowering personal loan interest rate in UAE.

Top-up or add-on personal loans are renewable loans that can be used to supplement an existing loan after the borrower has paid a certain number of payments. Top-up personal loans in the UAE are used to reward loyal, non-delinquent borrowers by providing longer tenors or reduced interest rates, depending on the bank's policy.

No, unless the bank expressly states otherwise or the student has a guarantor, a student cannot apply for this loan. The loan's eligibility restrictions include a minimum monthly salary and a maximum age range of 21 to 65 years. Some lenders may require a salary transfer and confirmation of employment with a lender-approved organization. However, some lenders offer personal loans in the UAE without requiring a company listing. As a guarantor, you can always apply for a student/education loan.

It would be up to you to decide. You should be informed that you must pay the loan's EMI from the beginning of the month, followed by the disbursal. You can take out a loan if you're confident that you'll be able to pay the monthly EMIs at the very least.

If you're having trouble paying your loan EMI, contact your bank to see if there's anything you can do. If you try to avoid the problem, it will only get worse. Banks will issue warnings before dispatching debt collectors. If you do not respond, they may designate you as a defaulter and may even take you to court for the unpaid personal loan in UAE. As a result, it is preferable that you call the bank and explain your circumstances. They may be able to lower your EMIs in some cases.

Almost all personal loans include a life insurance plan for applicants. This insurance coverage protects the borrower from having to make payments in the event of a fatal disease, permanent incapacity, or death. Some personal loans in Dubai also include life insurance plans that pay back the entire loan amount to the policyholder's family members in the event of the policyholder's death.

A personal loan can be used to pay off credit card debt. By consolidating the debt, the loan might assist in the payment of the credit card bill. When compared to credit cards, it has lower interest rates. Even if the applicant has a personal loan minimum wage of AED 2,000, you can return the loan in easy monthly installments over the following few years.

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