Personal loans are readily accepted by those who earn a salary who can use the loan to meet a variety of financial needs, from finding cash for your dream holiday or long-term investment requirements. However, these loans come with a huge obligation to repay in accordance with the conditions of the loan agreement with banks.
If you’re planning to take out a personal loan the first thing that comes up in your head is what number of loans you can receive? In reality, the possibility of receiving the loan within what amount is contingent upon the following aspects
- Debt Burden ratio or DBR
- Payroll amount as well as regular salary transfer
- Credit score
According to the UAE central bank’s regulations, HTML0 is
banks are not able to offer more than 20 percent of the monthly salary of an individual.
For example when you earn AED 25000 per month, the bank could grant personal loans up to AED 500 000.
Calculate your DBR -Debt Burden Ratio
Before you can apply to get a loan for personal use,, it is essential to understand what is your DBR(Debt burden ratio). It can be determined by taking your debt burden as a percentage of your income. This will let you know the impact of your debts on your earnings. A minimum DBR increases your chance of receiving a loan.
Central Bank mandated all financial institutions to make sure that they must ensure that the Debt Burden Ratio must not exceed 50 percent. This restricted a person’s capacity to take out loans at least 50% of his earnings or pay .’
For Example;
- Your Salary per Month is AED 10,000.
- You Have a Car Loan EMI of AED 1,000.
- You have a credit card with a limit of AED 20,000 ( DBR will be 5 percent on the maximum limit)
Your DBR should read:
Car Loan EMI: AED 1,000
Credit Card Due @ 5% : 1,000
Your Monthly Obligation x 100 / Your Monthly Salary= DBR
2,000 x 100 / 10,000 = 20%
Your DBR is 20%
According to the policy, you are able to get up to 50 percent DBR which means you may be eligible for additional personal loans or credit cards with a monthly commitment of AED 3000
Salary Personal Loans and non-salary transfer Loans
The majority of UAE banks provide two kinds of personal loans –
- Salary Transfer Personal Loans
- Non-Salary Transfer Personal Loans
If you select the salary transfer option, the bank will require the letter of salary with a specific format that is drafted by banks. By using this option, you will obtain lower interest rates and be able to get the highest loan amount that the bank will offer.
Review your credit history
Following the introduction, the UAE credit bureau collects personal and corporate loan data. All banks are scrutinizing credit reports to determine your creditworthiness before approving an individual loan.
If you don’t have a notion of your debt-to-income ratio, it is recommended to look up your credit report prior to deciding whether you want to make an application for a loan. The credit report provides details of your most recent credit activity and your obligations and highlights any late payments.
According to Al Etihad Credit Bureau, the credit score is calculated for an individual on the range of 300-900, which reflects the risk of default. This score is required to determine the eligibility requirements for loans. If you score less than 600, you are the most likely to be declined by banks in the majority of cases.