Personal loans are easily approved for the salary earners where you can utilize the loan for different financial needs ranging from finding money for your dream holidays to long term investment needs. However, these personal loans will come with great responsibility to repay according to the terms of the loan contract with banks.
If you are planning to get a personal loan the very first question raised in your mind is how many loans you get? Well, the eligibility of getting the loan in what limit depends upon these following factors
- Debt Burden ratio or DBR
- Your salary amount and consistent salary transfers
- Credit score
As per the UAE central bank regulations the
banks cannot provide more than 20 times of an individual monthly salary.
For instance, if you earn AED 25,000 a month the bank can provide a personal loan maximum of AED 500,000.
Before you apply for a personal loan it is important to you to know your DBR(Debt burden ratio). This can be calculated by taking your existing debt burden per cent of your current income. This will make you know the burden of liabilities on your income. A minimum DBR will improve your chances of getting a loan.
Central Bank mandated all financial institutions that the Debt Burden Ratio cannot be more than 50%. This limited a person’s ability to borrow up to 50% of their income or salary.’
- Your Salary per month is AED 10,000
- You Have Car Loan EMI of AED 1,000.
- You have a Credit Card of AED 20,000 Limit ( DBR will be 5% of the limit)
Your DBR should be ;
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%
As per policy, you can have max 50% DBR, which mean you can get additional personal loans or cards worth monthly obligation of AED 3,000
Most of the UAE banks offer two variants of personal loans-
- Salary Transfer Personal Loans
- Non-Salary Transfer Personal Loans
If you choose for salary transfer variant the bank will ask for a salary assignment letter with specific formats drafted by the banks. With this option, you can get lower interest rates and will be able to secure the maximum loan amount offered by the bank.
After the launch of UAE credit bureau which collects individual and company loan information. all banks are looking into credit report to check your creditworthiness before they approve a personal loan.
If you don’t have any idea about your debt burden ratio it is best to check your credit report before you apply for a loan. A credit report contains information about your recent credit activities and your liabilities and highlights any missed payments.
As per Al Etihad Credit Bureau, the credit score are assigned for an individual in the scale of 300 to 900 reflecting the risk of default. This score is necessary to know the eligibility criteria for loan products. A score below 600 is most likely to be turned down by most banks.