Eighty per cent of UAE residents have no idea how to calculate their own Debt Burden Ratio (DBR), according to a recent poll by Souqalmal.com.
The poll of 300 UAE residents by the region’s #1 financial comparison website highlights the gaping hole in borrowers’ financial knowledge when it comes to taking on credit or increasing their existing liabilities.
To address this issue, Souqalmal.com has launched a new Debt Burden Ratio calculator to help borrowers assess their level of indebtedness more effectively.
What is DBR and why do you need to know yours?
DBR is the percentage of a borrower’s monthly income that goes towards repaying their liabilities. Under UAE Central Bank guidelines, no UAE resident can have more than 50 per cent of their monthly income going towards debt repayments.
Understanding what DBR is and how to calculate your own is key in the UAE’s current financial landscape. According to the UAE Central Bank, the total value of loans to UAE residents, as of September 2015, stood at AED 330 billion, 7.5 per cent higher than the same month the previous year.
Last month Marwan Ahmad Lutfi, chief executive of the Al Etihad Credit Bureau (AECB), revealed that there are currently about 6.75 million active loans in the country. From a ratio perspective this means that every borrower has at least two loans.
And here at Souqalmal.com, the number of visits to the personal loans section of the website had jumped by 71 per cent this year to September compared to the same period in 2014.
As residents struggle with the spiraling cost of living, the temptation to load up on loans and credit cards to keep up with day-to-day expenses grows ever stronger. Which is why those searching for a new credit option need to be able to accurately assess their own DBR ratio.
Ambareen Musa, founder and chief executive of Souqalmal.com, said: “Since the launch of AECB late last year, banks can now access the bureau’s data to assess your individual credit worthiness. They will calculate your DBR as part of the process, so it makes sense for you to know how to calculate it so that you are aware where you stand and how much more you can borrow.”
Find out your Debt Burden Ratio
Souqalmal.com’s new DBR Calculator is easy to use. Users can simply input the related details of their loans and credit cards along with their salary and the financial tool will work out their existing DBR, indicating whether they are under or over the Central Bank’s 50 per cent threshold and whether or not they can take on more credit.
Ambareen Musa added: “A person’s DBR is one of the determining factors that dictates whether or not their loan or mortgage application gets approved. We want borrowers to use this tool to arm themselves with as much information about their indebtedness as possible before they consider taking on more credit.
“This will save them valuable time, empower them to make the right decisions and help to prevent people from taking on excessive debt they cannot afford to repay.”