Personal Loan Eligibility based on Salary

By: Bankbychoice.com0 comments

Personal loans are easily granted for salaried individuals, and they can be used for a variety of financial needs ranging from saving money for a dream vacation to long-term investment needs. These personal loans, on the other hand, will come with a heavy obligation to return according to the conditions of the loan contract with the banks.

If you’re thinking about taking out a personal loan, the first thing that comes to mind is how many loans you’ll need. Well, the eligibility for a loan in what amount is determined by the following variables.

  • Debt Burden ratio or DBR
  • Your salary amount and consistent salary transfers
  • Credit score

The UAE central bank’s regulations state that Banks are unable to provide more than 20 times a person’s monthly pay. For example, if you earn AED 25,000 per month, the bank may be able to provide you a personal loan of up to AED 500,000.

Make a DBR (Debt Burden Ratio) calculation

It’s critical to understand your DBR before applying for a personal loan (Debt burden ratio). Take your current debt burden as a percentage of your current income to determine this. This can help you understand the impact of obligations on your earnings. You’ll have a better chance of securing a loan if you have a minimal DBR.

The Central Bank mandated that the Debt Burden Ratio not exceed 50% for all financial organizations. This restricted a person’s ability to borrow up to 50% of their salary or income.’

For Example;

  1. Your Salary per month is AED 10,000
  2. You Have Car Loan EMI of AED 1,000.
  3. 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

Non-Salary Transfer Loans or Salary Transfer Personal Loans

The majority of UAE banks offer two types of personal loans:

  • Personal Loans for Salary Transfer
  • Personal Loans for Non-Salary Transfers

If you choose the salary transfer option, the bank will require a salary assignment letter in one of the bank’s pre-determined formats. You will be able to acquire cheaper interest rates and secure the maximum loan amount allowed by the bank if you choose this choice.

Check your credit report

Following the establishment of the UAE credit bureau, which collects information on individual and corporate loans. Before approving a personal loan, all banks review your credit report to determine your creditworthiness.

It is best to check your credit record before applying for a loan if you have no idea what your debt burden ratio is. A credit report includes details on your current credit actions as well as your liabilities, as well as any missed payments.

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