Debt Burden Ratio (DBR) is a key financial metric used by banks and financial institutions to assess an individual’s ability to repay loans. It represents the percentage of your monthly income that goes towards paying off debts, including personal loans, credit cards, and mortgages.
A lower DBR indicates better financial stability and a higher chance of loan approvals, while a higher DBR may signal financial risk, making it harder to secure loans.
Understanding your Debt Burden Ratio is crucial because:
✅ Loan Approvals: Banks and lenders use DBR to decide whether you qualify for a loan. In the UAE, most banks require a DBR of 50% or lower for loan approvals.
✅ Financial Health: A high DBR means most of your income is going towards debt payments, leaving little for savings or emergencies.
✅ Better Planning: Knowing your DBR helps you make informed financial decisions, ensuring you don’t over-borrow and fall into a debt trap.
If your DBR is too high, here are some practical steps to lower it:
🔹 Increase Your Income: Consider side hustles, freelancing, or passive income sources to improve your earnings.
🔹 Reduce Unnecessary Debt: Pay off credit card balances and high-interest loans as soon as possible.
🔹 Avoid Taking New Loans: Only borrow what you need and avoid unnecessary EMIs.
🔹 Negotiate Loan Terms: Talk to your bank about restructuring your loans to get better interest rates or longer tenures.
🔹 Improve Your Credit Score: A strong credit history can help you qualify for loans with better terms, reducing your overall financial burden.
