A good salary and a clean credit record can still get a “no” from a bank. The reason is often one fraction.
It’s called the debt-burden ratio: what you repay each month, divided by what you earn. In the UAE, the standard limit is 50%, and banks check your existing obligations when you apply for new credit.
The rule, in one line
Under Central Bank rules, your repayments to all banks and finance companies together must not exceed 50% of your gross salary and regular income.
Three parts of that sentence matter.
“All.” Every lender is counted together. A loan at one bank uses up room at every other.
“Gross.” The calculation uses your gross salary, plus regular income that the bank judges reliable and sustainable.
“50%.” This is the regulatory ceiling. A bank can set a stricter limit of its own, but it cannot approve lending above the ceiling.
There are special rules for some borrowers. If a loan extends into retirement, repayments must be structured so deductions fall to no more than 30% of income or pension. Beneficiaries of the Sheikh Zayed Housing Programme can go up to 60%, subject to its conditions.
What goes on top: your debts
The ratio counts your obligations to banks and finance companies: personal loans, car loans, home loans, overdrafts and credit cards.
Loans are simple. The monthly payment goes in.
Credit cards are the surprise. Banks may count your card limit, not just what you owe, even when you are not using it. The exact method varies by lender.
As an illustration, if a bank counts 5% of a card limit as a monthly commitment, a card with an AED 40,000 limit adds AED 2,000 to the calculation.
What isn’t part of the ratio? Rent, school fees and ordinary household bills are not loan repayments. But banks can still consider your living expenses when deciding how much you can afford.
What goes underneath: your income
The bottom of the fraction looks simple. The catch is the word “regular.”
For home loans, banks are expected to count only reliable and sustainable income. Bonuses and other non-standard or temporary income may be discounted, or excluded if they are not guaranteed.
So two people who earned the same amount last year can have different borrowing capacity today.
One borrower, worked through
As an illustration, take someone earning AED 30,000 a month, so the ceiling is AED 15,000. Assume the bank counts 5% of card limits, and watch what happens when the card limits are cut from AED 60,000 to AED 20,000.
Today | After cutting card limits | |
|---|---|---|
Car loan | AED 3,000 | AED 3,000 |
Personal loan | AED 2,500 | AED 2,500 |
Credit cards, at 5% of the limit | AED 3,000 | AED 1,000 |
Total commitments | AED 8,500 (28%) | AED 6,500 (22%) |
Room for a home loan payment | AED 6,500 | AED 8,500 |
Loan supported at 5% over 25 years | AED 1.11 million | AED 1.45 million |
Same payment tested at 7% | AED 920,000 | AED 1.20 million |
Nothing was repaid. No income changed.
About AED 340,000 of borrowing capacity came from card limits nobody was using.
Why the bank’s number is lower than yours
For home loans, there is one more step.
The Central Bank requires banks to stress test mortgage affordability at a rate 2 to 4 percentage points above the current rate, depending on the interest-rate environment.
So if your rate is 5%, the bank may test whether you could still afford the payment at 7% or higher. The last row of the table shows the effect: the same monthly payment supports a smaller loan.
That is why the amount you calculate yourself can be higher than the amount the bank approves. And because each bank applies its own credit policy, two banks can reach different numbers for the same person.
Three ways to make room
Cut the limits you don’t use. Lowering a card limit, or closing a card you never use, can reduce the commitment a lender assigns to it.
Clear the small loans first. A loan with only a few payments left still counts until it is settled.
Get the order right. If you’re planning to buy a home, taking a new car or personal loan first can reduce the mortgage amount you qualify for.
A longer loan term lowers the monthly payment, but you pay interest for longer. Terms are also capped: 48 months for a personal loan, 60 months for a car loan and 25 years for a home loan.
Before you apply, check your own credit report. It shows the loans and credit facilities a lender may see when assessing you.
Then compare your options before sending applications everywhere. That’s what NinjaCompares is built for.
Ninja’s Takeaways
The 50% counts every lender together. A bank can be stricter, but it can’t go above it.
Card limits can count even when you don’t use them.
Only regular income counts in full. Bonuses may not.
For a home loan, the bank tests you at a higher rate, so expect its number to be lower than yours.
Illustrative figures only. Banks apply their own credit policies and may count card limits and income differently, so ask your bank for the calculation that applies to you.
