Debt Burden Ratio (DBR)
A measure in UAE capping the percentage of monthly income used for debt.
Detailed Description
Debt Burden Ratio (DBR)
What does a higher Debt Burden Ratio indicate?
A higher DBR indicates a greater burden of debt relative to income, signaling potential difficulties in meeting repayment obligations.
How is the Debt Burden Ratio calculated?
The DBR is calculated using the formula: (Total Monthly Debt Payments / Gross Monthly Income) x 100.
What is considered an ideal DBR range?
A commonly accepted benchmark for an ideal DBR is 30% or lower, with 20% or less being optimal for long-term financial health.
Why do lenders assess the Debt Burden Ratio?
Lenders assess DBR to determine risk levels and the likelihood of loan approval; a lower DBR suggests better financial management.
What are some strategies to manage and improve DBR?
Strategies include increasing income, reducing debt, budgeting, avoiding new debt, and seeking financial counseling.