United Arab Emirates: Is Your Loan Application Still Rejected Despite Good Credit? here’s why

Dubai: If your loan applications continue to be rejected despite a good credit history, there may be some common reasoning as to why.

Your debt ratio, or simply debt ratio, is detrimental to lenders who decide whether or not to approve your loan application. And if your credit history is intact, but your loan applications are rejected, it’s probably because your ratio is low. But what is it exactly?

Your debt-to-income ratio is the percentage of your monthly income that you need to spend on your monthly debt payments plus the expected payment on the new loan. This is to check if your current debt increases or decreases your risk of taking out a new loan.

Generally, the lower your debt-to-debt ratio, the more likely you are to qualify for your loan, whether it’s a mortgage, car loan, or student loan. .

“Yet the reason (for the rejection) may have nothing to do with you personally,” analysts at lender Citi noted. “Instead, it may have everything to do with meeting a certain set of criteria.”

Each issuer maintains its own list of metrics against which all new credit requests are checked. These can include your income, credit rating, and debt-to-debt ratio, but can also extend to your workplace, they added.

“To complicate matters, these factors can become more stringent during an economic downturn (like now), Citi analysts explained.

“So while you might not be told exactly why your application was denied, a quick review of some of these criteria against which credit card and personal loan applications are assessed can help you understand how. improve your chances next time. “

Although all lenders calculate your debt ratio using the same calculation, there are other factors that affect their approval process for getting you a loan. Here, all lenders are working when they receive your loan application.

First, they add up the amount you pay each month for debt and recurring financial obligations (like credit cards, car loans and rentals, and student loans).

However, note that this does not include your current home loan, mortgage or rent payment, or other monthly expenses that are not debts (such as phone and electricity bills).

Second, add your projected mortgage payment to your total debt in step one. Then divide that total number by your monthly income. The resulting percentage is your debt to income ratio.

If you find that your ratio is too high, consider how you can lower it. You may be able to pay off your credit cards or reduce other monthly debt.

Alternatively, increasing your down payment may reduce your expected monthly mortgage payments. Or you might want to consider a cheaper home or car, or whatever the reason you are using the loan for.

You could lower your ratio by increasing your income, but some lenders may consider non-traditional sources of income such as allowances or trust income. If you have non-traditional sources of income, be sure to ask your lender about the availability of products and programs that include them.

In addition to reducing your overall debt, it’s important to add as little or no new debt as possible during the buying process, as this will affect your credit history.

Keeping your debt ratio low can help you qualify for a loan and pave the way for other borrowing opportunities. It can also help you manage your finances responsibly.

While you may think of your salary as a private matter, you will need to share it with your bank to establish a new financial relationship of any kind.

Every bank operating in the UAE requires applicants for credit cards or personal loans to have a minimum monthly salary.

Depending on the bank, this can be a minimum of 5,000 to 10,000 Dh. If you earn less than the minimum wage, you may need to apply to another bank or consider other ways to meet your financial obligations.

Therefore, it is worth asking a bank representative about the minimum wage requirements before applying for a loan or card.

Your employer not only sponsors your UAE work permit, the company you work for can also determine whether you get a credit card or a personal loan.

If you’ve ever been told that your employer is “not approved” or “unregistered,” it’s probably because the business is not registered with the bank. Each UAE bank has its own list of employers or companies against which all new account requests are checked.

Banks do this to check if your income or job is secure and if your business is financially stable. Since the introduction of the Al Etihad Credit Bureau, these lists are now a bit smaller, but as a rule large, well-known organizations are usually listed or registered.

If your employer is not on such a list, you can always ask the bank if they accept because some banks accept applications even if the company is not listed.