Young UAE residents struggling with loans, credit card balances or car instalments should map every debt they owe before taking on any new borrowing, financial professionals have said, as the UAE debt burden ratio ceiling set by the Central Bank of the UAE (CBUAE) remains widely misunderstood.
The guidance follows a public warning by Sharjah Ruler Sheikh Dr Sultan bin Muhammad Al Qasimi, who urged young people not to take on cars or other financial commitments they cannot afford.
‘Don’t burden yourself with a car you cannot afford and get caught up in instalments, debts and other financial commitments,’ Sheikh Dr Sultan said during a direct-line programme, calling on young people to step back from ‘bragging’ and ‘come back down to earth’.
What the UAE debt burden ratio actually allows
Under CBUAE Regulation No. 29/2011, deductions from salary or regular income for all loan types combined, including car finance, personal loans, overdraft facilities and credit cards, must not exceed 50% of gross monthly income for expatriates at any point.
According to the CBUAE Financial Stability Report 2024, UAE nationals face a higher ceiling of 60% of gross monthly income.
Terry Antoinette, a UAE-based finance professional, said this regulatory cap is not a target to reach. ‘If half your salary leaves your account on the first of the month before you have bought a single meal, you are not building a life; you are servicing one,’ he said.
Both Antoinette and Abhishek Jain, CEO at Pesa Capital and EIRS, put a healthier ceiling considerably lower: total debt repayments, including car finance, should ideally stay below 30 to 35% of monthly income. Consumer debt such as credit cards and personal loans should account for no more than around 15 to 20% of income. When 40 to 50% of income is going towards debt consistently, Jain said, the position can become financially unsustainable.
Steps for borrowers already in difficulty
Antoinette said the first move for anyone in difficulty is not a financial one. ‘The first step is not a financial one; it is an emotional one,’ he said, referring to the need to face the situation directly by writing down every debt, its outstanding balance, its interest or profit rate and the minimum monthly payment required.
A clear picture, he said, turns what can feel overwhelming into something manageable. Borrowers should then stop taking on any new debt while working through existing commitments.
Crucially, both professionals advised contacting the bank before missing a payment. The CBUAE rulebook clarifies that banks may restructure or reschedule personal loans whose total repayment burden exceeds 50% of gross salary, provided no fresh funds are released to the borrower, with the purpose of bringing the debt burden back within the permitted limit.
‘UAE banks have restructuring and consolidation options, and they are far more flexible with a customer who approaches them proactively than one who has already defaulted,’ Antoinette said.
Jain recommended tracking income and expenses first, then building a realistic budget that covers housing, utilities, food and transport before directing any surplus towards debt reduction. Once minimum repayments on all debts are secured, Antoinette recommends putting extra money towards the borrowing carrying the highest interest rate, most often credit card debt. ‘Mathematically, the highest rate is the enemy,’ he said.
Car finance can warrant particular attention for anyone who depends on a vehicle for work. Missing those payments carries a direct cost to income, not just to a credit record.
Both professionals also recommended maintaining some savings even while paying down debt. An emergency fund prevents a single unexpected cost, a medical bill, a car repair, a flight home, from landing straight on a credit card.
For UAE nationals, the CBUAE rulebook for national customers sets a maximum loan repayment period of 48 months for most personal borrowing, except where the Central Bank has granted a specific exemption. Banks that breach these terms face severe sanctions, including the government refraining from dealing with that institution.
Antoinette also warned against lifestyle inflation: each time income rises, increased spending can leave someone earning more while still unable to reach the end of the month without borrowing.
For borrowers already in difficulty, the immediate priority is therefore understanding exactly what they owe, protecting essential expenses, eliminating the most expensive debt first and building enough financial room to avoid falling back into new borrowing. Contacting the bank before a payment is missed is the single step most likely to open a restructuring conversation.
