Financial analysts on Thursday warned that personal and household debt in the United Arab Emirates is accumulating at a dangerous pace. The analysts conclude that this is largely due to excessive reliance on personal loans and credit cards.
Recent statistics show that personal loans in Q4 2015 amounted to £79 million – an increase on the £73 million borrowed in the first quarter of that year. This trend of increased growth means that, on average, household debt in the country is as much as £65,000.
A looming debt crisis
The situation is reaching such a level that it may be fair to speak of a debt crisis. According to a personal finance analyst with Nexus Group, citizens in the UAE often spend a third or more of their income on debt and interest repayments. The crisis has been worsened significantly by the influence of private lenders – ‘loan sharks’ – who offer credit with exorbitant interest rates attached.
When people can no longer get loans from banks due to poor credit history, they turn to these private lenders as a last resort. However, the Nexus Group analyst goes on to argue that, if possible, people should try to avoid loan sharks, as the high interest rates can lead to endless debt and even lawsuits if people fail to keep up with repayments.
Solutions to an international problem
Recent months have seen concerns raised in the press about the similar household debt bubble in the UK. A recent study by Aviva found that UK household debt had grown by 40 percent in the last six months of 2015 – a far greater rate than in the UAE – to reach an average total of £13,520. What can be done?
Avoiding loan sharks should be everyone’s first priority. Personal borrowing from reputable sources is paramount, and a poor credit rating needn’t prevent access to reputable sources of finance. There are other options for bad credit car finance in Southampton and across the UK – for example, guaranteed car finance in Southampton through http://www.rightdrive.co.uk/.
Besides this, remember that ideally, debt repayments should ideally be kept to 10 percent of monthly income, and should not exceed 30 percent. Taking out additional loans to pay earlier lenders is also best avoided, as it can lead to an endless spiral of debt.