Debt Burden Ratio commonly known as
DBR is a term which is massively used in banking industry. Bangladesh Bank has also instructed all the commercial banks to maintain
specific DBR for consumer financing. But, not only the customers but also the
bankers sometimes fall into trouble understanding this basic concept of
lending. This post will help you to understand the basic principle of Debt
Burden Ratio and to calculate your own DBR. So that you do not fall into the
spiral of debt.
What is Debt Burden Ratio ?
Debt Burden Ratio is a mathematical
ratio which banks consider while deciding an applicant whether is eligible for
loan or not. Though all the banks has specific rule of lending but there are
some invariable factors which all the banks follows e.g. Debt Burden Ratio.
How to calculate Debt Burden Ratio ?
The formula for calculating debt
burden ratio is
Debt Burden Ratio= Total Debts/
Total Assets
To understand this consider this
example. Let’s say you have a monthly income of Tk. 20000 and you have EMIs of
Tk. 2000, Personal Loan installment of Tk. 3000 and Rental Expenditure Tk.
5000. So, your DBR will be
DBR= 10000/20000 X 100= 50%
You can also use the online
calculator of DBR.
As per Bangladesh Bank’s instruction
DBR must be less then 33%. The lesser the DBR rate the higher the possibility
your application will be considered. To have a lesser DBR rate you may consider
the following tips:-
- Pay your monthly interest of Credit cards on time.
- Increase your income.
- Pay off your existing loans as soon as possible.
Debt Burden Ratio not only helps the
banks to control over the lending but also ensures that the lenders do not go
for lending beyond their capacity where they cannot pay off their debts.
Remember your DBR is the reflection of your percentage of debt.
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