An increasing number of UAE residents are using their credit cards or availing a personal loan to repay their existing debts, a new survey has found.
According to the latest online survey by the UAE-based finance comparison website compareit4me, around 28 per cent of UAE residents polled between July and August said that they incur additional debt to pay off their existing financial liabilities.
This figure has also risen by 20 per cent from the corresponding period last year with a large majority saying that they own more than one credit card, the survey noted.
“Majority (77.3 per cent) of the survey respondents have credit cards, with a quarter of them owning more than three cards,” said Jon Richards, CEO of compareit4me.com.
“This is a rather risky trend, especially if consumers find their monthly debt repayments becoming unmanageable.”
The poll results also revealed that around 11 per cent of respondents use personal loan for debt consolidation, increasingly relying on such measures to suit an immediate financial need.
These results are in line with latest figures from the UAE’s central bank, which showed that consumer lending in the country has picked up recently. Personal loans alone accounted for 77.5 per cent of new loans provided by banks to customers from all sectors in June, data showed.
Although majority of residents polled are managing their debt, the survey said that around 28 per cent are finding the debt repayment difficult.
An earlier poll conducted by compareit4me showed that between July and August, almost 5.8 per cent of respondents have defaulted on personal loans while 19.3 per cent have made a late payment once or twice in the last 12 months.
Meanwhile, around 77 per cent of respondents confirmed that they have some form of debt with UAE banks, with credit cards (54.7 per cent) topping the list, followed by personal loans (43.6 per cent), car loans (12.6 per cent) and mortgages (4.1 per cent).
Rising debt among UAE residents and citizens has also prompted the government to adopt a number of measures to address the issue.
In 2012, the UAE launched the Debts Settlement Fund to help out Emiratis settle the debts they incurred during the boom period. Under the initiative, commercial banks are required to waive 50 per cent of debtors’ loans while the other half is settled by the Dhs10 billion-government fund.
Recently, the country also launched the Al Etihad Credit bureau, which will issue credit reports that include a consumer’s debt levels, financial obligations, credit payments, history of default payments and late payments to financial institutions.
The bureau is expected to help reduce debts in the country and also to strengthen the local banking sector.