Dubai: Unpaid credit card balances, car loans and other forms of personal borrowings continue to hound consumers in the UAE, with total debt levels rising by 7.5 per cent over the past year.

The average resident in the country now carries a debt burden worth Dh42,600, as the total amount of personal loans reached Dh430 billion during the second quarter of 2016, up from Dh400 billion a year earlier.

The latest debt data provided by the National Bank of Abu Dhabi (NBAD) cover the amount of car, credit card and business loans that cash-strapped consumers owe their banks as of June this year.

A number of households have been feeling the pinch and left with no cash buffers as the economic environment remains subdued, owing to the decline in oil prices. Employment opportunities are still limited and reports of job cuts haven’t completely settled , while the high cost of living continues to put pressure on household budgets.

In a recent survey, a significant number of residents said that the high cost of housing and rising education and utility bills remain their biggest concerns. Others, especially Western expatriates and Arabs, are also worried about potential job losses, while 44 per cent of UAE nationals are worried about mounting loans.

The rise in personal loans, in particular, has raised some concerns, especially since the population isn’t expanding as fast as it used to, deposits aren’t that robust and banks are increasingly relying on borrowed funds.

Alp Eke, senior economist at NBAD, told Gulf News that the loan-to-deposit ratio has been steadily climbing and currently at 103.4 per cent level. “[That] is above the critical level of 100 per cent,” Eke said.

While personal debt is still rising, lenders are now a bit hesitant to extend loans amid tightening liquidity conditions. “Lenders are a bit more reluctant and are following stricter lending procedures due to the fact that deposits are not as easily available,” Eke said.

“Especially [small and medium enterprises] are facing difficulty obtaining loans. Lending institutions are more cautious in extending personal loans as economic conditions are uncertain and SMEs are struggling. The public is also cautious as the job market is tightening,” he added.

Analysts had earlier said that many residents in the country are still struggling to free themselves from the financial toll of heavy debt. Partly to be blamed is the fact that consumers tend to borrow more than they can afford to repay and lenders collect exorbitant charges.

“People tend to resort to these lenders when they find themselves needing to meet financial obligations, but are unable to apply for a bank loan because they do not meet the income criteria,” said SS Raju, personal finance expert at Nexus Group.

“However, these loan sharks must be avoided like the plague – they can put you in a sea of endless debt, and I you’re unable to pay it back, they can file lawsuits against you.”

The latest data, however, indicate that interest rates on personal loans through a salary transfer account have declined marginally from an average of 7.16 per cent in September 2015 to 6.59 per cent in August.