Why borrowing to repay another loan can be risky

What does the 50% rule actually cover?

The Bank of Mauritius guideline revised on 17 June 2021 sets a 50% debt-to-income ceiling for residential-property purchase/construction loans, subject to specified exemptions. It is not a universal salary cap for every loan. The ratio uses assessed gross monthly income, not take-home pay, and total monthly debt obligations. Banks may apply their own limits to other lending.

The guideline treats allowances, overtime, bonuses and commissions as variable income. For its income assessment, no more than 70% of the average monthly variable income over at least the preceding 12 months may be counted, alongside fixed income where applicable. That does not make variable income guaranteed. For your personal budget, test whether repayments still work if those payments stop.

Banks must verify declared indebtedness against MCIB for these property loans. More broadly, MCIB participants must consult it before approving, increasing or renewing credit. It records facilities and repayment information reported by participants. Declare all commitments, including debts not shown there. Clair cannot access your MCIB record. Our budget check includes card repayments even though the property-loan guideline permits banks to exclude credit-card facilities from its DTI calculation.

Example: Rs 30,000 dependable take-home income, Rs 5,000 existing repayments and a Rs 10,000 new repayment means 50% goes to debt. With Rs 16,000 in living costs, you are already Rs 1,000 short each month. Bank eligibility and personal affordability are different.

Job loss does not stop loan repayments, bills or the need to eat. Keep an emergency reserve that includes debts until income resumes; finding another job may take longer than expected.

Official sources checked on 7 October 2026. Ask your bank to confirm the rules, exemptions and income assessment applicable to your application.

New interest, processing fees, insurance and early-settlement charges can add to what you owe. Compare the total remaining cost of your current debt with the full cost of the replacement loan.
A smaller monthly instalment is not automatically a saving. Extending the term can mean paying more overall, even at a lower rate. For example, Rs 4,000 for 24 months totals Rs 96,000; Rs 3,000 for 36 months totals Rs 108,000, before any extra fees.
Consolidating unsecured debt into a loan secured on your home puts that property at risk if you cannot repay. Paying off a card and then using its limit again can also leave you with both debts.
Refinancing or consolidation can be useful when the overall terms improve and payments are sustainable. Get written settlement amounts, compare rates and all costs over the whole term, and plan how you will avoid rebuilding the cleared balances.

Start with the shortfall, not another application

List your essential expenses and all minimum repayments. If the budget does not cover them, contact your existing lender early to discuss an affordable arrangement and its costs. If you can afford extra payments, compare snowball and highest-interest-first repayment before taking on new borrowing.