The Debt Panel: ‘Can I use credit insurance to pay off my loan after losing my job?'

The former resident is stuck in India because of Covid-19 travel restrictions and cannot return to the UAE

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I had been working in the UAE for many years and went home to India for a vacation two months ago. However, I have been unable to return to the UAE due to the Covid-19 pandemic travel restrictions and subsequent flight bans.

I lost my job earlier this month due to my inability to return to the UAE and my residency visa also expired in the interim.

My issue is that I have a loan with a UAE bank, of which 11.82 per cent, or about Dh40,000, is still left to be repaid. I took the loan out in 2017 and the monthly instalment is Dh8,023.

When my company reduced our salaries by 35 per cent last year because of the pandemic, I was granted a three-month payment holiday by the bank. When this ended, I resumed paying the full monthly instalment even though my salary continued to be 35 per cent less than what I normally received.

The bank has also been deducting an insurance payment against the loan every month. Does this mean that the remaining amount owed is covered by the loan insurance?

Without a job and being unable to return to the UAE, am I still liable for legal action from the bank for non-repayment of the remaining amount owed on the loan? I am 61 and finding another job at my age is highly unlikely. Can you advise me on my legal position? DD, India

Debt panellist 1: Philip King, head of retail banking at Abu Dhabi Islamic Bank

This is an understandably difficult situation to be in, especially with the surge of unanticipated salary cuts and job losses resulting from the pandemic. We applaud you for your continued commitment and efforts to repay your debt despite your challenging circumstances.

In terms of your loan insurance, the first step is to check with your bank if the insurance policy covers involuntary job loss and for how long. If it does, then your insurance should support your monthly loan repayments and safeguard you from default for a predetermined period. It would pay either the entire monthly instalment or a part of it on your behalf, typically from 12 to 24 months, as these insurance policies provide short-term protection only.

When you miss making repayments, banks charge late payment fees. However, after three consecutive missed repayments and repeated warnings from your bank, they may file a police case against you and request a travel ban, preventing you from returning to the UAE.

You should double check with your bank to find out the terms and conditions of the insurance on your loan
Nathan McFarlane, founder of

With that being said, we encourage you to continue your job hunt, whether in the UAE or abroad.

Usually, leaving the UAE without fulfilling your financial obligations shouldn't be a problem if your bank is aware of your situation; there is no requirement for a borrower to maintain a residence in the UAE while their loans are not yet fully paid.

However, defaulting on your loans after leaving the country is a more serious issue compared with those defaulting while still in the country, and can lead to legal repercussions.

Living with debt can certainly be distressing and we highly recommend that you decrease your expenditure as much as possible through stringent budgeting or seek financial assistance during this difficult time.

Debt panellist 2: Nathan McFarlane, founder of

This is such an unfortunate situation to find yourself in and is certainly one that many expats are currently facing due to the Covid-19 travel restrictions.

There are a few things to highlight here, but let’s start with the insurance. It is likely you signed up for the insurance when you took the loan out and already have a copy of the policy’s terms in your loan agreement.

However, you should double check with your bank to find out more about the terms and conditions of the insurance on your loan. You may be eligible to make a claim based on your situation as this type of insurance is normally used in the event of a forced redundancy.

Whether or not you can utilise the insurance to pay your loan largely defines your next question about the possibility of your bank taking legal action against you for missed loan repayments.

If you are not covered by the insurance and an amount is still owed to the bank, it can take action to reclaim the money owed.

As ever in these situations, I suggest you notify the bank of your situation and stay in constant communication with them. Always do this in writing so you have a record of the discussion.

When the amount outstanding is as low as you have stated, banks are less likely to file civil cases to reclaim outstanding amounts owed. Nevertheless, this is not a guarantee and they may exercise their right to take legal action. If this is the case, then I advise you to seek legal advice to understand your rights.

What is more likely, however, is that the bank will want to settle the issue amicably and may offer alternative options to you. Based on my experience, if you do need to come to a settlement with the bank and you are outside the country, then they tend to be much more open to flexible ways of repaying a loan. I wish you the best of luck.

Debt panellist 3: Felicity Glover, personal finance editor at The National

Involuntary job loss can be a distressing life event at the best of times, but the Covid-19 pandemic has compounded this issue for millions of people around the world who have been furloughed, had their salaries reduced or are now unemployed.

It doesn’t help that you are stuck in India and unable to return to the UAE for the foreseeable future. However, it is important that you communicate with your bank as soon as possible to check the terms of your loan insurance policy as there are usually time limits to make an insurance claim against forced redundancy. This is typically within two to three months of losing your job.

You will also need proof of your job loss to make a claim – has your company provided you with an official letter confirming that you are no longer employed by them? If not, I advise you to also contact them immediately to request this.

If you miss more than three loan instalments, your bank can lodge a legal case against you, which is another reason why it is important to start the claims process as soon as possible to protect yourself against this happening.

It is important to note that credit card or loan protection insurance can be a contentious issue for consumers if they have been mis-sold the policy and are unable to make a claim because it doesn’t cover them for involuntary job loss. If that is the case with you, then you should request a refund of the monthly payments you made towards the policy and also lodge an official complaint with your bank.

While ageism has long been an issue in the workforce, I believe that this is an outdated view now that remote working has become the norm. You should not give up looking for another job just because you are 61. Many people – regardless of their age – have found a new purpose and career during the pandemic thanks to the burgeoning remote jobs sector.

I am sure that your work experience and skills can be utilised to earn a decent income online, allowing you to take back control of your personal finances. For India-based remote jobs, it is worth checking out remoters, and indeed, while fiverr offers global freelance opportunities.

The Debt Panel is a weekly column to help readers tackle their debts more effectively. If you have a question for the panel, write to

Updated: July 21, 2021, 6:52 AM