The Debt Panel: 'How can I keep up with my debt payments on a reduced salary?'

The Dubai resident has already been granted a payment holiday under the Tess programme and cut back on expenses

Steven Castelluccia / The National
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My salary was reduced by 30 per cent last year because of the Covid-19 pandemic. Before this happened, I was managing my debts and had not missed any instalments.

At the time, I applied under the Targeted Economic Support Scheme (Tess) to have a three-month payment holiday and my bank approved the request. This helped me immensely but the instalments have resumed on my personal loan and credit card and I am finding it difficult because my salary has not been reinstated to the full amount.

My debts are now too big for me to manage. Each month, the amount I owe on my credit card is increasing and all I can afford to pay is the minimum amount. I have almost depleted my savings to keep up with the payments and I am worried that I will not have enough to pay them next month.

I have cut back as much as possible on my daily expenses and feel trapped. I have been thinking about applying for bankruptcy but I do not know how to do this, or even if it is a wise decision. Or should I request a debt restructure first as both my credit card and loan are with the same bank? DG, Dubai

Debt panellist 1: Steve Cronin, founder of

It is a horrible feeling to be trapped by debt, especially if you feel powerless. The most important thing now is to understand your numbers and cash flow, and to take relentless action to come out of this situation. This should help you feel a bit more in control.

Unfortunately, people with debt think everything is fine until their salary takes a hit. Only then do they realise what a challenging situation they are in, especially if they have not saved up a cash buffer of three to six months of expenses.

Your credit card debt is the most dangerous as it will grow rapidly when you only pay off the minimum amount each month. You are experiencing this at the moment. Assuming you have a salary of more than Dh8,000 (or Dh7,000 at some banks), you should be able to obtain a consolidation loan.

This loan will combine your personal loan debt and card debt into a single loan. Interest rates on these vary but at least it will remove the very high interest rate of your card debt.

Your current salary, employment status and the fact that you have been paying all your dues regularly will all positively affect your application for a debt consolidation loan
R Sivaram, executive vice president and head of retail banking products at Emirates NBD

Approach your bank, ideally in person, with your request for a consolidation loan as soon as possible. Bring your salary and debt information, so you can be clear about what you can realistically pay each month. You should also talk to other banks to see whether they will take over the debt in a consolidation loan if you move your salary.

This is your best way out of the situation and you should put your time and energy into making it happen.

At the same time, see if you have any assets you can sell or if any friends or family can lend you some money to cover the card debt. You can even agree to pay them a low rate of interest, given they will not be receiving much from a bank deposit in the UAE these days.

Also, see if there are other ways you can earn additional income, such as online, at work with overtime, helping people out in your community or seeking other part-time roles.

Bankruptcy is an extreme situation and a last resort to be attempted only after you have spoken to your bank and other lenders.

Debt panellist 2: R Sivaram, executive vice president and head of retail banking products at Emirates NBD

I am glad that you are being conscientious and responsible towards meeting your financial obligations.

As a first step, I would urge you to reach out to your bank and discuss the possibility of debt consolidation as this would enable you to combine the total outstanding amounts owing on your credit card and loan into one personal loan.

This is a financial solution offered by most UAE banks and would be well suited to your situation. To avail this service, the bank may require you to transfer your salary to them and close your existing credit cards on settling the dues owed. This is for your benefit and will help you control your monthly expenditure.

Your current salary, employment status and the fact that you have been paying all your dues regularly will all positively affect your application for a debt consolidation loan. This will allow you to significantly lower your monthly instalment obligations, given the longer tenor. It will also ensure that you have only one instalment to pay each month, which will help you manage your disposable income more prudently.

You are addressing your financial situation in a timely manner and will hopefully embark on the path to financial stability soon.

Debt panellist 3: Carol Glynn, founder of Conscious Finance Coaching

Well done for keeping up with your personal loan payments and, at least, the minimum payment on your credit card. You have protected your credit score somewhat and also prevented late payment penalties, which, in turn, add additional interest each month if the balance is not paid in full. You are conscientious and not ignoring the problem and this is commendable.

I would recommend trying to restructure your debt before considering bankruptcy. Have you spoken to your bank about your situation? If not, request a meeting to discuss the option of a consolidation loan. From the information you have provided, this is probably your best way forward.

If they approve a loan, I urge you to cancel your credit card as soon as you clear the balance with the proceeds of the loan. It is important to protect yourself against credit card debt while you are paying off your loan.

This is a common mistake I see people make in situations such as yours. They feel relief after obtaining a consolidation loan but continue to use their credit card and very quickly find themselves in exactly the same financial situation, although with a bigger debt this time.

If your current bank is not helpful, approach other banks about a consolidation loan before you consider bankruptcy. Many will offer discounted rates or special offers for transfer loans.

Make sure you read the terms and conditions carefully. Ask questions such as what is the interest rate, is it fixed or will it increase after a period of time? What are the administration or one-off fees charged? What are the late payment or default charges? If there is an interest-free period, what will the interest rate be after this period ends?

Do you have any assets you can sell and use the funds to reduce your debt? As you are experiencing, credit card debt can escalate very quickly if you are not paying the full amount every month, so it is important to find a way to pay your credit card balance as soon as possible.

Personal bankruptcy, or insolvency, is a relatively new concept in the UAE. The UAE Personal Insolvency Law came into effect on November 29, 2019. While the law can help in certain circumstances, declaring bankruptcy should always be a last resort as it can have a long-term negative effect on your financial situation.

It is also important to understand that bankruptcy does not automatically absolve you of the need to pay your debts as you will still be expected to pay your creditors some, if not all, of what you owe.

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: August 11, 2021, 5:00 AM