The Debt Panel: 'If I switch to a freelance visa, will the bank call in my car loan?'

The Dubai resident has a Dh25,000 debt and has been unemployed for several months

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I lost my job a couple of months ago and haven’t managed to find another one yet.

I am still in the UAE and have a car loan of Dh25,000. I haven’t missed any payments yet as I am using my savings to pay the instalments. My end-of-service benefits were also used towards the loan.

To stay in the UAE, I have been thinking about applying for a freelance licence in a free zone, which would allow me to work on temporary contracts with companies.

If I transfer to a freelance visa, will this affect my loan and access to my bank account? Will the bank accept my change in status or will it demand proof of income?

If the bank does this, I am worried that it will call in the entire loan, which will use up the rest of my savings and ability to pay for living expenses until I start earning again. Is this a possibility and what would you advise me to do? GB, Dubai

Debt panellist 1: R Sivaram, executive vice president and head of retail banking products at Emirates NBD

I am glad you are being conscientious with respect to your financial obligations. Given that you have been making regular payments towards your car loan, this definitely works in your favour.

Once you change your status to a freelance visa, you should simply update your bank records with your new residency status.

As long as you continue paying the instalments towards your loan, the bank will not require you to close the facility. In future, if you find it difficult to service the loan instalments, it may be advisable to sell the asset and settle your dues.

I wish you the very best in your new venture and in returning to financial stability soon.

Debt panellist 2: Nathan McFarlane, founder of AskHelpWith.com

Firstly, well done for having an adequate emergency fund set aside to cover you in the event of this unforeseen circumstance occurring.

You are in a position that many people haven’t managed to attain for various reasons, which is to have a financial safety net to fall back on. By doing this, you have given yourself the freedom to still make payments and prepare to generate alternative sources of income.

You have also maintained a good credit rating with the bank by continuing to make payments on time. This may prove useful for you later down the line.

Once you change your status to a freelance visa, you should simply update your bank records with your new residency status

R Sivaram,
executive vice president and head of retail banking products at Emirates NBD

With regard to changing your visa, this shouldn’t have any impact on your loan. In short, the bank has no concern about who you are employed by, or whether are self-employed. However, it is important to note that getting credit can be more difficult when you are self-employed.

The bank only really cares about you making payments and as long as you continue with your instalments on time, you shouldn’t have any issues.

However, if you do miss payments, generally after three consecutive months, the bank does have the ability to cash the security cheque you gave it when taking out the loan.

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

Having a cash buffer of three to six months of expenses, ideally more, is one of the most important financial safety nets a person can have during times of economic uncertainty.

Well done for recognising this as it means that you have been able to keep up with your payments, maintain your credit score and pay for your daily living expenses.

I don't believe you will have an issue with your bank regarding switching your employment status to freelance. However, it is important to give the bank copies of your updated documents when your freelance visa is approved.

Under the regulations of the Central Bank of the UAE, banks are required to maintain updated records of their customers to help manage risk.

You will need to provide your bank with copies of your updated documents, which will include your new Emirates ID, valid proof of address such as an Ejari contract or utility bill, as well as your current passport and residency visa.

You can submit the documents in person at the local branch of your bank, or it may allow you to upload them electronically.

This is an important process to complete as the bank can temporarily block access to your account until it receives the updated documents.

If you continue to be concerned about keeping up with your car loan instalments while you set yourself up on a freelance visa, you could consider selling the vehicle and paying the loan off in full.

Being debt-free can give you peace of mind and help you focus on what really matters: earning money again and working towards saving and investing for your future.

It is worth considering the cost of having a car, such as regular maintenance, yearly registration and monthly loan repayments, versus cheaper public transport options.

There are numerous budget-friendly transport options available for residents in Dubai, such as the Metro or even pay-per-kilometre car rentals if you need to go further afield for work or other commitments.

It is also important to research the type of free zone business licence and visa you need, which can also help you to save money.

A number of free zones in Dubai and other emirates, such as Ras Al Khaimah, are now offering good deals on business licences, which may also come with a free residency visa for people considering setting up their own business or becoming a freelancer.

This is worth checking out as it could save you a few thousand dirhams.

In the meantime, it is also worth considering the possibility of applying for remote work positions to keep some money coming in rather than relying completely on your savings for daily living expenses.

Depending on your skill set, check out websites such as upwork, FlexJobs, We Work Remotely, JustRemote and Pangian, which operates across five continents and connects companies with potential employees regardless of where they live.

FlexJobs also offers a free downloadable guide on how to find a remote job and start working from home, which could be a valuable resource for you in the first few months of your freelance adventure.

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 [e-mail]