The Debt Panel: ‘Can insurance help me settle my Dh2.7m loan?’

The Dubai resident is struggling to repay her liabilities after losing her job in 2015

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I have had a loan since the late 1990s, as well as credit cards in addition to another loan I took out a few years ago. However, I have been unable to pay regular instalments as I lost my job in 2015.

Both loans have been restructured a number of times. One loan is for Dh2 million and the other is Dh700,000, and I was paying monthly instalments of Dh50,000. At the time, I was heading a company and could afford the payments.

Since I lost my job, I was working as a consultant on an ad hoc basis and was paying smaller amounts towards the loans.

However, I realised I could not continue with this approach because of the accumulated interest and penalties that were building up.

A couple of months ago, a court froze my bank account and imposed a travel ban on me. I currently have a lawyer who is discussing my situation with the bank’s legal team, but I still do not have a job and no means to pay the loan or support my family.

I am desperate to get a job and be in a position to negotiate and solve this problem.

My question is: if the loans are insured, can they be settled through the insurance companies? Or is there anything else that you would advise me to do to solve my problem? SM, Dubai

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

I’m sorry to hear about your situation and it is commendable that you are trying to find a workable solution so that you are able to meet your commitments.

As a first step, please continue to discuss with the bank, directly or through your lawyer, to reiterate your current situation and request for assistance with arriving at a viable settlement plan.

Request for a review of accrued penalties and other charges, considering the long vintage of the loan. Evaluate, if you have not done so already, if there are any assets that you can liquidate in the UAE or back home that you can use to settle part of the outstanding amount.

While loan insurance normally covers against any unfortunate events, please ask the bank for a copy of the relevant terms and conditions to understand if there are other coverages that may be available.

I wish you the best of luck in arriving at a good settlement plan with the bank and also in finding new employment soon that can help you make the required regular payments while also taking care of your daily requirements.

Debt panellist 2: Jaya Ratnani, managing partner at Freed Financial Services

Many people require loans and debts to carry out business investments or meet other responsibilities. While these are justifiable, it’s important that you don’t let them turn into bad debts.

Restructuring a loan is short-term solution and is usually done for one or two years. There are Central Bank guidelines on the maximum number of restructures that can be done. In addition, one needs to have a fixed source of income, namely salary or business income. Since you do not have a fixed job, this option is not possible.

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While loan insurance normally covers against any unfortunate events, please ask the bank for a copy of the relevant terms and conditions to understand if there are other coverages that may be available
R Sivaram, executive vice president and head of retail banking products, Emirates NBD

There are options of debt settlement that can be discussed with the bank. Since your loan is more than 20 years old, you would have already paid a substantial amount of interest to the bank. At times, banks are willing for a debt settlement negotiation where they get a lower amount than what is due.

You could also seek the help of professional debt negotiators who can help choose the right programme for your needs.

If you are making ad hoc payments without an agreed solution from the bank, it will be considered as a default and the bank is within its rights to file for legal action. You can explore the possibility to route your plea through the court and can apply for insolvency.

Under this law, borrowers are provided methods of repayment that offer protection from criminal prosecution. A court expert is appointed who will co-ordinate and produce a plan to settle the financial liabilities and fulfil all obligations under the stipulated plan.

Regarding the personal loan insurance, you will need to check if the monthly premium you were paying covers job loss or if it’s comprehensive coverage that covers only death or disability. This will be mentioned in your original loan contract, which you should have kept a copy of at the time of signing up for the loan.

To improve your current financial situation and seek stability, you must look for a suitable job instead of taking work on an ad hoc basis. If required, seek help from your peer groups to find the right work opportunity. I hope you will be able to sail through this tough situation.

Debt panellist 3: Nathan McFarlane, founder of AskHelpWith.com

This looks like an extremely difficult situation to be in. The loans are substantial amounts and they pose extra difficulties.

To have loans of this level, my assumption would be that you would have other assets? If so, I would start to look at selling other assets you have, including properties, and downgrading your lifestyle in the interim to solve these problems.

In the event you do not own any properties or other assets, this makes your situation much more difficult indeed.

Insurance policies on loans often cover payments for interim job loss, but I find it unlikely that it would cover such a long period of unemployment.

Getting legal advice at this stage is certainly a smart move if you do have access to it.

I think it’s always important to remember that banks want to recoup funds and are willing to negotiate, particularly when it comes to larger sums of money.

As I always advise, keep constant contact with the bank to minimise further issues. Best of luck.

Updated: December 22nd 2021, 5:06 AM