I have a Dh70,000 personal loan with a bank in the UAE. I have been unable to pay the instalments for a few months as I have been having financial problems and my salary is not enough to cover the payments.
I have been applying for other jobs in the hope of increasing my salary and have been offered a position outside the UAE. The salary is higher than what my current position pays.
Is it possible to pay my loan balance from another country? If so, what do I need to do to ensure that I will have no issues with the bank and move countries to start my new job without a problem? RL, Dubai
Debt panellist 1: Sameh Awadallah, acting global head of retail banking at Abu Dhabi Islamic Bank
You can pay your debt from another country. However, the crucial point to note here is to communicate with your bank.
As soon as you change employers, your bank will be aware of your employment status.
Also, if a bank knows that somebody is leaving the country and is expected to leave behind substantial debts, it can apply to the courts for a travel ban.
Banks can enforce collection even if you are in another country or jurisdiction, especially within the GCC region. I would advise you to reach out to your bank, explain your situation and intention to continue paying the loan after leaving the country.
Based on specific circumstances, a borrower’s track record of timely repayments and a willingness to pay back their debts in full, the bank may agree to a repayment plan.
Interest rates and some other terms might change, so it is important to know what these are so you can plan accordingly.
Requesting repayment breaks while looking for a job or moving to another country will provide you with some breathing space. You can also request the bank to change the repayment structure to only interest repayments in the short term, with the principal to be paid later.
It is important to note that the bank would rather receive regular repayments that lead to a debt being paid off rather than the borrower being unable to pay it because of an unmanageable payment structure in the short term.
Debt panellist 2: Jaya Ratnani, managing partner at Freed Financial Services
Being in debt is not a pleasant situation to be in. While your current situation may seem complicated, fortunately, there are ways to deal with it.
There is no legal requirement for a borrower to reside in the UAE. Banks in the UAE do accept payments from foreign countries but only after coming to an official agreement with the borrower.
However, leaving the country with unpaid liabilities could lead to legal consequences such as a civil case and travel ban. This will make it difficult for you to return to the UAE in the future.
Banks can enforce collection even if you are in another country or jurisdiction, especially within the GCC region
Sameh Awadallah,
acting global head of retail banking at Abu Dhabi Islamic Bank
The best way forward would be to approach the bank and discuss your planned relocation and intention to repay the loan. The bank may respond favourably if you explain your situation and discuss the amount you can afford to pay.
Draft a formal request to the bank and include your offer letter from the new company. It is possible that the bank will also require a guarantor who lives in the UAE to proceed with your request.
If the bank agrees to your request, it will then convert your current account to a savings account. After completing this process and coming to an agreement with the bank, you can exit the country and continue repaying your loan.
It is also essential for you to be aware of the new terms and conditions so you can plan your finances accordingly.
Debt panellist 3: Alison Soltani, founder of Leap Savvy Savers
Congratulations on your job offer. It is not easy dealing with financial problems, so I applaud your attempts to resolve your issues.
Firstly, it is imperative that you start paying your loan instalments as soon as possible. Banks are much more likely to agree to a borrower paying from abroad if they have been making reliable payments while living in the UAE.
If a borrower misses three to six months of payments (depending on the loan terms), this may be considered a default on the loan and the lending bank could file a criminal case against you, leading to a travel ban.
It is crucial for you to avoid this scenario so that you may leave the UAE, start your new job and continue paying the instalments.
To ensure that you can start repaying your loan before you leave, I recommend that you look carefully at all of your expenses for the past couple of months and highlight any purchases that were not necessary.
As a guide, necessary expenses usually comprise food, transport, housing, medical and insurance. Check whether eliminating unnecessary purchases frees up enough money in your budget to pay your loan instalments.
If you still cannot pay, research ways you can make extra money to put towards the debt — you could possibly sell unused items in your house, take on a part-time job, tutor students or provide a paid service depending on your skill set.
Once you have begun paying the loan again, contact the bank and speak with their loans department and relationship manager.
Banks are much more likely to agree to a borrower paying from abroad if they have been making reliable payments while living in the UAE.
Alison Soltani,
founder of Leap Savvy Savers
Explain your situation and show them your job offer letter as proof of future income. It may be possible to negotiate a longer term on the loan to reduce your monthly instalments. However, this will probably increase the overall interest you will pay on the loan.
Once you come to an agreement, ask that it be written on the bank's letterhead and be stamped and signed.
You should also be aware that the bank will take any end-of-service benefits or gratuity you receive, put it towards the debt and freeze your account, so it is essential that you speak with your bank as soon as possible to potentially avoid this.
If you need money to tide you over in the new country, I would also discuss this with the bank to see if it will release some funds before putting it all towards the loan.
It may also be worth seeking legal advice, particularly if the bank is unwilling to negotiate with you. But bear in mind that route could be costly and it would, in all likelihood, be more effective to demonstrate a capability to pay the loan instalments to the bank.
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 pf@thenational.ae
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How the UAE gratuity payment is calculated now
Employees leaving an organisation are entitled to an end-of-service gratuity after completing at least one year of service.
The tenure is calculated on the number of days worked and does not include lengthy leave periods, such as a sabbatical. If you have worked for a company between one and five years, you are paid 21 days of pay based on your final basic salary. After five years, however, you are entitled to 30 days of pay. The total lump sum you receive is based on the duration of your employment.
1. For those who have worked between one and five years, on a basic salary of Dh10,000 (calculation based on 30 days):
a. Dh10,000 ÷ 30 = Dh333.33. Your daily wage is Dh333.33
b. Dh333.33 x 21 = Dh7,000. So 21 days salary equates to Dh7,000 in gratuity entitlement for each year of service. Multiply this figure for every year of service up to five years.
2. For those who have worked more than five years
c. 333.33 x 30 = Dh10,000. So 30 days’ salary is Dh10,000 in gratuity entitlement for each year of service.
Note: The maximum figure cannot exceed two years total salary figure.
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