The Debt Panel: 'I took out a $245,000 loan to help a friend'

The Dubai resident is seeking advice on how to pay off the debt after losing their job and facing legal action from the bank

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I took out a personal loan of Dh900,000 ($245,064) in 2018 to help a friend who had been cheated by a business partner.

However, a year later, I lost my job and the company did not pay my gratuity. As of September 2019, I had paid Dh200,000 towards the personal loan.

The bank filed a criminal case against me in December 2019 after I missed three months of payments, as I was unable to find a job and keep up with the instalments.

I requested numerous times for the bank to give me more time to find a job to restart the loan instalments, but the collections department said it would not restructure the loan until I paid 50 per cent of the outstanding amount owing.

Then, in 2021, I received an SMS stating that the outstanding loan amount had been credited and the balance was zero.

This was reflected in my statement as a loan write-off. By December 2021, I cleared my criminal case by paying a minimal fine as the judge understood my situation, removed my travel ban and also organised a residence visa.

I called the bank’s customer service twice and they informed me that my loan had been settled.

However, six months went by and I found out that I had another travel ban against me as the bank had filed a civil case based on the Dh900,000 security cheque I signed for the original loan. It did this after the new bounced cheque laws were introduced in January 2022.

My bank has also added Dh85,000 to the Dh700,000 amount that remains on the loan.

I need the bank to agree to reduce the interest and provide a discounted rate, so that I can get a restructuring of my equated monthly instalment.

After three years of being unemployed, I started a freelance job a few months ago but earn a lot less now.

Are there alternative ways that I can sort this out, as the collection department is not co-operating? When I took out the original loan, I also paid Dh10,000 for insurance. Is my loan covered by insurance and can that be used to help me? JV, Dubai

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

We understand that this must be an extremely challenging time for you and your family.

In a short period, unpaid debt can turn into a monstrous sum as the interest and penalties are added to the loan. However, there are options to help you during these difficult times.

Wanting to help a friend or family member is human nature but it is not wise to do so by endangering your own financial situation.

When you lent the money to your friend, I assume you extended your help without any legal document or a clear obligation to pay you back within a certain number of months.

I would first suggest talking to your friend to see if he is in a position to give you back a part or whole of the amount you lent to him.

If your friend is still co-operative, it is important to work out a plan on what amount of money per month they would be able to pay back.

If your friend is in a position to pay a fixed amount every month, check if your bank is willing to lower the outstanding loan amount and waive some fees in favour of a lump-sum payment.

You should also continue reinforcing to the bank your intention to pay and asking for appropriate payment terms. This is especially important as you have now found employment again.

An alternative is also to consider consolidating your existing savings and liquidating some assets back home to gather the funds to pay off the bank yourself.

Always stay in touch with the bank's collection staff and do not avoid their calls — in fact, you could try to reach out to a senior official at the bank to explain your situation and seek a solution.

Continue to ask for solutions, such as a restructuring or settlement, based on your personal and financial situation.

While you did continue to make payments for the first year post-redundancy, you may have completely stopped making payments, which led to the bank to exercise its legal right to recover the total amount due by filing a case against you.

Under the loan agreement, the bank is in a strong position to win the case for non-payment and, in a majority of cases, court verdicts are usually in favour of banks.

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At this stage, the chance for negotiation and finding solutions with the bank become weaker as it has also incurred time and costs to recover its dues.

You should try to convince the bank about your willingness to repay the loan. There are several factors considered by the bank when reviewing a settlement proposal, such as your personal and financial position, cash-flow situation and your repayment history.

Prepare a letter that explains the events leading to your current situation.

Gather all the important documents related to your situation, such as a termination letter, bank statements, cash-flow position, and other assets and borrowings to support your request for a discount against the total amount owed on the loan.

With regards to the payment you have made towards an insurance policy against your existing loan — depending on the terms and conditions of your agreement, these policies could also cover involuntary loss of employment.

However, these are typically time bound and there is a set of documents you should have completed when you first lost your job.

It is commendable that you are reaching out for assistance with your situation to put in place changes before it is too late. I wish you all the best in arriving at a positive solution with your bank, as well as making the required changes with your budgeting and spending.

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

Most banks are supportive when it comes to clients who are undergoing financial hardship, especially if the cause of a loan default is due to a job loss or pay cut and leads to a reduction in their repayment capacity.

It is extremely important to demonstrate your intention to repay the loan and give the bank confidence that you will resume regular payments as soon as your salary is reinstated to the full amount.

You should continue to make reduced payments during this time, which will show your intention to pay and will help you in negotiating a restructuring once you find a job.

Missing payments for 90 days is considered a major default and the bank will do its utmost to recover the amount by taking legal action.
Jaya Ratnani, managing partner at Freed Financial Services

Missing payments for 90 days is considered a major default and the bank will do its utmost to recover the amount by taking legal action.

In your case, when the criminal case had been filed, you opted to pay the fines and release these charges. However, this does not relieve you of your obligations to make the payments to the bank.

The bank, on the other hand, had to incur additional legal expenses to file a civil case against you to recover its dues.

While you state that you did not have the ability to pay, you have been unable to demonstrate the intention to make payments to the bank.

Your loan amount remains unpaid for three years and has led to the bank taking losses equal to the full outstanding and incurring legal expenses.

In this situation, the chances of getting a restructuring on your loan are near to impossible as it is not in the interest of the bank.

The only possibility the bank may consider is a full and final settlement with a partial discount.

Draft a formal request to the bank, show them documents about your pay cut and explain your cash-flow situation.

If you have a plan to repay through selling an asset, you should also include this information in the letter to the bank.


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You can try to arrange a guarantor and get a short settlement plan for 12 months to 18 months from the bank.

Request the bank for a waiver of the accrued interest and a discount on the remaining outstanding amount owed.

Note that the bank will release the travel ban and the civil case upon repayment of the full settlement amount.

You will need to check the type of insurance you have availed by reading your original contract.

If it was a one-time payment you made when you took the loan out, then it is highly likely that it covers life insurance only.

The policies covered under job loss include insurance premiums paid monthly, in addition to your monthly instalment amount.

It may also be worth seeking professional advice, particularly if the bank is unwilling to negotiate with you.

Debt panellist 3: Alison Soltani, founder of Leap Savvy Savers

Your case is complex, but it is definitely worth first checking the terms of the loan insurance.

Loan insurance usually covers circumstances that affect your income, such as illness, serious injury and job loss.

However, terms of the insurance sometimes stipulate that you have to make a claim within a certain time frame after the loss of income.

Nonetheless, contacting the insurer and going through the small print of the insurance documents will give you the answer as to whether you can use it to cover some of the loan.

You might also consider contacting the friend you initially took out the loan for support.

It appears that you were extremely generous and supportive of your friend, and perhaps they could return the favour and contribute towards the monthly payment.

Alternatively, seeking legal advice may be beneficial for your case.

Although costly, a lawyer may be able to settle this matter in the courts and reduce the likelihood of you having to pay the loan in full.

They may also be able to negotiate a longer loan term and reduced monthly instalments.

Finally, should you still have to pay back the loan after following all the previous steps, conduct an honest assessment of your current financial situation.

Check where you can reduce your outgoings as much as possible and search for jobs in various sectors to increase your income.

If you have assets, such as property, stocks and shares or vehicles, it might be an option to sell some and pay a lump sum towards the loan.

This is not an ideal situation, but the strain of the debt in all probability outweighs the stress of selling your assets.

Taking on debt is a burden and the fact that you have taken out a large loan to support a friend is honourable, but not advisable unless you have a secure plan in place to pay back the money.

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: November 02, 2022, 5:00 AM