Lending options for credit card holders in chronic debt

Three loan options for UAE residents struggling with chronic personal debt.

Emirates NBD offers top-up loans for 'good' or 'regular paying' customers. Sammy Dallal / The National

For those in chronic debt, it’s important to take action immediately,” says Jon Richards of compareit4me.com. “Don’t let it drag on. You can request a copy of your credit report from the Al Etihad Credit Bureau, which will list all outstanding debt and give a full, clear picture of the situation.”

Mr Richards also advises comparing loan options and, if you are still unsure, booking an appointment with an adviser at your bank. Options to help residents ease their woes include:

Top-up loan

Emirates NBD and Mashreq offer top-up loans for “good” or “regular paying” customers. While Emirates NBD offers up to 120 per cent of the original loan, Mashreq offers up to 20 times your salary for a maximum of three years and with rates starting at 3.99 per cent, or a maximum of Dh1 million for up to two years, according to the bank’s website. But a top-up loan also comes with a double catch – it is considered a brand-new loan, which means paying an early settlement fee of 1 per cent on your original loan and a processing fee on the top-up amount.

Consolidation loan

A way of pulling all your debts together into one loan with the best rate, which will almost always beat a credit card rate. These are not always advertised so you will have to call banks and compare options yourself – and to reduce your monthly payment may involve increasing the loan term and total interest you pay. Kunal Malani of HSBC says: “We have seen this trend in developed markets to tidy up finances. However, it is very important that customers use this option sensibly and not allow further debt to mount on their credit cards.” Most personal loans will normally, in any case, offer you the option of refinancing existing debt.

Balance transfer credit cards

Credit card debt can be transferred onto a new credit card with a special offer rate. Mr Richards says these are a “great way” to manage finances, when themselves managed correctly. Emirates Islamic’s Easy Card, for instance, offers 0 per cent balance transfer for six months (to a maximum of 80 per cent of the new card’s credit limit), with a 2 per cent processing fee. While these can be a good short-term measure, again holders need to ensure they focus on paying off the debt without incurring further debt on the original card.

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