I am a sales manager earning Dh8,500 a month. I have been in the UAE for 20 years and currently owe about Dh200,000 to four different banks in credit cards, personal loans and an auto loan. Altogether I have six different liabilities. It’s been 14 months since I first started defaulting on most of my liabilities. I took the loans out two years ago and used my credit to invest Dh150,000 into a friend’s business, which turned out to be a scam and I lost all the money. I filed a police case and he was caught. The court sentenced him to nine months in jail but no money was recovered.
I was left with all the liabilities plus my family was here and I had responsibilities towards them. I contacted all the banks two years ago and informed them of my situation but unfortunately nobody responded strongly or took it seriously until just over a year ago when I first failed to pay. My family has now left the country and I have ended up becoming homeless. I could have left the country but I didn’t because I want to face the banks and the law as it’s my mistake. Until April 2016 I was paying Dh8,000 of my salary to the banks which was still not enough. I am still homeless and live in my car in Abu Dhabi. I sleep there or on street benches. Sometimes I go and stay with my younger brother in Sharjah as he has a room where I can wash and rest. Where can I go from here? AI, Abu Dhabi
Debt panellist 1: Rasheda Khatun Khan, a wealth and wellness planner and founder of Design Your Life
Surrounded by a mountain of debt is certainly not a situation anyone wants to be in. Not only do you need to address the repayment strategy but it must be having a huge emotional impact too.
It is definitely worth meeting with the banks again as their decision could be different from two years ago. Start with the bank you have the largest liability with. As they already have an agreement with you, they may also consider consolidating all the other cards too.
Your ideal solution is to get all liabilities consolidated into one or two longer term personal loans. Also look out for credit cards with 0% balance transfers. Make an appointment with these banks and explain where you are at. Be armed with your strategy to repay. Have your income and expenses clearly listed together with how much a month you can afford to pay towards debt.
Another option is to work the snowball effect. Take one card at a time and repay as much as possible, once one is cleared, close it down and concentrate on the next one. Dealing with one card at a time is emotionally fulfilling as you can count down the number of liabilities you have.
Also spend some time addressing your living situation. Finding a fixed place to stay is very important for your emotional and mental state. Dealing with financial distress and not being with your family is already taxing on your emotional state; to compromise your personal space and hygiene too is not a great foundation to help you pull through this situation. There are many sharing options you can consider. Have this be your first priority so you can be in the right head space to approach the banks and build up to your repayment strategy.
You have also highlighted a common mistake that’s made far too often in Dubai — using credit cash withdrawals for long-term investing. This is a very expensive way of investing making whatever investment you are about to make, into a highly risky one. Taking smart amounts of risk is essential but with no back up plan, it will only fall down. Not only are you being charged interest of around 15 per cent — 20 per cent, there is no repayment plan which means your investment needs to make over 25 per cent to be even worth while considering. Always have a back up plan when taking on investments especially business investments.
Debt panellist 2: Keren Bobker, The National's On Your Side columnist and an independent financial adviser with Holborn Assets
It is commendable that AI wants to stay and face his debts and I applaud his ethical stance but I fear it may be too late to rectify this situation. I note that the majority of the debt was an investment in a business scam and it is very unfair that he has not received any money back. But it doesn’t look as if any funds will be forthcoming either so as the borrowings are in his name he has full legal responsibility. It’s a harsh lesson to learn but no matter what you invest in, even if with friends or family, it is important to get full details and be sure that you are not taking excessive risk. It’s a double blow to be let down by a friend.
I understand that AI has been using most of his salary to try to make repayments and does not have enough left over to provide a roof over his head. I presume he has no family members who are able to assist. It is disappointing that the banks did not reply when he first contacted them so that arrangements could have been made to structure a repayment plan. While I doubt he could have paid the full amount the banks would be doing the right thing in allowing more time for debts to be paid back and would probably have a better chance of receiving all that is owed albeit over a longer period of time.
Once someone misses a number of repayments, usually three, a bank has the option to register a police case for non payments of debt and this usually means that a person will be detained if they attempt to leave the UAE. As far as I am aware there are no pending police cases so AI is still able to leave the UAE and join his family. While I do not advocate people “doing a runner”, he has stated that he has the intention of repaying his debts and he can do this from outside the country. If he is unable to make the repayments it is likely that there will be police cases registered before too long and this could result in imprisonment for debt and without an income he has no ability to repay or to assist his family. It is far from an ideal solution but considering the current circumstances he has few other options at this time.
The Debt Panel brings together four financial experts: Jamal Alvi, the chief credit officer at Abu Dhabi Islamic Bank (ADIB); Ambareen Musa, the founder and chief executive of the comparison website Souqalmal.com; Rasheda Khatun Khan, a wealth and wellness planner and founder of Design Your Life; and Keren Bobker, The National’s On Your Side columnist and an independent financial adviser with Holborn Assets in Dubai. Together they answer queries in a weekly online column to help readers better tackle their debts. If you have a question for the panel, write to pf@thenational.ae.
