I have lost two jobs in the shipping industry in the last two years due to market conditions, the first time in 2016 and the second in 2017. I have finally managed to get a job with a reduced salary of Dh22,000; I previously earned Dh29,500. During the time I was unemployed, I managed to pay my bills, rent and school fees by taking out credit card loans. At the moment my monthly instalments are about 70 per cent of my Dh22,000 monthly salary (which is paid to my primary bank) and my outstanding debts are:
Bank 1: (my primary bank)
Credit card 1: Dh100,000 - converted into monthly instalments of Dh8,000
Credit card 2: Dh21,000 - converted into monthly instalments of Dh1,600
Car loan: Dh36,000, monthly repayments of Dh2,073
Credit Card: Dh36,000, converted into monthly instalments of Dh1,700
Credit card: Dh16,000 - paying the minimum of Dh800 as I unable to convert into instalments
Total owed: Dh209,000
My credit rating with Al Etihad Credit Bureau is 570.
To give me breathing space, I am surviving on balance transfers between my various cards. I have not taken on any new cards since 2015 and I took on my car loan in 2015; I another 16 months to go. I am managing to make all my monthly payments within the due date but this means I cannot be helped. My primary bank says because I have not defaulted and make regular payments, my case cannot be dealt with by the collection unit. They also said that because my salary is already being credited to the bank, they cannot offer me a consolidation / buy out loan – nor can they extend my credit card loans to reduce the amount as the maximum is 24 months, which I already have in place. The other issue is that my company is not on banks' approved employer lists.
To resolve my situation, I have moved from a two-bedroom home to a one-bedroom unit to secure a lower rent and shifted my son to another school to reduce the school fees by Dh18,000 a year. But I am paying approximately Dh15,800 in debt repayments a month from a salary of Dh22,000. This does not leave me with enough money for expenses such as rent, school fees and groceries. My wife does not work. I would like a reduction in my monthly payments, particularly from my primary bank, where my repayments come to Dh12,000 a month. IK, Abu Dhabi
Debt panellist 1: Shaker Zainal, head of retail banking at CBI
You have taken the right approach to engage and restructure your debts with all your banks, to reduce your overall monthly outgoing payments.
Each bank has its own restructuring policy and what they offer may not always be what is desired. Your primary bank, where your salary is paid into, should be able to provide you with some relief by extending your tenure. Bring this to the attention of the management of your primary bank and request them to consolidate all your loans with them, including the car loan, for a period of 48 months.
That would be a loan of Dh157,000 (Dh100,000+Dh21,000+Dh36,000 =157,000) for four years and enable you to bring down your current monthly payments of Dh11,673 to your primary bank, to a range of between Dh3,500 and Dh5,000, depending on the interest rate.
All banks value long-term relationships with their customers and are aware of circumstances caused by an unexpected event. Therefore, they are likely to accommodate and support your request, particularly as you have not historically defaulted, despite the challenges you faced.
Your key strengths are that you have been a good borrower with a strong repayment track record and, additionally, the fact your salary is transferred to your primary bank should provide them with adequate level of comfort. These two elements should surely help your case.
Once this is done, you will have some money to spare, with which to close out both of your other cards.
In case of short-term financial stress, consider bringing in some funds back from home, if you have investments or assets that can be easily liquidated. Another option is to take out a personal loan there, if you’re able to secure a lower interest rate.
Debt panellist 2: Ambareen Musa, founder and chief executive of Souqalmal.com
Your current debt-to-income ratio is very high, exceeding the standard 50 per cent stipulated by banks in the country. With your debt repayments obviously putting a strain on your finances, you must reinitiate the conversation with your primary bank. Explain your financial difficulties to them and how you are struggling to keep up with your current repayment schedule. Contrary to what you believe, defaulting on your loans will not make it any easier to negotiate your repayment terms. In fact, once your debts are rolled over to a collection agency, it will become nearly impossible to negotiate directly with your bank.
Since your primary bank is not willing to consolidate all your debts, try to convince them to consolidate just the two credit cards and car loans that you owe to them. Since these form the bulk of your debts, it would make a significant difference if the bank was to lower the combined interest rate on them and extend the tenure to 48 months. This would help spread out your instalments and give you the financial leverage to settle the debts you owe on the other two credit cards.
If negotiating with the bank yourself does not help, you could enlist the services of a third party to take over the negotiations on your behalf. You can reach out to debt management and counseling companies, who may be able to negotiate better repayment terms for you.
While you're dealing with the banks, explore all your options on the personal front too. You may want to consider tapping into your personal savings or any investments you have back home. Liquidating just enough assets to free up cash to pay off Bank 3's credit card would also be a good idea. This is because you're only making minimum payments every month and are accumulating interest at a very high rate, which is typical of credit cards in the UAE.
Banks are most likely to cut you a good deal if you offer to put down a lump-sum payment towards settling your credit cards. This may also involve a partial waiver of the interest you've accumulated so far. And that's exactly why it may make sense to focus your financial resources towards immediate repayment. __________
Debt panellist 3: Steve Cronin, founder of DeadSimpleSaving.com, which helps residents invest their own money
Using credit cards to maintain your lifestyle in between jobs is understandable but rapidly creates debt problems, as you have discovered. Saving a cash buffer of up to six months’ expenses while working will help to keep you going for a while, though not for a long period of uncertainty like you have faced.
The shipping industry has structural oversupply, which means fewer well-paid jobs may be available. You may need to assess your skills and see if there are other industries that could benefit from your experience. Keep an eye out for any jobs out there in shipping and keep networking – many jobs are not advertised. A job with a company that has stronger ties to local banks would help to reduce your interest rates. Meanwhile, see if you can push for a pay rise, promotion or extra work at your current company.
The interest rates on your credit card loans are extremely high, given that over 24 months you are having to pay instalments that add up to nearly twice the amount originally owed. Talk to other banks and see if they are willing to take on the debt at a better rate if you move your salary to them – after all, you have done well not to miss any payments and have a reasonable credit score. Your primary bank is making a lot of money out of you and refusing to reduce the interest rate without good reason. Try to discuss the situation with as senior a person as possible at the bank and raise the prospect of complaining to the Central Bank of the UAE if no progress is made.
Until this situation is resolved, you will need to continue to reduce your expenses and find additional sources of income. Your wife may have to start working, at least temporarily. Make sure that you discuss the financial situation together and that you are not trying to shoulder this burden alone.
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 firstname.lastname@example.org