The Debt Panel: 'Can I leave the UAE and pay my debts from another country?'

The Dubai resident is planning to move home to be with family, but is worried that her bank will freeze her end-of-service gratuity to pay off her debts

My family left the UAE in December because we couldn't afford to pay our sons’ school fees anymore. I have remained here to continue working so I can financially support my family and pay off our debts.

I am finding it very difficult without my family and they are also lost without me. I resigned from my position and have already been applying for jobs back home. I plan to leave the UAE at the end of the school year.

However, I am worried about the debts we have here. While I haven’t missed any payments, supporting two households in two countries is a huge strain on our finances and my husband is diabetic and not working.

I plan to use some of my end-of-service benefit to pay off part of our debt, but I will need most of it to take home with me to continue supporting my family until I start working again.

We came here to work and make money to buy a house. But our children couldn’t attend a public school, so we went from one loan to a top-up loan, to a second and a third credit card to pay school fees. Instead of making money, we had to borrow money constantly just to send our boys to school.

Would it be possible to continue paying our UAE debts from my home country? Are banks open to this option during the pandemic, particularly if we haven't missed any instalments – or will they freeze my entire gratuity and I won't be allowed to touch it? TA, Dubai

Debt panellist 1: Philip King, head of retail banking at Abu Dhabi Islamic Bank

This is a very challenging period for many individuals and families in the UAE and I sympathise with you on the immense pressure you must be facing, both financially and mentally. It is great to see that you have been consistent with your payments, despite your circumstances. Your sense of accountability and commitment to repaying your finances will benefit you greatly when negotiating with your bank.

While cards are typically beneficial for short-term financing needs or emergencies, they could be detrimental in the long term. If not managed properly, they can pose several risks, including overspending, high interest rates and unpaid balances that will have a direct impact on a person's credit score.

Firstly, we highly recommend that you inform your bank about your resignation and plan to return home. It is essential that you explain your situation to your bank, reiterating that you intend to meet your financial obligations and will continue making your payments. Also tell them that you are actively looking for a job and/or alternative sources of income in your home country.

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There is no requirement for you as a borrower to maintain a residence in the UAE while your loans are not yet fully paid

Based on specific circumstances and a borrower’s track record of timely repayments, proven ability and willingness to repay their debts in full, the bank may be able to agree on such a repayment plan.

In terms of your end-of-service gratuity, you will need to refer to the terms and conditions of your loan agreement for more clarity on your rights and obligations in this situation. Typically, loan agreements include a clause that allows lenders to allocate end-of-service gratuity payments towards debt repayments. Banks usually mark this as "final pay" and may use it to pay off your outstanding debt.

This is done as a safety measure for the lender, ensuring that the borrower will not default. Therefore, it is vital that you alert the bank about your plans to move back to your home country.

Once you reach a mutual agreement with your bank, it would be best to have it in writing. A formal clearance letter should support your eligibility to exit the country without being questioned at immigration.

Living with debt can be distressing, however, we encourage you to continue your active job search. In the meantime, it is also highly recommended that you decrease your expenditure as much as possible through stringent budgeting.

Debt panellist 2: Stuart Ritchie, director of wealth advice at AES

There is no requirement for you as a borrower to maintain a residence in the UAE while your loans are not yet fully paid. Payments can be made while you are outside of the UAE. You will need to come to an agreement with your bank if this is what you would like to do, allowing plenty of time to put your affairs in order before moving home.

They may be supportive if you have been able to keep to the repayment schedule so far and can prove you will be able to continue to make payments in the future. Your bank may change the interest rate on your debt to agree to this; it is important for you to be clear on what the new terms are so you can plan accordingly.

However, if you leave without repaying your debts and without coming to an agreement about how these will be repaid, or if you have missed three consecutive or six non-consecutive instalments, you could be detained at the airport if a travel ban is issued against you.

The consequences of leaving could include delaying your departure or even being faced with legal charges, and being marked as an absconder in immigration records.

Banks in the UAE have the right to demand immediate and full settlement of your debts when you’re leaving the country. In fact, your personal loan contract may even entitle your bank to offset your end-of-service gratuity benefits towards the outstanding loan amount.

Banks do this as a precautionary measure to ensure you do not leave with any outstanding debts and to protect their interests. Given you mention you have made all repayments, this is unlikely to be the case providing you reach an agreement with them.

Seeking a repayment break while you repatriate and search for employment will allow you some time to organise your finances, as will asking the bank to change the repayment structure to only interest repayments in the short term, with the principal part of the loan to be paid at a later date.

Debt panellist 3: Ambareen Musa, founder and chief executive of Souqalmal.com

Since you're planning to move back to your home country, you will be obligated to repay and close your outstanding credit card debts and personal loan before you go. Banks in the UAE have the right to demand immediate and full settlement of debts when your employment contract ends and if you plan to leave the country.

Banks are alerted when your final salary and end-of-service benefits are credited into your account. This transaction triggers a red flag that signals that the account holder may leave the UAE. If any of your credit cards or loan is with your primary bank, it has the right to withhold your end-of-service benefit to ensure they are able to recover your debts, at least partially.

So, what are your options? The ideal way to go would be to make a lump-sum payment against your credit cards and settle your loan before you exit the UAE. The banks could allow you to close your debts with a lower settlement amount and waive certain interest charges and fees if you were to make an up-front repayment. This would require tapping into your savings and investments or asking for financial assistance from close relatives.

The other option is to approach the bank and negotiate a restructuring of your outstanding credit card balance into a fixed-rate, fixed-tenure loan. This would convert your credit card debt into a loan arrangement and help to reduce the heavy interest you are currently being charged.

If your primary bank can consolidate your loan and credit cards into a single loan, that would also make the repayment a lot more manageable. However, banks would only be willing to go down this route if you were to find a job and continue working in the UAE.

Regardless of the option you choose, once your debts are settled, you must obtain a no-liability letter from the bank and ask them to return any post-dated cheques you signed as security against the loan. It is also important to review your credit report to ensure there's no mismatch in bank records.

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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