I have worked as an HR manager for a company in Dubai since November 2015. I left my previous job after completing over eight years there and then got into financial trouble. This is because my husband went to India due to a medical emergency relating to his mother. He is back now and still on a visit visa searching for a job. My current salary is Dh13,000, but I have nine credit cards with a total outstanding amount of Dh219,000. One bank converted my credit card repayment into a loan with a tenure period of 48 months and I got into trouble with another bank in April, which is negatively impacting my credit score.
I have knocked on the doors of each bank to apply for a loan of Dh170,000 so that I can close all the remaining eight cards. But none of the banks are willing to provide me with a solution. As of now I'm getting into more debt as my salary is not enough even for my or my family's sustenance. I have one son who is doing his schooling here in Dubai. I need some emergency help from any of the financial institutions here. As of now I don't know what to do. I can pay half of my salary towards a loan every month. SM, Dubai
Debt panellist 1: Rasheda Khatun, a wealth and wellness planner
We have to start addressing these problems much earlier than when the amount of debt is, in this case, 16 times your salary. Debt does not just disappear, nor does it just appear. Unfortunately many financial institutions are just not prepared to take on other banks’ debt by offering a consolidation loan. You are better off restructuring the credit card on to a loan with the same bank for the amount owed on its own card. At least you can reduce the cost of having the debt on a credit card, from an interest rate of around 20 per cent on your credit card to around 5 per cent on a loan.
Make sure you know your own numbers. Take your own income and expenses sheet to the bank and show how much you can afford to pay. Make sure you have included all other debt and the monthly repayments so you can ensure you are able to keep up with the monthly repayments for all your loans and credit cards.
Also look outside financial institutions, for example to friends and family. Again offer them a monthly repayment that you can afford to keep up. Another solution is to sell assets. Look at what you have already got and see what you can sell. Perhaps jewellery and/or your car. If you own property, a remortgage loan is a good option to explore. Then look at where you can cut costs on your monthly expenses. Perhaps rent?
A common pattern we are seeing here is people building up debt without really knowing how they can repay it and then confronting the problem only when the amount of debt accumulated is too much to cope with. At this point there are very few options to help you to find a sustainable solution. Think twice when accepting credit cards. Unfortunately they are easily available here without much explanation as to how they actually work or finding out how one intends to use the card and repay it back. If you were to understand the true cost of a credit card, I’m pretty sure it would be your last resort to borrowing money.
Debt panellist 2: Jamal Alvi, the chief credit officer at Abu Dhabi Islamic Bank
Your case is yet another unfortunate example of using credit cards as a loan/financing tool rather a payment tool. The Central Bank regulations allow banks to lend up to 20 times of salary subject to the maximum repayment period of four years with monthly instalments no going beyond 50 per cent of monthly income. Banks have varied policies of who and how much they lend to – depending on, among other things, the type of employer an applicant is working for. Your approach to consolidate the credit card debt into a single loan is the right one. But given your income and total debt level, your only chance of getting a debt consolidation loan is from the bank where your salary is transferred to. I would recommend that you approach them.
The Debt Panel brings together four financial experts: Jamal Alvi, the chief credit officer at Abu Dhabi Islamic Bank; 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.
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