I have always been a good banking customer, with a clear payment history on my debts. But recently my father became really sick and I have been unable to make my payments on time. I initially borrowed the money because I tried to help someone, but unfortunately that person lost their job and had to leave the country. Now I have debts in the UAE of more than Dh130,000. I work in telesales earning Dh7,000 a month and I am the only source of income for my family in Pakistan. My debts comprise one personal loan and four credit cards with four different banks.
Loan: Dh27,000
Credit card: 1: Dh19,000
Credit card 2: Dh22,000
Credit card 3: Dh10,000
Credit card 4: Dh54,000
In December I approached my primary bank (with which I have the loan and one credit card) to see if they could top up my loan so that I could close my credit card debts, but because of my credit report they were unable to process my application. Now the other three banks I have credit cards with are chasing me and I am unable to pay them.
I have missed two months’ payment on the card I owe Dh54,000 on and that bank is now filing a case against me. They did offer me an instalment plan, but it was not manageable as out of my Dh7000 salary, I am already paying Dh2,650 for my personal loan, then Dh1,000 on my credit cards, Dh1,350 for my accommodation and Dh1,000 on my other expenses. For the past couple of months I haven’t even had any money to send back home. I want to find a solution to clear my debts and am willing to pay instalments that are manageable for my salary. My company is in a process of renewing my employment visa, but they will be unable to do that if the bank files a case against me. What should I do as I need to support my parents and don’t want to leave them alone without my help? AH, Dubai
Debt panellist 1: Ambareen Musa, the founder and chief executive of Souqalmal.com
You’re in a tough situation with elderly parents back home who rely on you financially, and a mounting debt problem to worry about here in the UAE. So to make sure you’re able to honour your long-term financial commitments, you’ll have to start right at the root of the problem.
You’re stuck in a debt trap, since your monthly income (Dh7,000) is less than the equated monthly instalments on your total debt of Dh130,000, and the root of the problem is your credit card debt. You will have to find a way to swap this high-cost debt for low-cost debt to ease the pressure on your finances.
Call or visit your lenders and discuss alternative repayment options with them. The worst thing you can do in this position is to avoid having a conversation with your bank. Explain your current financial situation to them and request for a stretched-out repayment plan that you can afford, and one that will not completely drain your monthly income.
Approach your primary bank, as well as the other credit card providers, to explore the debt consolidation option to avail better repayment terms. Keep in mind that approval for a debt consolidation loan is based on the sole discretion of the bank. If you qualify, the bank can club all your loan and credit card debt into one fixed-interest loan, which can lower your interest payments and extend the repayment tenure as well.
Finally, if both the revised repayment plan and debt consolidation options don’t work out for you, you can request for repayment deferment for the loan from your primary bank, wherein the bank can offer you a penalty-free payment break for a few months. This will help you free up cash that you must save to pay off at least one or two of your credit cards.
You should also speak to your employer about your debt situation and request a few months’ salary in advance to settle your credit card debt, while exploring freelance work opportunities to supplement your income.
Debt panellist 2: Keren Bobker, The National's On Your Side columnist and an independent financial adviser
This is unfortunate situation as AH is over her head in debt. Under Central Bank guidelines no one should be able to borrow money that takes their repayments over the stated Debt Burden Ration (DBR). The DBR is the amount required to meet minimum debt repayments each month and should be no more than 50 per cent of monthly income. On a salary of Dh7,000, total monthly repayments should not exceed Dh3,500, and that is already being exceeded.
Is there no way that AH can meet the payments if the largest credit card debt is restructured? It appears that the bank has given an option that is less than the current payments, and that has to be better than not making any payments, which will have serious consequences. If no payments are made and a police case is registered, this becomes a criminal offence and can lead to imprisonment. It is worth asking the lender if there is any way of reducing the payments slightly.
Are there any other options available for reducing the debts? Are any family members able to assist? What about the person who was given the money from the loan? They are partly responsible so should find a way of helping.
In respect of the visa renewal, it is not uncommon for there to be delays and problems where there is an outstanding criminal case. This action is meant to put pressure on a person to sort out any issues. Usually applications will be rejected by government departments where an outstanding criminal case is showing on the government computer systems or if they have asked the police if they can proceed. This is not automatic, however, and some visas will be processed even if there is a case, mainly if there are dependents in the UAE. A request can be made to renew a visa on humanitarian grounds.
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
