The Debt Panel: Electronics manager is caught up in a loan with a 40% interest rate

The Dubai resident has debts totalling Dh87,000 but his latest loan is tipping him over the edge

Illustration by Alvaro Sanmarti
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I work as an area manager for an electronics company, earning Dh7,000. Last year, when I had a different employer, I needed a small loan for my sister’s marriage and other family expenses, such as a medical emergency. I borrowed Dh23,000, which came with a credit card with a limit of Dh5,000. The credit provider has very high interest rates, and I now owe Dh14,000 on the credit card. The personal loan has a 40 per cent interest rate, so despite paying Dh1,000 a month, I still owe Dh19,000. I have other debts too, so in total I owe:

Personal loans

Bank 1: Dh19,000

Bank 2: Dh18,000

Car loan:


Credit cards :

Bank 1: Dh14,000

Bank 2: Dh10,000

Bank 3: Dh5,000

Bank 4: Dh10,000

Total outstanding: Dh87,000

Until recently I had no problems, but the loan and card from Bank 1 is making my life miserable because of the high interest and fees and I want to close them. I tried to consolidate my debts with other banks but my company is not approved by most of them. The nature of my job is field work, so my salary has to cover transport costs across Dubai as well as my accommodation, living expenses and debt repayments.

My wife is pregnant with the baby due any moment, and I have to support my parents as well. My wife was living here but the expenses were not manageable, so she returned home to India. How can I get out of this situation? ZU, Dubai

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

While cards in the UAE have a high average annual percentage rate of around 40 per cent, and you are being charged a similarly high rate on your loan with Bank 1, I can’t understand how your liabilities with the provider have increased from Dh28,000 to Dh33,000 in such a short time frame, unless you’ve missed card repayments and accumulated significant charges. It’s a reminder to all customers to read through all terms and conditions before taking out financing and to make as large repayments as possible on their cards each month.

The challenge you face is that nearly a third of your total outstanding liabilities is in the form card debt and you are receiving punitive rates from Bank 1. While you should not be looking to increase your debt any further, you should speak to Bank 1 to see whether it is possible to restructure your repayments. Failing this, you should approach Bank 2 requesting a consolidating loan for all of your debt and, once approved, make an early repayment for all liabilities held with Bank 1, as well as your other card.

When approaching Bank 2, explain your full financial picture and how you intend to pay off all your debt in a systematic manner. You are well within the Central Bank’s loan regulations -  allowing banks to provide you with a loan up to 20 times your monthly salary - so they should be able to help you if you provide enough evidence to support your intentions.

Where possible, aim to lower your monthly expenses so you can save more and use that cash to help pay off all your dues.


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Debt panellist 2: Steve Cronin, founder of, a website for demystifying sensible investing

There are so many people in your situation, where a family issue tips them into debt. Despite you thinking there were no problems before, you were already on shaky ground with loans and growing balances on multiple credit cards. Use this current challenge as a wake-up call to transform your finances, though I appreciate it is not easy.

First, do whatever you can to improve your cashflow, increasing revenue and decreasing expenses. Ask your employer for 1) a raise if you take on more duties, 2) a salary advance of a month or more, and/or c) to have your transport costs covered. Consider moving company to one that is approved by the banks, as this will create more options for managing your debts. See if you can make other revenue on the side, by selling unwanted items you own, coaching or helping people, doing admin etc.

Minimise your expenses by reducing your living costs as far as possible without endangering your health. Track everything. All spare money should go to paying off your debt. It will be worth the short-term pain.

You have to focus on paying off your credit card debts as soon as possible. Communicate regularly with your banks and ask them for ideas. Are there any banks at all that will accept a debt consolidation loan? Check which of your four cards has the highest interest rate (likely from Bank 1) and pay that off first, paying the minimum balance on the others.

Ask Bank 1 if they will consolidate the card and loan you have with them. They may also give you a payment holiday on the loan so you can focus on paying off the card. Same for Bank 2. Do not accept a consolidation loan with a similarly high interest rate as your credit card. Avoid stretching loans further over time, as you will pay more interest.

Meanwhile do not use any of your credit cards. You cannot afford to add to your debt, even if this means saying no to some family requests. If you get deeper in debt, you won’t be able to help your family at all. Put your cards in a bowl of water and stick them in a freezer.


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Debt Panellist 3: Rasheda Khatun Khan, a wealth and wellness planner and founder of Design Your Life

Debt affects the whole family and causes huge amounts of emotional and physical stress. Falling into debt always follows the same stages: credit cards lead to a personal loan, which leads into a consolidation loan followed by another and so on. Meanwhile payments are kept up to date, often paying off the minimum, until one day your total repayments are no longer manageable.

Debtors then play one bank off against others and start missing payments here and there. The months between missing payments grow shorter, and then the banks start calling to get their money back because they have not paid them for months. This then leads to cashing in your security cheque and a legal case.

People in debt, such as yourself, cannot wait until the final stages before they address the situation as by this point they have very limited options.  To address the cycle of debt once and for all, you must first recognise the root cause.

In your case it is the omission of a miscellaneous fund and an emergency fund. You may assume these two funds are the same, but let me explain the difference: a miscellaneous fund covers those monthly expenses that you did not factor in yet they pop up every single month, each time with a different name. For example; car maintenance, family visiting, a birthday or home maintenance. An emergency fund is for the larger expenses that come up occasionally, for example; emergency travel, medical issues or even redundancy.

To build up these funds, simply allocate a set amount per month and transfer it out to a separate account that you call your miscellaneous account and emergency fund account. The funds in the miscellaneous account will go up and down each month as you use it, so just keep feeding into it. The emergency fund account, however, should hold between three to six months of your salary or household income - so build this up slowly. This offers enough security in case of emergency. When you use your emergency fund, spend the following months topping it back up again. Anticipating these costs will save you from getting into debt. You may think you cannot afford to build these funds, but actually you cannot afford not to because more expenses will come up.

And while you built up these funds, you can simultaneously tackle the debts. Unfortunately you have cornered yourself and now have limited options with the banks. Based on your current salary, you will not be able to consolidate so ask your existing lenders to restructure your card or loan. Be sure to provide your own affordability by sharing a thorough breakdown of all of your income and expenses.

Next, try the snowball effect. Concentrate on paying off the smallest credit first; once paid off, put that money towards overpaying on the next smallest credit card and so on. This can take time so persevere.

The Debt Panel is a weekly online column to help readers tackle their debts more effectively. If you have a question for the panel, write to