I have had a debt problem for the last six months and unless it is solved immediately, I will suffer many problems. I was working in the health care industry in Dubai for three years earning Dh7,700. Now I work in Fujairah as a medical laboratory technologist earning Dh9,000. My end of service gratuity from my last job, of about Dh9,000, was taken by the bank I have the loan with. Due to a personal financial crisis, for the last four months I have been paying Dh1,000 in fees such as late payment fees and over limit utilisation. I need to clear the outstanding payments with a loan of about Dh10,000 to Dh20,000 so that I can live without paying this Dh1,000 every month. In about two months, I will complete six months in the new company and then I can take a consolidation loan or a top up.
My debts are: outstanding / monthly payment
Loan 1: Dh95,000 / Dh3,275
Credit card 1: Dh6,783 / Dh653
Credit card 2: Dh7,839 / Dh653
I borrowed the money two years ago (back then the debts were about Dh60,000) to help finance my wife’s business but I lost everything and we are now divorced. When I was living with my wife, my monthly expenses were Dh4,000, now they are about Dh2,500. I also send money to my mother and five children in my home country. The money supports my two sons, who are studying accounting and engineering but I cannot support my three daughters, who are all under 10. How can I get out of this vicious circle? MA, Fujairah
Debt panellist 1: Shaker Zainal, head of retail banking at CBI bank
You currently owe approximately Dh110,000 across two credit cards and a personal loan, and if you continue to miss your monthly payments, this will increase significantly, particularly as you will be accruing a high-rate of interest on missed credit card payments. You must take decisive action before your debt becomes uncontrollable.
You have not made it clear in your question whether your liabilities are with one or more than one provider or whether you have entered a dialogue with your bank or credit card providers about your financial situation. Given that your employment tenure is less than six months, you may find it difficult to obtain finance from new lenders. Therefore, initiate a discussion with your existing primary bank to kick-start your plan to become debt free.
You can discuss the potential to restructure your loan and convert your remaining card debt into the existing personal loan to create a consolidated single monthly payment, all be it with a longer repayment tenure. You should present a plan that demonstrates the full extent of all your liabilities and current monthly payments as well as present a repayment plan which is feasible and well-thought out. Your plan should take into account your salary, current financial commitments and monthly expenses. Remember, you will only benefit from your restructured finance if you do not incur any fresh debts, so it is important you can remain financially disciplined and can commit yourself 100 per cent to the revised repayment plan and longer loan repayment tenure.
Make sure all correspondence with your banks is in writing to guarantee you have an accurate record of your discussions should you need to refer to them at a later date.
You must also find ways to cut costs and increase your income: If possible, can you ask a close relative for an interest-free loan, can you move to cheaper accommodation and you must also reduce all unnecessary spending. Finally, if you have assets available, you may consider selling some of them to reduce your overall debt burden.
Debt panellist 2: Steve Cronin, founder of DeadSimpleSaving.com, which helps residents invest sensibly
I'm sorry to hear you lost everything backing your wife’s business. It appears you have got back on your own two feet with the new job and just need to get through this rough patch.
At the moment the fees are preventing you from paying back the loans properly. I suggest talking to your bank and explaining your situation – talk to the most senior person you can find. You have a better-paid job now so you have positive news for the bank. They may even be prepared to give you a payment holiday or halt the late payment fees for the next two months.
Avoid taking a loan to pay off the penalty charges from another loan – ideally ask the bank to restructure the entire loan. Talk to one or two other banks also, as they may be willing to take on the entire loan at a better rate and on better terms.
Try to minimise your use of credit cards. The balances are fairly low at the moment, but they will grow rapidly. As soon as you are able to start paying the minimum balance on your loan, try to pay off your credit card balances as fast as you can. Avoid putting anything additional on the cards also. If you can get a consolidation loan including your card balances, this should reduce the interest rate on the debt. Be wary of loans with interest rates as high as credit card debt (e.g. 3 per cent per month or 40 per cent per year).
You may have to accept a lesser quality of living for a few months, so you can increase the amount of your monthly income you have left over. See if there are ways to reduce phone bills, travel costs and accommodation costs. Is there a family member or friend who can lend you some money to support your daughters until times are easier?
Look for ways to boost your income – ask your employer if there are additional tasks you can take on, sell some possessions or offer services to others around you or online if you have specific skills. Also, would your sons be able to take on part-time jobs while they are studying?
Debt Panellist 3: Rasheda Khatun Khan, a wealth and wellness planner and founder of Design Your Life
Untangling yourself from the spiral of debt is challenging. The first step is to cut back on your lifestyle costs as much as possible. Consolidating your credit cards is only be a solution if the monthly commitments are affordable. Otherwise you will find yourself in credit card debt again.
Approach the bank you have your personal loan with and request a restructure. Lowering your monthly commitments by stretching the term over a longer period will help with affordability. This option does mean you end up paying more for the loan in the end but right now you must prioritise the monthly affordability. If you have any bonuses from your current job, use them to pay down the credit cards. Start with the card that has the lower balance and try to pay this down first.
It’s always tricky coming out of a loss situation. Losing money to a failed venture can set you back months or even years. It’s so important to ensure that you invest into businesses you can afford to take on. This means you have enough savings to put into the business yourself with minimal borrowing. The minute you borrow money to start a business means you have to generate double figure growth rates just to cover the cost of borrowing before making a profit. It puts a lot of pressure on the entity to succeed.
You have managed to find your way through a divorce and an overall financial loss and made it this far so well done. Now it is time to take back control of your finances.
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