The Debt Panel: 'How can I consolidate my liabilities after my salary was cut by 50%?'

The Dubai resident can no longer keep up with her monthly loan and credit card instalments, pay for daily living expenses or support her family in the Philippines

Mathew Kurian / The National
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I have a personal loan and four credit cards with two different banks. Since April, my salary of Dh5,305 has been reduced by 50 per cent because of the pandemic and I am no longer able to pay my liabilities.

My salary is transferred to my bank and it automatically deducts my personal loan repayment of Dh2,295, which left me with just Dh357.50 to live on and pay my other debts after my salary was reduced.

Thankfully, my bank recently approved a payment holiday on my personal loan and my instalments resume again in October. This is a relief, but I still don’t have enough to pay the remainder of my liabilities, send money home to my family and pay for my daily expenses.

My debts are:

  • Personal loan: Dh70,126 (Dh2,295 monthly instalment)
  • Credit card 1: Dh4,759.53 (Dh1,336.19 minimum payment)
  • Credit card 2: Dh3,747.93 (Dh638.80 minimum payment)
  • Credit card 3: Dh6,339.59 (Dh487 minimum payment)
  • Credit card 4: Dh21,918.92 (Dh 937.67 minimum payment)

I have also requested the second bank to defer my payments for my other two credit cards, which I have not been able to make any payments towards since my salary was reduced in April.

They have rejected my request on the grounds that credit cards are not eligible for a payment holiday as they say it only applies to personal loans, home loans and car loans. I am now being harassed by their collections team and they are threatening to lodge a legal case against me.

I want to resume my monthly payments and do not want to run away from my liabilities, but I am unable to do so at the moment. I am also struggling to send money home to my family.

Is there a company or a bank that would offer me a debt consolidation for all my liabilities so I can reduce my monthly payments and continue supporting my family in the Philippines? GP, Dubai

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

Over the past few months, the Covid-19 pandemic has continued to present challenges to the livelihood of individuals and families. Understandably, having your income reduced by 50 per cent must have been be a great financial setback, however, we commend your sense of accountability and commitment in meeting your financial obligations.

A number of banks offer consolidation loans so it may be worthwhile researching the best one for you and your personal circumstances.

Firstly, we advise you to proactively communicate your situation with your lenders. Provide the bank with proof of your salary reduction and emphasise that this has placed you in a very difficult situation, leaving you with no means to pay for basic necessities.

It would also be worthwhile to reiterate, in writing, that you intend to diligently meet your repayments and that you remain fully committed to clearing the outstanding dues.

It is in the bank's interest to mitigate any risks of default, so they may be more forthcoming in working out new repayment terms. Therefore, I urge you to request your bank for a debt restructuring or consolidation plan that will enable you to aggregate all your existing liabilities into a new loan with a longer tenure and lower financing rates.

This will help in substantially reducing your monthly instalment payments and allow you to service the loan with your lower salary.

Alongside liaising with your lenders, there is no better time than now to extensively review your budget and rethink your expenditures. Avoid spending any further on your cards and consider contacting any friends or family for temporary support as you weather these challenges and regain control over your situation.

It may also be helpful to explore new job opportunities that will allow you to meet your repayments every month. Understandably, this may be a difficult time to secure a new permanent job.

Debt panellist 2: Ambareen Musa, founder and chief executive of

Managing your financial commitments with just half of your regular income is going to be incredibly difficult. Unfortunately, there are many other UAE residents facing the same predicament during these challenging times. Qualifying for a payment holiday is going to be very helpful, but you will need some more support from your banks to manage your finances.

You must approach your credit card providers and request them to restructure your credit card debt. This can be done by converting your outstanding credit card balance into a fixed-interest, fixed-tenure loan. However, you must also request for this repayment arrangement to be brought into force once your original salary is reinstated.

This type of restructuring will help plug the financial drain being caused by heavy credit card interest rates and penalty fees, especially now that you're unable to even keep up with your minimum monthly payments. Approach the banks armed with proof of your reduced salary and current debt obligations.

Another option is to approach your primary lender to consolidate your personal loan with all the other credit card debt. Ideally, this would help reduce your interest payments and make the combined debt a lot more manageable. However, this may be a long shot since the bank would be taking a lot more risk by offering you this facility.

You should also look into your own financial resources to see if you can liquidate some savings or assets back home to relieve yourself of some of this financial stress. If you do have some readily accessible savings or some financial aid from your family and close relatives, you could use these funds to settle and close some of your credit card debts.

Alongside liaising with your lenders, there is no better time than now to extensively review your budget and rethink your expenditures.

Further, you could consider taking on some additional freelance or part-time work opportunities to supplement your current income, and free up some more cash to meet your debt repayments.

If all else fails, you could consider getting some pro bono legal help. The Philippine Consulate in Dubai and the Philippine Embassy in Abu Dhabi both run free-of-charge legal aid clinics every month, where lawyers offer free counseling for Filipino expats dealing with various legal issues in the UAE, including debt-related matters.

You could also seek guidance on the financial insolvency option under the UAE's new laws, and whether this legal route is a sound option for you or not.

Debt panellist 3: Stuart Ritchie, chartered financial planner at AES International

You have done the best thing possible in requesting a payment holiday for your personal loan. This allows you to use the money you’ve freed up to pay your living expenses for the next few months.

Based on your current minimum payments, however, even your full salary would not be able to cover these. A consolidation loan, therefore, will be the greatest help as it will consolidate all you owe into one affordable payment.

A number of banks offer consolidation loans so it may be worthwhile researching the best one for you and your personal circumstances.

Following this, take time to address your underlying spending issues. Based on your salary, you are struggling to afford all the repayments, send money home and cover your everyday expenses. See where you can cut back on your spending in order to alleviate some of the financial pressure you’re feeling right now.