The Debt Panel: 'I am drowning in Dh425,000 of debt and have fallen behind in my repayments'

The Dubai resident's salary was cut by almost 50% because of Covid-19 and she has started missing instalments on her loan and credit cards

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My company has been affected by the Covid-19 pandemic, which led to my salary being reduced from Dh30,000 to Dh16,500 earlier this year. I am finding it very difficult to pay my debts, provide financial support to my family at home and pay for my living expenses.

I have a personal loan and three credit cards with three different banks. I have informed all three banks that my salary was cut because of the pandemic and have also provided them with letter from my company confirming this.

Here is the list of my debts:

  • Personal loan: Outstanding balance is approximately Dh364,470 and monthly payments of Dh9,850
  • Credit card 1: Outstanding balance is Dh14,995 and a minimum monthly payment of Dh1,000
  • Credit card 2: Outstanding balance of Dh35,373 and a minimum monthly payment of Dh3,500
  • Credit card 3: Outstanding balance of Dh10,500 the bank is taking Dh1,750 per month

I have requested the banks to reduce my monthly instalments as they total Dh16,100 a month, but they are ignoring my requests. I have started missing payments and they are threatening legal action. Now that my salary is Dh16,500, I can afford to pay a total of Dh6,000 towards all of my debts, which would allow me to continue to support my family and pay for my living expenses in the UAE.

My living expenses add up to Dh10,500 a month, which includes rent (Dh3,500), groceries and food (Dh1,500), electricity and internet (Dh500), family remittance (Dh4,000), mobile (Dh500) and petrol (Dh500).

I am receiving multiple calls from the banks' collection departments and I find it very stressful as I am trapped in a spiral of debt. I know that I will not be able to financially survive if the banks refuse to reduce my monthly instalments. Can you advise me on what options I have and how to convince the banks to help me? LL, Dubai

Debt panellist 1: R Sivaram, executive vice president and head of retail banking products at Emirates NBD

These are challenging times and I sympathise with your situation. However, there are viable options that you can explore with the banks to help alleviate your burden.

There are two possible solutions that you can explore, one is debt re-structuring and the other is debt consolidation.

Under debt re-structuring, all your existing facilities such as your personal loan and credit cards with the different banks are re-structured with revised longer payment terms (up to 84 months). Under debt consolidation, all your outstanding dues are consolidated into one personal loan with revised and longer payment terms.

Technically, you fall under the Targeted Economic Support Scheme (Tess) as your salary has been reduced

Given your revised salary of Dh16,500 and your total outstanding debt of about Dh425,000, it would be advisable to consider the debt re-structuring route. This is a financial solution offered by most UAE banks and would be well suited to your situation.

To use this service, apply for the debt re-structuring programme for your loan and cards, which will significantly lower your monthly instalment obligations and help you to manage your disposable income more prudently.

I would also advise cancelling your credit cards to control spending and review your living expenses to help you manage your finances better.

Given you are being forthcoming about managing your financial commitments, and the extenuating circumstances that have caused this, I am sure the banks will view your position favourably and find a suitable solution to help you address the problem.

Debt panellist 2: Carol Glynn, founder of Conscious Finance Coaching

There are a few steps I would recommend. First, review your expenses and reduce them wherever possible, such as moving to cheaper accommodation, stopping or reducing your family remittance until your salary is increased again, changing your mobile package to a cheaper option or using public transport instead of your car.

Technically, you fall under the Targeted Economic Support Scheme (Tess) as your salary has been reduced as a result of the Covid-19 pandemic. However, the terms of this don't often apply to customers who have defaulted in the past. Hopefully, you hadn't defaulted on instalment payments before your salary was decreased.

Another step may be to speak to banks about converting your three credit card debts into a personal loan. Banks often offer transfer loan arrangements that carry zero interest for a period of time. Ensure you understand the interest rates and payment terms that apply after the interest-free period. Credit card debt is very expensive and I would recommend focusing on those debts first.

While you are working with the banks on a resolution, plan and prioritise your debt payments wherever possible. Decide which one is most beneficial to focus on clearing. There are various approaches to this, but always pay at least the minimum balance off each debt each month.

You could use the "snowball method" and pay the smallest debt first, or you could choose to pay off the most expensive debt by using the "avalanche method". Or perhaps focusing on the debt with the highest monthly payment, known as the "Kiyosaki method" is a better option. Prioritising your debts based on one of these three methods could be beneficial to you.

Debt panellist 3: Steve Cronin, founder of

Your monthly repayments were already more than 50 per cent of your previous salary before it got cut. This was a warning sign that you were financially vulnerable. However, you still have a job and a reasonable salary, which puts you in a better position to negotiate with the banks compared with many who have no income at the moment.

The Central Bank of the UAE has extended the Tess scheme until June 2021, so in theory you should be able to get a three-month payment holiday from each bank with no interest penalty as you have documented evidence of a near-50 per cent pay cut.

Continue to push the banks on this – you may need to go to the branch and insist on talking to the branch manager and/or try to talk to a more senior loan officer at the bank's head office.

If you make no progress, contact the UAE Central Bank's Consumer Protection Department, by phone or in person at one of their branches. They will let you know your rights and what you can do about it.

Your card balances are not that big, but they will balloon if you keep missing payments. Your personal loan is fairly large, so defaulting on the loan by missing three payments would create a serious situation. Ideally, you should focus on paying off the two cards with lower balances to reduce the complexity of your finances, but you currently don’t even have enough to pay your monthly personal loan payments.

One way out is to find a bank that will grant you a consolidation loan, which will wrap all your debt under one loan with a lower interest rate. You are well above the minimum salary of Dh8,000 for a consolidation loan, so it should be possible.

Make it clear to the banks that your job is secure and you have a plan for paying back your debt responsibly. If your company is planning to reinstate your previous salary in the coming months, make the bank aware of that as well. Push hard for this consolidation loan, as it will help you a lot. You will likely need to increase the term of your loan as monthly repayments cannot be more than half your salary.

Meanwhile, you must do everything you can to reduce your expenses so you can pay off more debt. If you can reduce or stop your remittances to your home country, this will help significantly. Are you able to borrow some money from family or friends? I appreciate none of this is easy for you or your family, but you are all in this together – if you fail financially, then so will they.

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