Illustration by Alex Belman
Illustration by Alex Belman

The Debt Panel: 'I am struggling to repay Dh500,000 in debt after my salary was slashed by a third'



I really need help with my four credit cards. I have just been paying off the interest for the past three years. I owe about Dh200,00 on the cards alone with that amount barely changing despite all the money I have paid for them. I borrowed the money two years ago to support my daughter's schooling and bought land in my home country of Trinidad and Tobago, so that I could build a house.

My total debts are:

Credit card 1: Dh120,000

Credit card 2: Dh30,000

Credit card 3: Dh30,000

Credit card 4: Dh20,000

Personal loan: Dh302,000 (Dh7,710 monthly) 

Total: Dh502,000

I work in the oil and gas industry and while my salary was Dh19,000, it has been cut drastically to Dh13,000, which is not enough to cover the cards. The banks are killing me with the interest eating up every last dollar each month. They are refusing to offer me a settlement plan, instead demanding I pay up in full. The bank attached to credit card 1 bounced my cheque this year and the case was later closed. Now they have reopened the case and bounced another cheque I gave them two years ago. I cannot go on with this pain and torture. The collection people from each bank call three to four times a day threatening to open a police case. I cannot even get a buy out from any bank because my credit rating is bad. It is unbearable now. My monthly living expenses are Dh4000, which includes utilities, food and transport. What do you suggest? SK, Abu Dhabi

Debt panellist 1: Kunal Malani, head of customer value management at HSBC

You describe a classic debt spiral - a situation where a borrower is barely able to cover the cost of interest payments due and with finances so stretched that there is no chance of refinancing to repay principal.

The fall in your earnings has complicated things. Your personal loan is now bigger than the 20 times salary cap set by the Central Bank of the UAE and, when considering your credit card balances, your overall debt repayment burden makes it unlikely  banks would offer a new loan to refinance your borrowings.

A restructuring settlement with your creditors is the most immediate way forward. To make that happen, you must speak with more senior executives at your banks, explain your situation transparently, the determination you have to clear your debts and why their help - through a restructuring - will enable you to repay.

You could also sell the land your bought in your home country to settle your debts here. If you choose to sell your land, you could use those proceeds to pay off the debt carrying the highest interest cost. This will most likely be your credit cards.

Once you are on a path of sustainable debt reduction, you will need discipline to remain there. The launch of the UAE’s Al Etihad Credit Bureau should be of assistance.

The Credit Bureau is a central source holding information on all debt owed by individuals. This will help ensure banks get a full and accurate picture of outstanding debts, personal loans and credit card obligations from a loan applicant, enabling a clearer assessment of repayment capabilities to be made at the outset.

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Read more:

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Bounced cheques in UAE: new rules 'a progressive step for the justice system'

It is possible to restructure debt directly with UAE banks, a Sharjah resident reveals how

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

You've ended up with a significant amount of debt, 38 times your monthly income to be exact. And the biggest mistake you made was to rely on credit cards to meet your financial needs.

You will have to up your negotiation game with the banks. Get in touch with the individual banks and tell them clearly you have every intention to pay off the outstanding balance, but you can only do so if this debt is restructured into a fixed-interest fixed-tenure loan. This will not only stop the accumulation of interest but also put you on a systematic repayment plan. If the bank agrees to this, great, if not, you will have to continue making the minimum payment on all the cards as you figure out how to repay and close the individual credit card accounts one by one.

Since the debt collectors from all the banks have been calling you incessantly, you have to cut down the number of debts first, to give you some breathing space. The ideal strategy would be to pay off the credit card with the smallest outstanding balance, and then close that credit card account and move on to the next one.

Now, how do you plan on gathering together the funds required to pay off these debts? The first step would be to optimise your income by cutting down all avoidable expenses. This will require big changes like moving to a cheaper accommodation, and small ones too like swapping cab rides for metro travel.

Can you reason with your employer that since your salary has been slashed drastically, you need a few months in advance or an interest-free loan to help you keep up with your financial commitments? It also wouldn't be a bad idea to keep abreast of new job openings in your industry to help you get back on your previous pay scale. If your employment contract allows, you may even consider taking on a freelance opportunity or part-time job elsewhere to earn some extra income.

Looking at your personal resources, can you tap into your existing savings or liquidate your assets to pay off the debts? You could also approach close relatives and family members to request an interest-free loan. And remember to use any extra funds you manage to collect to pay down your debts and not to supplement your disposable income.

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Read more:

The Debt Panel: 'My friends pay my food and transport bills because my salary is eaten up by debts'

A nine-step guide to help you renegotiate bank debts in the UAE

The Debt Panel: 'I bailed out my mum when my dad died and now owe over Dh240,000'

The Debt Panel: 'I borrowed Dh50,000 on credit cards to pay family medical expenses and friends' shopping bills'

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Debt panellist 2: Rasheda Khatun Khan, a wealth and wellness planner

Credit card interest is the highest borrowing rate there is. Typically the interest rate is around 35 per cent per annum. It should not be used for long-term borrowing, like purchasing land or building a home. No property or any other investment can sustain a growth rate of more than 35 per cent every year. This means you have already paid far more than the original purchase price of your land investment.

If you are also using credit cards to pay living expenses like school fees, because you cannot afford it from your salary, then the problem is a lifestyle affordability issue. The pattern of debt will only continue no matter how many times you consolidate. In this case, you need to consider what lifestyle is affordable for your current salary and family situation. 
Here is my suggestion for your next steps:

1. All communication with the banks should be in writing - both your emails and the banks' replies. This way if it ends up being a legal case you can present your attempts to repay.  This includes any settlement requests, pleas to make affordable repayments and explanation from you as to why you cannot keep up the repayments, ie reduced salary. I suggest you get a current salary letter and present it to the banks as evidence of a lower salary.

2. Make any payment, even small, towards your credit cards every month. At least the bank or the courts can see your physical attempts to make repayments.

3. Request an interest statement from each bank so you can see exactly how much interest is being charged. If this is unreasonable, request the bank to look into it and see if there is another solution based on affordability.

3. Contact a lawyer to represent you. They can then contact the banks on your behalf and will understand from a legal perspective where you stand. Do this before another case is filed as you may be able to come to a resolution with the help of your lawyer.

4. Consider selling or releasing funds from the land you purchased so you can reduce some of the debt. If you have other assets do the same. Holding onto assets when you are paying so much interest on your debt doesn’t balance out. The debt is costing you multiple times what your asset is making you.

5. Call on friends and family for help. See whether you can release any funds from this circle. Repaying a family member can be far cheaper than repaying a bank. Also ask your circle if anybody can help with legal services.

The downward spiral of credit card debt can trap you and your family into a huge financial crisis. If you have balances on two or more cards, that’s the time to get a grip and find a solution.

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 pf@thenational.ae

Match info:

Manchester City 2
Sterling (8'), Walker (52')

Newcastle United 1
Yedlin (30')

Teams

Punjabi Legends Owners: Inzamam-ul-Haq and Intizar-ul-Haq; Key player: Misbah-ul-Haq

Pakhtoons Owners: Habib Khan and Tajuddin Khan; Key player: Shahid Afridi

Maratha Arabians Owners: Sohail Khan, Ali Tumbi, Parvez Khan; Key player: Virender Sehwag

Bangla Tigers Owners: Shirajuddin Alam, Yasin Choudhary, Neelesh Bhatnager, Anis and Rizwan Sajan; Key player: TBC

Colombo Lions Owners: Sri Lanka Cricket; Key player: TBC

Kerala Kings Owners: Hussain Adam Ali and Shafi Ul Mulk; Key player: Eoin Morgan

Venue Sharjah Cricket Stadium

Format 10 overs per side, matches last for 90 minutes

Timeline October 25: Around 120 players to be entered into a draft, to be held in Dubai; December 21: Matches start; December 24: Finals

The specs

Engine: 3.9-litre twin-turbo V8
Power: 620hp from 5,750-7,500rpm
Torque: 760Nm from 3,000-5,750rpm
Transmission: Eight-speed dual-clutch auto
On sale: Now
Price: From Dh1.05 million ($286,000)

MATCH INFO

Manchester United 1 (Fernandes pen 2') Tottenham Hotspur 6 (Ndombele 4', Son 7' & 37' Kane (30' & pen 79, Aurier 51')

Man of the match Son Heung-min (Tottenham)

Tips for travelling while needing dialysis
  • Inform your doctor about your plans. 
  • Ask about your treatment so you know how it works. 
  • Pay attention to your health if you travel to a hot destination. 
  • Plan your trip well. 
Diriyah project at a glance

- Diriyah’s 1.9km King Salman Boulevard, a Parisian Champs-Elysees-inspired avenue, is scheduled for completion in 2028
- The Royal Diriyah Opera House is expected to be completed in four years
- Diriyah’s first of 42 hotels, the Bab Samhan hotel, will open in the first quarter of 2024
- On completion in 2030, the Diriyah project is forecast to accommodate more than 100,000 people
- The $63.2 billion Diriyah project will contribute $7.2 billion to the kingdom’s GDP
- It will create more than 178,000 jobs and aims to attract more than 50 million visits a year
- About 2,000 people work for the Diriyah Company, with more than 86 per cent being Saudi citizens

The Specs

Engine: 1.6-litre 4-cylinder petrol
Power: 118hp
Torque: 149Nm
Transmission: Six-speed automatic
Price: From Dh61,500
On sale: Now

Dubai works towards better air quality by 2021

Dubai is on a mission to record good air quality for 90 per cent of the year – up from 86 per cent annually today – by 2021.

The municipality plans to have seven mobile air-monitoring stations by 2020 to capture more accurate data in hourly and daily trends of pollution.

These will be on the Palm Jumeirah, Al Qusais, Muhaisnah, Rashidiyah, Al Wasl, Al Quoz and Dubai Investment Park.

“It will allow real-time responding for emergency cases,” said Khaldoon Al Daraji, first environment safety officer at the municipality.

“We’re in a good position except for the cases that are out of our hands, such as sandstorms.

“Sandstorms are our main concern because the UAE is just a receiver.

“The hotspots are Iran, Saudi Arabia and southern Iraq, but we’re working hard with the region to reduce the cycle of sandstorm generation.”

Mr Al Daraji said monitoring as it stood covered 47 per cent of Dubai.

There are 12 fixed stations in the emirate, but Dubai also receives information from monitors belonging to other entities.

“There are 25 stations in total,” Mr Al Daraji said.

“We added new technology and equipment used for the first time for the detection of heavy metals.

“A hundred parameters can be detected but we want to expand it to make sure that the data captured can allow a baseline study in some areas to ensure they are well positioned.”

Company profile

Company name: Fasset
Started: 2019
Founders: Mohammad Raafi Hossain, Daniel Ahmed
Based: Dubai
Sector: FinTech
Initial investment: $2.45 million
Current number of staff: 86
Investment stage: Pre-series B
Investors: Investcorp, Liberty City Ventures, Fatima Gobi Ventures, Primal Capital, Wealthwell Ventures, FHS Capital, VN2 Capital, local family offices

Company Profile

Name: Direct Debit System
Started: Sept 2017
Based: UAE with a subsidiary in the UK
Industry: FinTech
Funding: Undisclosed
Investors: Elaine Jones
Number of employees: 8


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