The Debt Panel: 'I am worried about losing my job and defaulting on my loan'

I am having financial difficulties and need some help to solve my problem. I currently earn Dh6,200 a month but my financial responsibilities exceed my salary. These are my monthly expenses:

Loan repayment: Dh2,700
Room rent: Dh1,600
Groceries: Dh1,500 (including baby products such as nappies)
Credit card: Dh150 (minimum payment)
Petrol: Dh800-Dh900

Every month, I end up having to borrow money as I don’t have enough to fulfil the basic needs of my family.

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The principal amount of my loan is Dh99,600 but with interest, the outstanding balance is Dh103,226 and there is another three years left on the loan.

I am worried about losing my job and defaulting on the loan. If that happens, what will be the consequences? Is there anything that the bank can do to help me lower the monthly payments on the loan? I don't want to borrow money from people just to survive each month. RA, Dubai

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

Your situation may seem overwhelming, but it is essential to remain optimistic and make all possible efforts to improve your financial circumstances.

Typically, when you miss repayments, banks charge late payment fees. This, along with the accrued principal and interest payments, will ultimately make your journey out of debt more challenging.

In addition, missed repayments can have a serious impact on your Al Etihad Credit Bureau score and affect your eligibility to avail future loans, or impact the rates you pay.

Generally, after three consecutive missed repayments and repeated warnings from the bank, they may file a police case or civil case against you, which can have some undesirable consequences.

I speak from experience in this situation: keeping up with payments while having little income for whatever reason can be extremely difficult

To get your finances back on track, I advise that you speak to your bank to consolidate or refinance your debts into a single loan with lower rates and a longer tenure. They may also be able to provide facilities such as instalment deferrals to allow you to take a short-term relief from repayments.

It would be helpful for you to seek alternative avenues to improve your income and liquidity to supplement your debt management plan. This may mean finding a secure job with a better salary, and selling some of your assets (for example, your car) to raise additional funds to support your current cash flow.

It is also important to establish sound fiscal measures to help put you on a more sustainable financial footing. Make every effort to curb your expenses, such as moving to a cheaper accommodation, carpool to save on petrol costs, or perhaps consider relocating your family back home.

Debt panellist 2: Nathan McFarlane, founder of Helpwith.ae

It is a common occurrence for many people in the UAE to experience these kinds of difficulties, particularly with rising costs and a lack of understanding for the difficulties they may face when not being able to maintain debt payments.

I speak from experience in this situation: keeping up with payments while having little income for whatever reason can be extremely difficult, especially if you don’t understand the costs associated with maintaining timely payments and how to fix your financial problems.

The great news is there are solutions for your issue and you shouldn’t be fearful of what may or may not happen. The important thing is to look towards solving the problem, whether that be reducing your expenditure or finding a way to either restructure or settle your liabilities with the bank.

To reduce your monthly expenditure, you can look at restructuring your existing debt into a longer tenure (normally 48 months) if your credit score is still relatively good. This can be done with your existing bank if they grant it or you can search for other providers to buyout your existing liabilities.

I suggest a good starting point would be to download your Al Etihad Credit Bureau report, find out where your credit status is now and work towards a solution from there.

It is important to understand that these problems aren’t solved overnight – it’s a long-haul commitment to solve your financial problems. However, in the case of restructuring your debts, you may have to improve your credit score before being granted a loan from the bank.

Debt panellist 3: Felicity Glover, personal finance editor at The National

Worrying about debt and job security is a problem many people face at some stage in their lives. The Covid-19 pandemic has compounded this issue and created economic uncertainty for millions of people around the world.

It doesn't help that your salary is not enough to meet your financial responsibilities every month and you are going further into debt by borrowing money to support your family.

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Depending on your skills and experience, there are a number of ways you can supplement your income to help you through this period, such as taking on freelance work through websites including Fiverr and Upwork.

Hiring is also expected to pick up in the UAE this year, so there is the option of looking for a new job that offers a higher salary. Is it possible for your spouse to also look for part-time work to help with the bills?

Any extra money you earn can also be used to pay down your loan faster.

In the meantime, try to find ways to cut down on your monthly expenditure to save as much as possible. This could include moving to cheaper accommodation and cutting down on transport expenses by catching public transport. It would also help to develop a budget and stick to it as much as possible.

It is also worth checking with your bank if it is possible to request a payment holiday on your loan or if you can restructure it over a longer period of time to lower your monthly instalments.

A last resort would be to sell assets if you have them. This could be anything from investments to a car, land or property. While assets are a financial safety net, sometimes it is the only choice you may have to get back on track and start saving for your future, which includes an emergency fund equivalent to three to six months of your salary that would help you in situations such as this.

Finally, there are consequences for missing debt repayments. Not only will this add interest and late fee penalites to the existing debt, but the bank can also file a police case against you after three missed payments.

Worrying about something that hasn't happened – in this case, losing your job – will only detract from what you must focus on: reducing your outgoings and boosting your income. While it may be difficult at times, particularly with a young family, try to use this energy to help you stay motivated and secure your financial future.

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 pf@thenational.ae

Ultra processed foods

- Carbonated drinks, sweet or savoury packaged snacks, confectionery, mass-produced packaged breads and buns

- margarines and spreads; cookies, biscuits, pastries, cakes, and cake mixes, breakfast cereals, cereal and energy bars;

- energy drinks, milk drinks, fruit yoghurts and fruit drinks, cocoa drinks, meat and chicken extracts and instant sauces

- infant formulas and follow-on milks, health and slimming products such as powdered or fortified meal and dish substitutes,

- many ready-to-heat products including pre-prepared pies and pasta and pizza dishes, poultry and fish nuggets and sticks, sausages, burgers, hot dogs, and other reconstituted meat products, powdered and packaged instant soups, noodles and desserts.

From Zero

Artist: Linkin Park

Label: Warner Records

Number of tracks: 11

Rating: 4/5

What is a robo-adviser?

Robo-advisers use an online sign-up process to gauge an investor’s risk tolerance by feeding information such as their age, income, saving goals and investment history into an algorithm, which then assigns them an investment portfolio, ranging from more conservative to higher risk ones.

These portfolios are made up of exchange traded funds (ETFs) with exposure to indices such as US and global equities, fixed-income products like bonds, though exposure to real estate, commodity ETFs or gold is also possible.

Investing in ETFs allows robo-advisers to offer fees far lower than traditional investments, such as actively managed mutual funds bought through a bank or broker. Investors can buy ETFs directly via a brokerage, but with robo-advisers they benefit from investment portfolios matched to their risk tolerance as well as being user friendly.

Many robo-advisers charge what are called wrap fees, meaning there are no additional fees such as subscription or withdrawal fees, success fees or fees for rebalancing.

What is Folia?

Prince Khaled bin Alwaleed bin Talal's new plant-based menu will launch at Four Seasons hotels in Dubai this November. A desire to cater to people looking for clean, healthy meals beyond green salad is what inspired Prince Khaled and American celebrity chef Matthew Kenney to create Folia. The word means "from the leaves" in Latin, and the exclusive menu offers fine plant-based cuisine across Four Seasons properties in Los Angeles, Bahrain and, soon, Dubai.

Kenney specialises in vegan cuisine and is the founder of Plant Food Wine and 20 other restaurants worldwide. "I’ve always appreciated Matthew’s work," says the Saudi royal. "He has a singular culinary talent and his approach to plant-based dining is prescient and unrivalled. I was a fan of his long before we established our professional relationship."

Folia first launched at The Four Seasons Hotel Los Angeles at Beverly Hills in July 2018. It is available at the poolside Cabana Restaurant and for in-room dining across the property, as well as in its private event space. The food is vibrant and colourful, full of fresh dishes such as the hearts of palm ceviche with California fruit, vegetables and edible flowers; green hearb tacos filled with roasted squash and king oyster barbacoa; and a savoury coconut cream pie with macadamia crust.

In March 2019, the Folia menu reached Gulf shores, as it was introduced at the Four Seasons Hotel Bahrain Bay, where it is served at the Bay View Lounge. Next, on Tuesday, November 1 – also known as World Vegan Day – it will come to the UAE, to the Four Seasons Resort Dubai at Jumeirah Beach and the Four Seasons DIFC, both properties Prince Khaled has spent "considerable time at and love".

There are also plans to take Folia to several more locations throughout the Middle East and Europe.

While health-conscious diners will be attracted to the concept, Prince Khaled is careful to stress Folia is "not meant for a specific subset of customers. It is meant for everyone who wants a culinary experience without the negative impact that eating out so often comes with."