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

The South African borrowed over Dh83,000 from a friend and the rest from the banks, but a period of unemployment has left her struggling to manage her debts

Illustration by Mathew Kurian
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I borrowed Dh83,600 from a friend to help my mother when my dad passed away as she was going to lose the house. He had been in hospital at home in South Africa for months before he died. I had to help settle her debts and give her money to live from. I also have debts with three banks:

Bank 1: Dh100,000: one loan (Dh60,000) and two credit cards (Dh20,000 each)

Bank 2: Dh20,000: one loan (Dh10,000) and one card (Dh10,000)

Bank 3: Dh40,000: one loan

The loans and credit cards have been accumulating as I lost my job in the insurance industry for a while and could not make the payments. I now have my debts with Bank one and three under control, but Bank two and the loan from my friend are in a very critical situation. The bank has already made a case against me, and my friend will do the same. My salary is only Dh15,000 a month and I have tried for months to get a consolidation loan but this won't happen due to missed payments.

I am starting my new job now and don't want to run away from anything; I just need advice on how to pay my debts back and get out of this mess. I also don't want to go to jail as I have too many responsibilities. I love Dubai; it is my home but I have made a few stupid mistakes I need to rectify. ND, Dubai

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

I'm sorry to hear of your loss. It is encouraging to see that you are not running away from your responsibilities and have the debts with two banks under control.

It looks like the remaining debt with Bank two and your friend still pose a risk, bearing in mind the bank has initiated legal proceedings. The first thing you should consider is consolidating your outstanding obligations for these two.

It is important that you show signs of co-operation with the bank and have an open conversation around negotiating an extension or rescheduling your outstanding.

You may also want to consider entering into discussions with Bank three – with whom you are up to date with your payments – and try to negotiate for them to buyout and settle your outstanding loan with Bank two. Since the interest rate on credit cards is higher than on personal loans (as general rule – you should recheck this in your personal case) you may want to ensure that the buyout loan settles the outstanding on your credit card foremost.

Furthermore, you could also consider increasing your loan tenure with Bank three to the four-year limit to reduce your monthly obligations.

Assuming you are successful in negotiating the buyout and you settle your outstanding – you could then engage with Bank one to renegotiate the terms on your outstanding loans with them as you will be showing the willingness to settle.

Banks do generally appreciate it when customers demonstrate their desire to settle their debts and may be more willing to enter into negotiated agreements with such customers.

You will need to show evidence of recent discipline in credit repayments to be able to recruit the help of banks for the above options to work. You could also ask your friend for more time or set up a direct debit instruction for small monthly repayments to him as a sign of commitment.

However, even with doing everything above, this may still not be enough to manage the issue. If it is possible you may consider arranging to dispose of any personal assets you might have either here or back home in South Africa to help repay your friend and even some of your bank debt to help you get back on your feet as quickly as possible.


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

Taking a loan in critical times is justified, however falling short on payments is a bad situation to be in. When you mention that your payments to Bank 1 and 3 are under control, exactly how close are you to settling these debts? And since two of those debts are on credit cards, you really should be focusing on repaying them in full and closing the credit card accounts to avoid paying through the nose towards interest payments.

Next, speak with your friend and try to strike a deal with him wherein you provide him two cheques instead of one, so it will give you some additional time to gather the funds. Considering the situation with Bank 2, you should first pay off the credit card and then focus on the loan as the interest on the credit card is higher. There are two methods that can be considered while paying off your debts - debt stacking and debt snowball.

Debt stacking is where you pay off your loans on the basis of interest rates. It will help you reduce your total interest payment towards your debt obligations. First, you need to rank your loan and credit card debts on the basis of interest rate. The idea is to prioritise paying off the most expensive debt first and fastest, and then move on to the next one on the list.

Alternatively, try the debt snowball method - a very effective medium of paying off loans according to a lot of personal finance experts. Here, you start by paying off the smallest loan and check them off your list. The debt snowball method is not as cost-effective as debt stacking, but can be psychologically more motivating.

You must also take a close look at your expenses and think of ways to lower them and free up some cash to use towards your debt repayments. This could vary from moving to a cheaper accommodation, canceling your TV subscription or cutting back on recreational spending.

Before you commit to taking on any new debt,  carefully consider how you will  pay it off and whether it is a justifiable decision to even begin with.


Read more:

The Debt Panel: Filipino has made all the cutbacks he can and still cannot repay his Dh185,000 debts

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Debt panellist 3: Michael Routledge, the founder of the debt advice site

I'm sorry to hear your situation has reached this point. Borrowing from friends is never simple. I don't think I've come across a single case where borrowing from friends works out well. Normally it culminates in the end of a friendship.

At present you owe Dh243,600, which is an exceptionally large amount for someone earning Dh15,000 per month. Based on a 50 per cent debt burden ratio, your monthly payments would be Dh7,500 which would take you around three years to clear the debt. I suggest you download our free debt support package (, which will help you prepare a statement of accounts to offer your lenders a clear and transparent view of your finances. You should also contact the Al Etihad Credit Bureau and request your credit report. This will offer support to your case when discussing with your lenders. Using the documents provided on our site, you should meet the collections departments of your lenders and request your debts are restructured in such a way that you can afford to service the debt using 50 per cent of your salary.

In most cases, lenders will probably refuse any request to restructure the debt, but persevere and keep pushing towards your goal. Being in debt is a very difficult situation, however I know from experience the feeling you have when you manage to reach agreements with your lenders and are then able to pay off your debt; it's undoubtedly one of the best feelings in the world.

Only you can make this happen, so get your head down and work hard at it - the benefits far outweigh the work.

On this panel this week: Kunal Malani, head of customer value management, UAE and Mena at HSBC Middle East; Ambareen Musa, founder and chief executive of financial comparison site and Michael Routledge, the founder of the debt advice site

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