The Debt Panel: 'I fear I'll lose my job and won't clear my Dh210,000 dues. What do I do?'

The Abu Dhabi hospitality employee has received a Dh3,000 salary cut and wants to be prepared for the worst

Illustration by Mathew Kurian 
Powered by automated translation

I owe Dh200,000 on a personal loan and have already deferred it for two months through my bank’s Covid-19 debt relief programme. This is because my Dh16,000 salary in the hospitality sector has been reduced to Dh13,000 as I now have to take 10 days of unpaid leave a month until September. This lower salary started in April.

I do not want to run away to avoid repaying the debt but if I lose my job my final settlement of about Dh50,000 would only cover around a quarter of the outstanding balance.

I am worried this lower salary will continue beyond September. While I have not received any indication from the company that I will lose my job, hospitality is at risk globally and I fear I will be affected.

I took on the loan in March last year. It was a buyout loan, clearing another loan balance with a different bank and giving me an additional amount. I used the money to pay for expenses for my house in Sri Lanka. While the last payment for the apartment, which was bought from a developer, was in 2015, we had to pay for other expenses. My debts are:

Personal loan: Dh205,335 (monthly instalment of Dh7,389)

Credit card: Dh5,000

Total: Dh210,335

I have 30 instalments out of 40 left on my loan. I do not want to run away to avoid repaying the debt but if I lose my job my final settlement of about Dh50,000 would only cover around a quarter of the outstanding balance. Also, if my end-of-service benefits get swallowed up by the loan, I won’t have any cash in hand either.

I also have an insurance policy attached to the loan. I paid 1 per cent of the loan amount for it and am trying to find out more details about the policy. Can this help me if I lose my job?

The next loan instalment I have to pay is on August 3. My Dh16,000 salary includes a live-out allowance of Dh7,000 but it will be reduced to Dh6,000 from June. Our rent is Dh5,000, which I pay for, however my employer would give us accommodation if we decided to give up the live-out allowance.

The rest of our expenses are taken care of from my wife's salary as an administrator. She also signed up for a small loan last year, which will be paid off at the end of this year, so that is not an issue.

I am 32 and do not have any children. So far we are doing OK but if I lose my job and want to return to Sri Lanka, I fear I may not be able to leave. What options do I have? TA, Abu Dhabi

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

Let’s examine the positive aspects of your situation. The fact that both you and your spouse are employed works in your favour while trying to find a solution to your current financial situation.

As a first step, approach your bank to discuss debt restructuring which will help consolidate all existing liabilities into a new loan. This will provide two key benefits: first, it will replace multiple instalments and combine different credit facilities into one single loan; second, the tenor of the restructured loan can be extended up to 84 months, reducing the required monthly payments considerably.

In your case, the personal loan and credit card dues can be consolidated into one new loan. The longer tenor of the new loan will help lower your existing monthly instalments significantly thus increasing your disposable income. This will help you save better despite a reduced salary. I also advise cancelling your credit card, if possible, to better manage your finances and reviewing your living expenses so you can save more in case of potential job loss.

With regards to your query on insurance for the loan, this is most likely life insurance cover for the loan applicant that will help cover the loan outstanding in case of loss of life. However, please confirm the details of the coverage with your bank to see if other events like involuntary loss of employment are also covered.

Given you are being forthcoming about managing your financial commitments and have no delinquent history, I am sure your bank will view this favourably and find a suitable solution to address your current financial predicament, especially given the ongoing extenuating circumstances.

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

It is understandable for you to be worried about your financial future at this time, but instead of panicking over what could happen, prepare a financial backup plan with a clear head.

Based on how personal loan agreements are designed in the UAE, your bank may have the first claim on your end-of-service-benefits from the employer. It is standard practice for banks in the country to add a clause in personal loan contracts, which gives them complete authority to offset and adjust the borrower’s benefits towards any outstanding loan dues. So, if you're worried about losing your job in the future, make alternative arrangements to hold on to some cash to help tide you over a sudden spell of unemployment. Ideally, you should have an emergency savings fund in place. If not, save up some physical cash or save a portion of your regular income in a separate savings account.

Regarding the personal loan insurance, is this meant to cover your repayments against involuntary job loss, or does it offer coverage in case of death or disability? Speak to your bank and try to procure a copy of the benefits, terms and conditions under this insurance coverage.

As for your accommodation, you're now saving Dh1,000, based on your current rent and reduced housing allowance. You should compare the cost and benefits of moving to company accommodation versus living out. Does the company accommodation also cover utilities, such as water, electricity and AC? Is it closer to your workplace? Does it make sense to look for something even cheaper? Answering these questions will help you decide which option makes more financial sense.

The fact you're a double income household also works in your favour. Now that your wife is very close to settling her loan, you can plan to redirect her monthly savings towards your outstanding debt. It would be best to repay the small credit card debt you have first, because it is much more expensive than your personal loan in terms of interest. This will also save you the headache of grappling with multiple debts.

Be prepared for the bank to demand immediate and full repayment of the loan if you are made redundant by your employer. This means you need to find a way to repay the bank the outstanding loan minus your benefits. Reviewing your savings and investments, taking on some freelance or part-time work assignments and cutting back on all non-essential spending will slowly help you get to a position where you can negotiate with the bank and request a lower lump-sum settlement.

Debt panellist 3: Rasheda Khatun Khan, founder of Design Your Life

Many people like you are now coping with a reduction in salary or a complete loss of income during this pandemic. This is when we need to rely on our emergency funds and assess if we are overexposed to debt. A good rule-of-thumb to calculate a reasonable debt load is that households should spend no more than a maximum of 40 per cent of their income on debt servicing. This includes housing expenses plus other debt, such as car loans and credit cards.

Many people make the grave mistake of putting all their savings into their investments such as property, not leaving any reserve set aside for emergencies. Anticipating unexpected events and planning for them is as important as investing for the future. You need to consider them as one thing. For example, with every property purchase, you should have a reserve account for unexpected property related expenses.

This pandemic has also highlighted the need to create more than one source of income whether through investment income or a side hustle. So, how can you generate more income? Could you rent our your property or release equity from it?  Do you have other assets you can sell to release funds to reduce your debt?

I recommend considering you and your wife's income as a whole. Working together will help you find solutions that fit both of you. Also, contact your bank and ask what options you have after the two-month deferred period. Maybe they can offer another solution. Finally, start preparing your CV to find other employment opportunities, so that you are ready should the worst happen.

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