I have lived in the UAE for almost four years and recently received a better offer to work in Saudi Arabia. However, I still have Dh147,000 left to pay off on two loans – commitments I do not want to run away from. I can easily pay the instalments every month, even if I am not in the UAE, but how do I make this happen? I earn Dh14,000 as an in-flight chef and the new job will pay me Dh16,000. My debts are:
Bank loan 1: Dh28,000 left to pay (monthly payments of Dh3,632 until May 2019)
Bank loan 2: Dh120,000 left to pay (monthly payments of Dh3,852 until October 2021)
Total owed: Dh148,000
I borrowed the money to buy a house in my home country of India. I now need proper guidance on how to leave the UAE with the debts still in place as I have every intention of repaying on time. SH, Abu Dhabi
Debt Panellist 1: Philip King, head of retail banking at Abu Dhabi Islamic Bank
To maintain a strong relationship with your bank you should be honest and transparent about your situation, explaining that you are moving to Saudi Arabia, where you will be in full-time employment, and have every intention of fulfilling your repayment schedule. You should also share your new employment details and contract with the bank to support your application. However, in many cases, banks will be cautious given that you may abscond and it would be difficult and expensive for them to recover the debt. You should therefore be prepared that they may not agree to your request.
It is therefore best to try and repay the Dh147,000 in full before you leave. Your end of service gratuity should definitely go towards this, as should any funds that you can raise by selling the house that you purchased in your home country, along with other assets such as a car, furniture or any other household items.
In summary, while it is worth having an initial conversation with your bank in which you clearly state your intention, you should be prepared that your application will be rejected.
Debt panellist 2: Keren Bobker, an independent financial adviser with Holborn Assets
Congratulations on the new job. I am pleased you fully intend to meet your commitments. Compared to many cases we see, the total amount outstanding is not very large and the repayments should easily be manageable on your income.
While banks prefer customers repay loans in full before leaving the UAE, not least because it is harder and more expensive to chase up defaulters outside the county, it is not essential. If either of these loans are with the bank your current salary is paid to, they will receive notification you have left your job and your account will be frozen. Your final payment from your employer, plus any End of Service Gratuity, will then be offset against monies owed leaving you with a reduced debt.
Check the terms of any agreement paid from a salary account as it may contain a clause that states the debt must be paid in full if a monthly salary will cease to be paid.
Given the amount you owe, it is unlikely the banks will apply to the courts for a travel ban, however it may be in your interest to negotiate with the banks once you have left the UAE. Unfortunately, many people leave the UAE with no intention of repaying what they owe so banks are understandably concerned in situations such as this.
Payments can easily be made from outside the UAE and you will need to make arrangements with the bank to do this. The quicker you deal with this the better, to ensure no payments are missed and the banks remain favourable towards you. If either of these banks has branches in Saudi Arabia, you could ask them transfer the debts to a branch there. I am aware of cases where a bank has allowed this - a better arrangement for all parties.
Debt panellist 3: Ambareen Musa, founder and chief executive of Souqalmal.com
Your primary bank may freeze the funds in your account when the final salary is credited. This is done to ensure your ongoing debt commitments are covered in case you were to leave the country without repaying these. The bank can also apply for a travel ban on borrowers if it suspects they are likely to abscond leaving a substantial debt trail behind.
Given this scenario, it is best to keep your lenders in the loop about your plans to relocate. You can submit the job offer letter from the new employer as a sign that you are committed and financially able to keep up with your regular repayments from outside the UAE. However, banks may not always be willing to accept this arrangement, which is why you must be prepared to deal with a demand for immediate settlement.
Here's an approach to consider: tap into your savings and investments and possibly approach close relatives to lend you money to settle both your loans. You could also use your gratuity to partially settle your loans, or at least the smaller loan. If you cannot gather enough funds this way, you could apply for a home equity release loan (a loan against property) in India using your home as collateral.
Once the loans have been repaid and you have started working in Saudi Arabia, you can apply for a personal loan and repay your family members as well as replenish your savings/investments to get your finances back on track.
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 firstname.lastname@example.org