I signed up for a credit card in August 2018 and later took out a loan of Dh292,000 at the end of last year to buy land and build a house in the Philippines.
Then, at the beginning of this year, I managed to secure an irresistible offer in another GCC country. My company was slow to cancel my work visa and because my new employer issued a flight ticket, I left the UAE in February.
This was before my Emirates ID was cancelled and before my employer could advise the bank that I was gone. Although I never used the credit card in the UAE, I started using it for some miscellaneous expenses in my new country. I soon maxed out the card and have not made any repayments. I also have an outstanding loan in the Philippines of 250,000 pesos (Dh18,072) from 2016 which I borrowed to buy a car there. I'm hoping to repay that loan by the end of this year. My debts are:
Personal loan: Dh236,544 (with a Dh7,398 monthly payment)
Credit card: Dh5,381
Car loan in the Philippines: Dh18,500
I have not made any repayments on the card and stopping paying my loan instalments three months ago due to financial constraints. Can the bank in the UAE chase me?
I am 30 and work as a design manager, earning the equivalent of Dh20,175. My expenses come to about Dh18,500, and include rent of Dh3,500, groceries of Dh2,000, remittances of Dh11,000 which includes repayments for a car loan in the Philippines and Dh2,000 for transport costs. My wife lives with me.
What is the proper course of action I should take? As I did not get clearance from my employer and I have stopped making repayments, will there be a case against me? I have been receiving emails from the bank but have ignored them so far. MY, GCC
Debt panellist 1: Philip King, head of retail banking at Abu Dhabi Islamic Bank
As you have missed several months’ worth of repayments and ignored numerous collection notices, your bank has likely listed you as a defaulter and would already have initiated debt recovery measures.
The bank could attempt an approach which includes passing the defaulted balance to debt collection agencies that have a large overseas network, and which can be uncompromising in their approach to chasing the outstanding amount owed.
The bank could also explore legal options. As your outstanding loan is over Dh200,000, the bank could file a criminal case that likely bears a penalty of a jail term. Consequently, the bank could also file a civil lawsuit to recover the remaining borrowing. Under UAE Civil Law, the bank is allowed to chase unrecovered debts for up to 15 years. The bank can also file a travel ban which will restrict you from returning or passing through the UAE.
Depending on the magnitude and severity of the case, as well as the extradition rules and treaties with the other country, debtors may be extradited back to the UAE to face legal charges.
There are numerous repercussions for absconding defaulters, but you don’t have to subject yourself to these burdens. I advise contacting your bank to discuss a formal settlement agreement that will allow you to comfortably and sustainably service the remaining debt. This could entail a longer repayment schedule, lower rates and lower instalments. You could also try taking a loan from a bank in the current country where you are based, and settle the outstanding debt in the previous bank.
In addition, it would be helpful to establish a responsible money management plan that includes wise budgeting habits. Perhaps you could also ask your wife or other family members to help you out in paying necessary bills including rent, groceries and remittances.
Debt panellist 2: Keren Bobker, an independent financial adviser with Holborn Assets
The short answer is that the proper course of action is to repay the money you have borrowed. There is both a legal and moral obligation to repay any money borrowed. Your visa cancellation has little bearing on what you owe to the bank. Your UAE visa should be cancelled by an employer and you need to contact your previous company to ensure this has happened.
Being outside of the UAE does not prevent anyone from repaying the money they have borrowed. Stop ignoring the bank’s emails and reply to them today.
As you have missed three loan repayments and have not made any payments on the credit card, it is highly likely that the bank will take action against you by registering a police case. This means if you enter the UAE, you would be detained at immigration.
It is also common for banks to engage debt collection agencies to chase debtors and they are far less amenable to deal with than banks. In some cases, debts can be ‘sold on’ to another company and they may have jurisdiction in the country you are in which makes the situation far more serious.
You must contact your lender and discuss setting up a payment plan. The sooner you do this the better, as the longer you ignore the debts the less accommodating the bank will be and the debt can increase faster through the addition of interest and penalties.
Paying off your car loan in the Philippines by the end of this year will increase the amount you can offer your UAE lender to reduce your outstanding debts. Make contact today, be honest, and offer as much as you can pay on a monthly basis. Do it now before the situation becomes even more serious.
Debt panellist 3: Rasheda Khatun Khan, founder of Design Your Life
By leaving the UAE without informing the bank, not making repayments and then ignoring their emails, your lender will assume you have absconded with no intention to pay. This can get you in a lot of trouble.
The first thing to do is to get in touch with the bank and explain your situation. Work out a repayment plan with them and be clear about what you can afford to repay. Go through the numbers yourself first and have a figure in mind that you can allocate towards repaying your loan and credit card.
The balance on your credit card will start to increase even if you are not using it due to the interest charges and fees you are incurring every month. The longer you leave this outstanding, the larger your balance will be. As annual credit card interest rates are as high as 40 per cent or more, you will find the amount you owe can double and triple over a very short period of time. If you can repay this in full on your next pay cheque, do so.
It is also essential to examine your spending and look at making lifestyle changes. Ask yourself how you got into this situation and how on a salary of Dh20,175, you have been unable to repay your liabilities. Are you living beyond your means? Can you sell your car in the Philippines, especially as you do not live there?
Be careful you do not fall into the pattern of persistent overspending. A one-off month is easier to recover from, but it appears you are spending more than your salary every month. This financial behaviour will only increase your debt and at some point your options for a loan from the bank will no longer be available.
Spending decisions must be based on affordability. Taking out a loan on the basis of just wanting the money does not make good financial reckoning. You need to know you can commit to the repayment for the length of the loan's tenor. Buying a house is a huge purchase and one that should be based on your affordability. You are now on a salary higher than you were in the UAE but still find yourself unable to repay your debts. It’s time to cut your lifestyle costs and work out a debt repayment plan before your situation escalates out of control.
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