The Debt Panel: ‘My bank threatened to lodge a case against me for missing one payment’

Despite a payment holiday, the Dubai resident is struggling to keep up with loan instalments after receiving a pay cut at the start of the pandemic

Mathew Kurian / The National
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Since the Covid-19 pandemic began, my company introduced salary reductions for employees. For me, this meant that I was being paid Dh1,000 less per month. Before the pandemic, I would normally be paid Dh4,000 and if I worked overtime, it would increase to Dh4,500 or Dh5,000 a month depending on how many more hours I worked.

I took out a three-year Dh40,000 loan last year and the monthly instalments are Dh1,765. Because my salary has been decreased, I applied for a payment holiday with my bank and was given a two-month reprieve on my instalments.

However, my loan instalments began again on September 4 – and this is the first time that I have  missed a payment. My housing, food and transport expenses total nearly Dh2,000 a month and I also support my family back home, which leaves me with not enough money to pay the loan.

I have tried talking to my bank and asking them for more time to try to find the money to pay them, but they are now threatening to lodge a case against me for missing just one payment. I am very worried and don't know what to do. Can you advise me on my rights, please? BW, Dubai

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

During this unprecedented time, many UAE residents are struggling with managing their financial commitments due to unanticipated pay cuts. You have done the right thing by swiftly informing your bank about your salary reduction and inability to repay your debt. While payment holidays provide temporary financial relief, you still need to find a lasting solution to your current predicament.

Typically, when you only miss one loan repayment, banks charge a late payment fee. We advise you to thoroughly read the terms and conditions of your agreement with the bank. Your rights and obligations in this situation should be clearly highlighted and detailed in the contract. In addition, maintaining a constructive dialogue with your bank is necessary. Consider providing them with proof of your salary reduction, reiterating and emphasising that this has placed you in a challenging financial situation.

Going down this route by filing legal charges may now have become standard protocol for banks to ensure that borrowers do not leave the country without repaying their loans

It is in the bank's interest to resolve your issue promptly and mitigate any risks of further default, so they are highly likely to cooperate with you on new repayment terms. I suggest that you request for a debt restructuring or consolidation plan that will allow you to aggregate your existing liabilities into a new loan with a longer tenure and lower monthly payments. This will help you to successfully service the loan with your lower salary.

During this time, it is crucial that you adapt your spending and budgeting to account for your lower salary. In addition, it may be worth exploring job opportunities with better remuneration prospects to ensure you meet your payment schedule, while considering selling assets to raise funds in order to help you through this difficult time.

Panellist 2: Ambareen Musa, founder and chief executive of

To prevent loan defaults in the current circumstances, banks may be resorting to stricter measures. Going down this route by filing legal charges may now have become standard protocol for banks to ensure that borrowers do not leave the country without repaying their loans. This may seem unfair to you, since you're caught in the pandemic's repercussions through no fault of your own. But from the bank's perspective, they provided you with financial relief earlier and now expect you to continue your repayments as per schedule.

To find a solution to your debt woes, you should approach the bank and explain that you're still receiving a reduced monthly salary. Speak to bank representatives to see what other debt relief options are available to you. Check if your loan can be restructured to reduce your monthly instalments. If you're unable to negotiate more relaxed repayment terms on your own, you could consider working with a licensed debt counselling/management company which can negotiate with the bank on your behalf.

At the same time, you also have to find ways to free up more of your income to meet the monthly instalments due to the bank. Is there another family member or sibling who can temporarily contribute towards supporting your family back home? This can help you pause remittances while you get your repayments back on track. And of course, the opportunity for you to take on freelance or part-time work to supplement your current income would be very helpful during this time, too.

Alternatively, if you can't negotiate with the bank and are stuck with no option but to default on your loan, you can go down the legal insolvency route. The UAE's Personal Insolvency Law allows you to approach the civil court and request for a court-mediated settlement of your debt when you aren't in a financial position to afford your debt repayments.

Panellist 3: Stuart Ritchie, chartered financial planner at AES International

I would advise getting in touch with your bank, either by telephone or in-person at your branch, to find out what debt relief options are available.

The bank may be able to restructure your debts to make your repayments more manageable for you at this current time, such as increasing the term of your loan so your monthly instalments are reduced to what you can realistically afford. They may also allow you to make interest-only payments until your full salary is reinstated.

The majority of banks in the UAE have been offering a three-month payment holiday for those affected by the pandemic, providing they have made previous repayments and their account is in good standing.

Given your bank granted you a two-month holiday previously, it may be that they’re unwilling to offer a full payment holiday to you again.

Do keep in mind that interest will continue to accrue even when repayments are paused or reduced, so the total amount you repay will be more than it would have been with your initial repayment schedule.