The Debt Panel: 'My debts are 36 times my monthly salary. Is there a way back?'

The Abu Dhabi resident, from the Philippines, owes Dh290,000 on a salary of Dh8,000 after borrowing to pay for family medical bills

Illustration by Alex Belman

I am from the Philippines and work in sales in Abu Dhabi.   I owe almost Dh290,000 on a salary of Dh8,000 and want to consolidate all my credit card and loans into one payment with one bank. I have contacted the bank but they are not accepting my request, as my company is not listed. I have a bad credit rating with the Al Etihad Credit Bureau and I tried using debt management companies but they just took payments and nothing happened. I also tried to top up my loan but they say my debt ratio burden (DBR) is over the limit. I am totally stressed and cannot sleep; sometimes I lose my mind and think I should throw myself in front of a car to finish all my problems.

I started using credit cards when my father suffered a heart attack in 2015 and he had to stay in the intensive care unit in hospital. It cost a lot of money and was not easy as I am the one in my family supporting. My father survived and returned home but he needed ongoing medication until his death four months later. I then paid for the burial and expenses in my country.

I also have a court case coming up for the provider of credit card 3 mentioned below. My debts are:

Debt owed / monthly repayments
Card 1: Dh14,000 / Dh1,500
Card 2: Dh14,000 / Dh2,000
Card 3: Dh40,000 / Dh3,300
Card 4: Dh14,000 / Dh1,500
Card 5: Dh75,000 / Dh1550 (converted to loan)
Card 6: Dh22,000 / Dh1,500
Loan 1: Dh100,000 / Dh3,300
Money borrowed from friends: Dh10,000
Total owed: Dh289,000
My expenses include Dh800 for a sharing room and D300 on food. Please help me settle my debts. BL, Abu Dhabi 

Debt panellist 1: Philip King, the head of retail banking at Abu Dhabi Islamic Bank

I’m truly sorry you have become so overwhelmed by your debt that such horrific thoughts have crossed your mind. Considering a path to financial stability is hard, especially when you feel your situation is hopeless. However, whether it is consolidating loans or entering a more formal repayment solution, there is always a route to become debt free.

With total bank liabilities of almost Dh280,000 and a salary of Dh8,000, UAE financial institutions are going to find it very difficult to consolidate your debt. You exceed Central Bank DBR guidelines of 50 per cent (in your case it is over 100 per cent) and your total debt is also over 30 times your monthly salary, well above the 20 times limit. I’m not sure how long your situation has been this bad, but taking out additional cards, even given the desperate situation in which you found yourself, is certainly not a solution. Cards charge the highest annual percentage rate (APR) and are a major contributor to your downward debt spiral.

It sounds like your loan and cards are held with one bank and, at this stage, the best option is to speak to them providing full details of your predicament and a sustainable action plan on how you plan to become debt free. Currently, you cannot afford to service your monthly repayments and it is also in your bank’s interest to recover their debt. Hopefully, you can find an agreement and they can provide a consolidating loan.

Even if you manage to agree a monthly repayment programme of Dh5,000 a month, it is going to take dedication and discipline to become debt free. Your living expenses are already modest and if you have any assets of value, a priority should be to sell these to eat into your total. Living with significant debt is undoubtedly stressful and can lead to anxiety and depression, however, by taking the first steps towards tackling your finances, you will begin to feel less strained and more in control.

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

The total debt you owe is 36 times your monthly salary, which means you must prioritise debt repayment over everything else, and systematically start paying it off.

Your DBR is in the danger zone and you're working with an unlisted employer, so debt consolidation doesn't seem like a possible solution to your debt woes. You will have to approach your banks and credit card providers individually to request a restructured payment plan. The credit card providers can restructure your outstanding balance into a fixed-interest fixed-tenure loan, which will essentially rid you of the exorbitant interest payments on your credit cards.

Your goal should be to get rid of the credit card debts one by one, while continuing to make the minimum payments on the rest, to avoid being charged late payment fees. That means you will have to tap into your assets and income to arrange the funds for the repayments. If you could get an interest free-loan from your employer or a few months' salary in advance, you can use that money to pay off some of the card debt.

I can see that you've cut down your monthly expenses to the bare minimum. And since the expense side of things is taken care of, you should now explore different ways to maximise your income and ease the stress on your finances. Could you request your employer for a raise this year, or perhaps look for a job with a company that is an approved employer on the banks' lists, and pays more too? Alternatively, you could consider looking for part-time or freelance work to tap into another source of income.

With one of the banks taking legal action against you, you definitely need some legal counselling to guide you in the right direction. How about visiting the Philippine Consulate in Dubai or the Philippine Embassy in Abu Dhabi to access free legal advice? Gulf Law has partnered with the Consulate and Embassy to offer pro-bono legal counselling to Filipino expats, and they can guide you on how to deal with your creditors.

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Debt panellist 3: Keren Bobker, an independent financial adviser with Holborn Assets

The first thing I want to say is please don’t harm yourself. I appreciate this is a very stressful situation but that is not the solution.

I have read through this case several times and I am struggling to work out how you managed to borrow this much money. On your salary of Dh8,000, you should have total borrowings of no more than Dh160,000 if UAE Central Bank guidelines were followed. The amount that can be lent to people has been regulated in this way since 2011.

No bank is permitted to provide a loan, even for consolidation reasons, if the total monthly outgoings on all debts exceeds the DBR of 50 per cent of income and this is why you are not being offered a loan, even to replace the existing credit cards on a higher rate of interest

As matters stand, your total monthly repayments are Dh14,665, close to double your income so clearly this is not sustainable. Once the repayments are even close to the amount of income earned, people get into a debt spiral, borrowing from one source to repay another but this only makes the matter worse.

With the way the system is set up in the UAE, unless repayments are maintained, there will be legal action and non-payment of a debt can lead to imprisonment in some emirates, although this means there will be no income and a situation can only get worse. The threat of a court case is often used to scare people into making payment but if the money is not there it won’t make a difference.

In the past, you have helped your family, so is anyone is a position to help you now? Unless family or friends can assist, or you have any assets to sell, your options are limited.

Have you tried approaching your lenders with a suggested payment plan? You have to halve your payment but some of the banks may be willing to accept a reduced payment rather than none at all. My understanding is that banks are obliged to discuss such options with customers or a complaint can be made to the Central Bank.

This is a very tough situation, and an unpleasant lesson to learn about taking on too much debts, but it can be resolved if lenders are willing to take a rational and long-term approach, and you meet your obligations.

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 [e-mail]