I am a single mother of two from India with outstanding debts of Dh349,000. My husband left the UAE three years ago, leaving me to repay our loans and credit cards. This means the majority of my Dh25,000 salary as an administration employee goes towards debt. Over the last year, I've repeatedly asked my bank, where my salary is transferred, for a loan restructure due to financial constraints and my children's education expenses. However, they rejected my request as I have never defaulted with that lender. They also say my credit score with the Al Etihad Credit Bureau is not good and that if my records were clear I could go to any bank for a loan. I have other debts as well and lifestyle expenses to pay, which the bank is not considering in their decision. My debts are:
Loan: Dh230,000 (Dh11,747 monthly payment)
Credit card 1: Dh20,000 (Dh975)
Credit card 2: Dh29,000 (Dh1,800)
Credit card 3: Dh28,000 (Dh973)
Credit card 4: Dh8,000 (Dh714)
Credit card 5: Dh6,000 (Dh500)
Credit card 6: Dh15,000 (Dh1,000)
Credit card 7: Dh13,000 (Dh800)
Total: Dh349,000 (Dh18,509 in monthly payments)
My husband took on these debts in my name as I could get loans and credit cards. He used it to pay for the rent but then left the UAE due to job loss and everything fell on me. I have two children studying here, one in grade 10 and one in university. My monthly living expenses are Dh12,000 with Dh3,500 in education costs, Dh5,500 in rent, Dh400 for internet and Dh800 for groceries. I also pay Dh1,800 for car rental, which I cannot get out of as I work in a remote location with no bus or car pool options.
While I have a good record with my bank, I am defaulting on payments with other banks, which means I receive threatening calls and emails on a daily basis. Some have also threatened to go to my HR, so I am now scared to take the calls. I cannot sleep peacefully, my health is suffering and my younger daughter has grown used to seeing my worried face. My husband has no communication with us. I have tried my best to involve him but he has no job or income in India and legal consultants have told me I will not receive maintenance from him. We are yet to divorce. I need a loan of Dh100,000 to settle my dues. Some friends have helped me, but they cannot always do this. My parents are elderly and are not in a position to help me. How can I find a solution with the bank? SN, Abu Dhabi
Debt panellist 1: Shaker Zainal, head of retail banking at CBI
To understand your options, let’s establish some fundamentals first. Your debt burden ratio, which is measured by your total monthly debt payments, divided by your monthly income, is 74 per cent. In the UAE, the DBR is an important factor that determines an individual’s ability to receive a bank loan or financing, because the Central Bank of the UAE regulations require this ratio not to exceed 50 per cent for any borrower. This is to protect people and prevent them from getting over-leveraged. In light of this, it is not surprising your bank has not approved your repeated loan applications.
This brings us to your available options. Additional bank financing is not an option for you in the UAE at this stage. Your first priority should be to bring down your DBR. If you have any liquid assets in the UAE or in India, consider selling them to receive some cash inflows. You can buy them back later, if really needed, when you have achieved some relief. Secondly, discuss your situation with your employer and request a long-term advance salary payment. This could be an option, particularly if you have been working for the same company for a relatively long period of time.
The third sensible action to consider is to bring down your costs. Could you move to a smaller house or rent a cheaper car? Can you apply for some scholarships to at least partially support your education costs? Anything you can think of to reduce your monthly costs and cash outflows could be helpful.
Once you have reduced your DBR to below 50 per cent, the next step should be to consolidate all your existing bank debts into a single, long-term personal loan, so that you can avoid the high interest charges on your credit cards. Your likelihood of getting a long-term re-structure loan is highest at the bank your monthly salary is credited to.
Debt panellist 2: Keren Bobker, an independent financial adviser with Holborn Assets
You are in a tough situation, the amount you owe and the repayments are very high and take a significant portion of your income. The debt repayments equal Dh18,509 each month and your fixed expenses are Dh12,000, so together these come to Dh30,509. This leaves you with a monthly shortfall in excess of Dh5,500, which is untenable.
You say your husband took these debts in your name. I assume you signed the applications yourself, so that makes you legally responsible for the borrowing. Cards should only ever be used by the person’s name they are in as that is part of the legal agreement with the bank. It is disappointing your husband has simply walked away from this.
Even if you have defaulted on repayments, a bank should not harass you at work on a daily basis. They are also not permitted to speak to any third party about your debts as that would be in breach of data protection rules. You can register a complaint with the Central Bank.
Sadly, your options are limited in the UAE. You say your parents and husband cannot assist but are there any other family members that can help? Do you have any assets in India that can be sold to reduce the credit card debts so you can start paying more than the minimum, which is required to start reducing the total debt? Are you able to work overtime to increase your income?
You say you have a child at university, so can they start working to bring some more income into the household to assist? The laws regarding university students taking on jobs have become more flexible in the past year, so this would be a sensible option.
Debt panellist 3: Steve Cronin, founder of DeadSimpleSaving.com
You have been left to pick up the pieces but fortunately, you have a reasonably well-paid job – you need to fix your financial situation in case you lose it, and also so you can start smiling again.
You are up against bank bureaucracy following rules rather than being flexible, and punishing you because you haven’t defaulted with your main bank. Defaulting to get their attention is not the way forward though. Prepare a proposal showing all your debt, interest rates and time to repayment. You need to make an appointment with someone senior enough to make flexible decisions – a branch manager or loan officer at headquarters that can review your slightly unusual case. Demonstrate to them that you want to reduce your total monthly payments and that this will reduce the risk of you defaulting on your main loan.
Your DBR is a challenge though. You would have to extend the term of your loan to reduce the monthly instalments, but you may also need to pay off some credit cards first. If you do get a loan, try to pay it down as much as possible so you don’t have debt and interest payments hanging over you for years. Unfortunately your card defaults will stay on your credit bureau record for five years.
Currently your monthly expenses (Dh30,509) exceed your salary, causing you to default on your card payments. You need to tackle this urgently, though I appreciate this is difficult with children. Do not use credit cards further to help with cashflow – put them away. See if you can find a better-paid job or ask your company for additional work, a raise or at least an advance. Anything that can quieten the more aggressive credit card companies will make your life easier. Depending on your company, talking to your HR department about the situation may reduce your stress if you find them sympathetic. It’s not like you have been careless or brought this on yourself.
See if you can raise additional money by selling assets, doing side-jobs such as admin for friends or online via websites such as upwork.com. Can your university-aged child get a part-time job to help support you? You also need to cut down on expenses as far as possible, even if it means another tough couple of years. In the worst case, you may have to change schools or home. The most likely way to avoid this is to track down sufficiently senior managers at your main bank and push for a solution.
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