I have three debts with three banks and one bank’s collections department is always harassing me. They want to file a case against me and tell me they will deposit my security cheque. I have been in Dubai for four years and was on good terms with the bank until January when my minimum payments became more than my monthly salary. This meant I could no longer make payments. My debts are:
Total outstanding / monthly payment
Credit card - Dh30,000 / not paid the minimum of Dh3,000 for six months (however made a payment of Dh2,500 in June)
Credit card – Dh10,000 / not paid the minimum of Dh500 for three months
Loan - Dh65,000 / Dh2,300
Total debt: Dh105,000
A few weeks ago I sought legal advice from a consultancy. They told me not to make any payments while I wait for their final comments. I also tried to get a personal loan from other UAE banks to close the cards, but all my applications were declined.
Bank 1 has been calling my home in India and my office here with a bad attitude since January. I asked the bank to convert my outstanding EMI into lower amounts to make the payments easier but they will not do that. They have asked me to make a payment of Dh5,200 soon or else they will submit the cheque. I took on the debt three years ago to pay rent and other bills, such as utility and phone demands in the UAE. All the money was spent here and the outstanding total is high due to interest.
I earn Dh6,300 in the oil and gas sector. I have to travel out of the UAE for my job and the bank is now threatening a traveI ban. If this happens I will 100 per cent lose my job. I was in living in Dubai on my own, but I now share in Sharjah to reduce costs. I am single but have to support my elderly parents. My expenses are: rent and food - Dh2,000, car and petrol - Dh1,500, loan payment - Dh2,300, utility and other expenses - Dh1,000 to Dh2,000. For the last two years, I have not received a pay rise or any bonuses due to slow business conditions. This month I saved Dh1 after all my expenses, so how can I make these payments? RK, Sharjah
Debt Panellist 1: Philip King, head of retail banking at Abu Dhabi Islamic Bank
If you are failing to meet the minimum repayments on your card debt, it is not surprising the bank is in regular contact to try and recover what you owe them. You have built up significant debt using cards with an ambition to only pay off the minimum amount each month. You will therefore be paying a high rate on the outstanding balance without making any significant headway in terms of clearing the total debt.
You should try to find ways to budget and control your living costs as currently you have no savings at the end of each month, nor means to increase the size of your repayments. The focus needs to be to lower your ‘other expenses’ until you reach financial stability, as well as making small savings on food and petrol costs, where possible. Over time, discipline across your monthly spending can amount to a large saving. You are also basing financial planning on circumstances outside of your control, such as the expectation that you will get a bonus in the future, which is a common mistake.
It doesn’t appear that you any legal standing to forfeit your repayments. Your best option is to meet with the banks holding your credit card debt and request a consolidation loan. You will need to present a clear plan for how you can afford to repay what you owe, and commit to meeting this repayment schedule to rebuild trust with the banks, who will naturally be worried that you are travelling and may abscond. A priority should be to control your living expenses so that you have funds to repay your debts every month.
Debt panellist 2: Keren Bobker, an independent financial adviser with Holborn Assets
The relationship with any bank will go sour if someone does not make the repayments they agreed to. As you have not made repayments to at least two of the banks for more than three months, it does not surprise me that they are not calling you to request payment. You will be aware that non-payment of debt is a criminal offence in the UAE and if a person fails to make three payments on a loan then a bank has the right to register a police case. It is not unusual to request a travel ban to prevent someone from absconding in order to try and escape their debts and consequences, so this is a real possibility.
I note that you borrowed money to pay daily expenses, but that will never be a sustainable situation. Borrowing to support a lifestyle, even with a low salary, is never going to end well and I wonder how you thought you would be able to repay what you have borrowed. Indeed, I am curious as to how you borrowed so much on your income, as you advise that your minimum monthly repayments on all three debts are Dh5,800, 92 per cent of earnings, and this is far in excess of the Central Bank of the UAE limits. Even with interest added and possibly penalties for non-payment your actual borrowings are too high. How did you think you would be able to repay these debts on your income? Borrowing yet more money to repay existing debts is a terrible idea and you were quite rightly declined.
You say that you are in discussions with a ‘consultancy’ and that they have advised you not to make any further payments until they come back to you. This is terrible advice as you will only be in a worse situation with the banks. The only way to stall the banks in taking further action is to make payments.
At this level of debt, in comparison to income, the options are few as the banks are unlikely to be amenable once a person has already missed various payments. I note that you have reduced your outgoings but you still have outgoings that exceed your income. Are you able to reduce your costs any further? The only way to live sensibly is by doing so within your means. You have to find ways of reducing your outgoings so you can start repaying the money that you owe. Even if the lenders agree to reschedule, the money must still be repaid.
Do you have any assets in India that can be sold to repay part of what you owe? Do you have any family members that are able, and willing, to assist? Can other family members support your parents for a while so that you can focus on repaying debts? Unless steps are taken, this could all end very badly and you will have no ability to support your parents. Sadly, without taking drastic steps and getting some outside support, your options are very limited at this time.
Debt panellist 3: Steve Cronin, founder of DeadSimpleSaving.com, which helps residents invest their own money
Your loan repayment is using up all your monthly salary above your expenses, so you have nothing left to pay your cards off or create a buffer for further problems. My recommendations are the following:
1. Keep paying your loan and credit cards as much as possible - not making the minimum payment or any kind of payment is triggering all these issues with banks. Waiting for the consultancy may lead to a bank cashing your cheque.
2. Maintain frequent dialogue with your banks. Ideally you should get a consolidation loan that wraps your credit card debt. What is the reason for the banks rejecting you and can you fix that?
3. If you can demonstrate that the balance on your card is mostly interest-on-interest - and you have already paid off the original borrowed amounts one or more times over - then you may have a legal case, but this a slow and costly process.
4. Ask your employer for extra work or a company loan. Start looking for other, better-paid jobs, even in other sectors or find other sources of work and non-work income, including selling assets.
5. Find ways to reduce your living expenses, even if it means being uncomfortable for a year or so. Will your company contribute towards your car expenses or provide a company car?
6. Can a family friend support your parents for a bit or provide a loan at a cheaper rate to allow you to get your head above water again?
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 email@example.com