The Debt Panel: 'My salary is late and I'm missing repayments. What should I do?'

The Dubai engineer, from India, owes Dh44,000 on a loan and two credit cards

Under UAE law, only the person whose name is on the debt is accountable. A spouse is only liable if a debt is in joint names, they have provided a security cheque or they are a guarantor. IllustrationShow more

I have debts of Dh44,000 and my salary as an engineer in Dubai is Dh5,500. However, my employer has been delaying salary payments because of financial difficulties so I have been unable to make my repayments on time.

My debts are: outstanding balance / (monthly payment)

Personal loan: Dh29,000 (Dh1,470)

Credit card 1: Dh10,000 (Dh600)

Credit card 2: Dh5,000 (Dh400)

Total: Dh44,000 (Dh2,470)

I contacted my main lender (for the loan and credit card 1) to consolidate the two debts into one to ease the load. The bank says it is happy to do this but they will consider the credit as a new loan. It said I would then need to pay off the loan over another 48-month period. I did not agree to this offer, as the proposed interest rates were very high at 39.99 per cent per annum on a reducing rate. Other banks won't consider a buyout of my debts because of my bad credit history from the defaults.

I first took on debt in December 2017 for family expenses when they visited Dubai. I have made 18 instalments on the loan but I am struggling because my employer owes me two month's salary. My salary also supports my parents and brother, who live in a rented house in India. My monthly expenses total Dh3,050 and include Dh400 for food; Dh200 for transport; Dh250 for my phone bills and Dh2,200 for remittances.

I want to resign and look for a new job but I am concerned my bank account will be put on hold and I may not be able to exit the country and re-enter on a new visa because of the loan. Would I face issues at immigration? How can I get out of this situation? I want to close this issue once and for all. MK, Dubai

Debt panellist 1: Shaker Zainal, head of retail banking at CBI

Consolidating all your debts into a single personal loan, with a long enough tenor to allow you to service your monthly debt payments, is the recommended course of action in your case. You can approach other banks and explore whether a debt consolidation loan may be extended to you, if you transfer your salary to them as well, as many banks offer such loans. Meanwhile, you can also negotiate the loan rate with your existing bank, based on the market rates you can present to them.

Resigning from your current job, without finding a better job, will not resolve your issues. This will exacerbate your current cash flow problems. It may also take longer than you expect to find a new job, and in the meantime your debts will continue to pile up. Be aware that most loan agreements include relevant clauses allowing banks to freeze the outstanding balance in your current accounts, if they realise your monthly salary is no longer being credited to your account. Banks can also freeze your end-of-service benefits in this scenario, based on the terms and conditions of the loan agreement.

A travel ban can only be imposed on you if the bank files a valid police case with a travel ban or a criminal court ruling to the same effect. In other cases, you can still exit and re-enter the country.

Cutting non-essential costs as much as possible and trying to get some temporary cost-free funding are other options to consider.

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

The interest rate you've been offered on the consolidated debt is too high. It isn't any better than the hefty average interest rates on regular credit cards in the UAE. At this rate, you'd end up paying twice the amount you originally owed to the bank.

It may be worth checking with the second credit card provider if they are open to consolidating all three of your existing debts. This lender may be able to offer better repayment terms on the consolidated debt. However, it is a prerequisite to transfer your salary to the new lender in case of debt consolidation, so you must be willing to do so.

Since you've had trouble getting other banks to consider debt consolidation owing to a low credit score, you can also try to have your outstanding credit card debts restructured, as these are the most expensive debts on your list. Speak individually to both the credit card providers about converting your outstanding credit card balance into a fixed-interest loan.

Regarding your loan, check with the lender if they can offer you a temporary payment holiday in the interim. Various banks in the UAE offer a penalty-free payment break for around two months or so. Although this is only a short-term solution, it could give you some breathing room while you focus your resources towards paying off your outstanding credit card debt.

If negotiating all by yourself doesn't seem to work out, you could enlist the services of a professional debt counsellor or debt management company to negotiate with the banks on your behalf.

If you want to switch your job, it is best to keep working with the current employer while you search for better opportunities. Resigning before you're able to get a confirmed job offer from another employer will land you in further trouble. Banks in the UAE are known to freeze salary accounts when the final salary and end-of-service benefits are credited. There's also the additional risk of getting stopped by immigration authorities when you try to exit the UAE. This could happen if the lenders open a police case against you, effectively putting a travel ban on you. Your best bet to avoid this would be to approach the bank with proof of the new employment in hand. In the meanwhile, look for some additional part-time work to bring extra cash to pay off your debts.

Debt panellist 3: Steve Cronin, founder of DeadSimpleSaving.com

It is frustrating your employer’s failure to pay has put you in a difficult situation. This shows the importance of having a cash buffer, where you have saved up six months of expenses, so you can find a job or cope with delayed salary payments.

You urgently need to find a new job, even if you have to take a slight pay cut. Your employer’s situation is unlikely to improve. Work on preparing your CV and start networking on LinkedIn and across the UAE, talking to friends and attending events for your industry or specialism. Make yourself as employable as possible, building your confidence, looking presentable and improving your skills in the evening. Now is the time to work hard and get yourself out of this situation.

If you resign or get fired, you can stay in the UAE for 30 days to find a new job. You will not have to leave the country and return to start your new visa, unless you exceed this period. It is important to find a job before you resign. As you are not getting paid, you should feel comfortable going to job interviews during work hours.

However, your bank may freeze your accounts and insist on full repayment if it is informed by your employer that you have left the company. If you have a new job lined up, go to the bank (or another bank) and explain to them when you will start working again and what your new salary will be. If you have a choice, aim for a large company that has a good relationship with the banks, as this may reduce your loan’s interest rate. You are right to turn down a 40 per cent interest rate, as you will never escape from such debt.

Meanwhile, try to reduce your monthly living costs as much as possible. There are new mobile providers charging a lot less than Dh250 per month. Discuss with your family how to reduce your remittances; all that money needs to pay your debt off otherwise you will not be able to support your family in the future. See if your brother or another family member can step up to support your parents for a year or so while you get yourself back on track.

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 [e-mail]