In 2013, I applied for a Dh60,000 loan and then transferred the loan to another bank as I could increase the amount to Dh140,000, which allowed me to to pay for medical expenses for my family and close my credit card.
My mother was becoming very sick from diabetes and in 2019, she underwent an expensive surgical procedure as she was suffering from serious podiatry issues. My wife was also pregnant at the time and had to resign from her job, making me the sole breadwinner of the family.
Because of the Covid-19 pandemic, my monthly salary of Dh8,400 was reduced to Dh5,865. My monthly instalments on the loan are Dh3,657 per month, but after deducting Dh1,250 for rent, I am left with just Dh958 for household expenses to buy groceries and pay utility bills. I am also meant to send Dh1,000 every month to my family in India, so we are running on a negative budget.
So far, I have borrowed a total of Dh25,000 from family and friends to help us survive these past few months. I couldn’t afford to pay for a doctor last month for my sick two-year-old daughter, and we had to make a very difficult decision to send my wife and child home on November 5 as she still couldn’t find a job here. My mother also passed away in September and I was unable to go home for her funeral.
I have not missed any loan instalments, and have applied for a payment deferral with my bank. But they said that because I don't meet the minimum 25 per cent salary reduction threshold caused by the pandemic, they cannot approve my request. I don't know how to solve this difficult situation and am very depressed. Can you help me, please? JG, Dubai
Debt panellist 1: Philip King, head of retail banking at Abu Dhabi Islamic Bank
We would like to extend our sincerest condolences on the loss of your mother. This must be a very difficult time for you and your family, and we sympathise with your challenging situation.
Despite these burdens, it is admirable to see that you remain committed in repaying your loan to the best of your ability. Your sense of accountability and consistency will greatly benefit you when negotiating with your bank.
We highly advise you to proactively communicate your situation with your bank. In your discussions with them, make sure to provide the necessary documents that exhibit your salary reduction, as well as proof of accumulated medical fees and expenses that can help explain your predicament.
Emphasise that you intend to diligently meet your loan repayments and completely clear your outstanding dues. Over the course of the year, banks have been greatly encouraged to be lenient and understanding of their customers’ situation by offering payment holidays or reduced fees.
Just last week, the Central Bank of the UAE announced that it will extend to June 2021 the applicability period of key components of the Targeted Economic Support Scheme (Tess) to support banking customers who are impacted by the pandemic.
Ultimately, it is in the bank's interest to minimise the risk of customers’ default, which is why they would most likely be willing to work out new repayment terms for you. You can request for a longer financing tenure with lower monthly repayments to help alleviate short-term financial pressures.
For the time being, we advise that you and your family continue to exercise frugal budgeting. It would also help if your wife can share your financial responsibilities by securing a job.
Debt panellist 2: Ambareen Musa, founder and chief executive of Souqalmal.com
The situation you now find yourself in sounds very challenging. Unfortunately, financial difficulties have become the reality of many people like yourself, who are facing a cash crunch owing to salary cuts, forced unpaid leave and redundancies.
To start with, you should reopen the negotiations with your bank. From the salary figures you've quoted, it looks like you've received a 30 per cent pay cut. You can use this, along with your personal financial circumstances as grounds for applying for a payment holiday.
If this isn't feasible, ask the bank if and how your loan can be restructured to make it more affordable for you to repay. This could be an extension of the loan tenure or a reduction in the interest rate, which would make repayments more manageable for you.
You must also find ways to cut costs and boost your income, such as moving to cheaper accommodation to save on rent. Since your family has moved back home, can you ask your employer to sponsor and arrange for your accommodation, so you can skip paying rent altogether?
You could also consider temporarily reducing remittances to your family for the time being. You could continue relying on some financial help from another family member for a few months until you sort things out. Taking on some freelance or additional part-time work on the side could also be a good option.
Debt panellist 3: Stuart Ritchie, director of wealth advice at AES
A possible option is to request an extension to the term of your loan agreement so that your debt is spread over a longer period, reducing your monthly payments to a more manageable level. You could also speak to the bank about only paying the interest on the loan until your situation resolves.
This may help you in the short-term with your cash flow until your full monthly salary is reinstated. It is important to note that you may pay more over the longer term by doing this and it is only a temporary solution.
If possible, avoid taking on any other debt, including from family or friends. It’s important that your budget returns to being positive as soon as possible to stop your debt getting out of control.
In the meantime, I would advise speaking to your employer about when you can expect your salary to return in full. You could also discuss with them about taking on additional responsibilities or options to work overtime, at least temporarily, to boost your earnings. This will give you more room in your budget to put together a repayment plan while having enough to cover your other outgoings.
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