Abu Dhabi, UAEMonday 21 October 2019

The Debt Panel: 'Can I repay my Dh40,000 personal loan from Singapore?'

The Dubai resident, from India, is relocating to take on a higher-paid role

Illustration by Mathew Kurian 
Illustration by Mathew Kurian 

I have been offered a better-paid job in Singapore after working in Dubai for over two years. I am 25, from India, and earn Dh4,000 a month in the UAE as a piping design engineer. My job here also comes with free accommodation. The new role in Singapore would pay me S$3,700 (Dh9,841) and also includes accommodation.

The issue with all of this is that I have an outstanding loan here on which I owe Dh40,000 with a monthly payment of Dh1,329. I did have two credit cards but I am closing those now.

I have completed one year of the four-year loan and only have three years left. I borrowed the money to build a home in India. The Singapore package is much better and I would be able to clear the loan within seven to eight months on such a good salary. I am about to be sent the offer letter and visa copy and I plan to resign very soon. If I submit the new visa and offer letter documents to bank, will it let me pay off the loan from Singapore? Also can I set up a non-resident account in the UAE to pay the debt from?

When I resign my end-of-service settlement will come through and I understand the bank will hold that amount. It should be Dh9,000 to Dh10,000 and will help to clear several months of payments. I also have about Dh1,000 in savings and I have not missed any payments. How shall I negotiate with the bank on this? MK, Dubai

Debt panellist 1: Ambareen Musa, founder and chief executive of Souqalmal.com

The solution to your debt situation may be simpler than you think. We have come across several cases of expatriates successfully making a similar arrangement with their bank, allowing them to repay their loan instalments from abroad. The only variable in this equation is your lender's stance on debt repayment from overseas.

It is also a good idea to be prepared with a Plan B in case your lender demands full repayment of the debt before you leave.

Ambareen Musa, Souqalmal.com

Here are three steps to help you negotiate with your lender and work out a suitable repayment plan:

• The first thing in your favour is that you haven't defaulted on your loan payments. That shows your intention to stick to your debt commitments in the future as well, so use that to your advantage when you approach the bank.

• The second beneficial factor is that you are about to receive your final offer letter from the employer in Singapore. This document (subject to the bank's vetting protocol) should convince the lender of your ability to repay them.

• The final negotiating tool is your willingness to use your end-of-service benefits and gratuity to partially offset the outstanding loan.

Remember that verbal approval from a bank representative is not enough in this case. To ensure a smooth exit from the UAE, you must obtain a written agreement from the lender with details of the remaining loan amount and how you'll be repaying it after moving to Singapore. It's always best to err on the side of caution.

It is also a good idea to be prepared with a Plan B in case your lender demands full repayment of the debt before you leave. After adjusting your gratuity and savings against the outstanding loan, you would still have about Dh30,000 to pay back. Try to find alternative ways to gather the cash to repay the bank such as informal loans from family and friends or a loan against your property. You could also explain your situation to your new employer and request the first month's salary in advance.

Debt panellist 2: Philip King, head of retail banking at Abu Dhabi Islamic Bank

Congratulations on securing a job with a higher salary and I am pleased that you have taken responsibility to address your debt obligations in the UAE.

As you have ascertained, it is important to initiate communications with the bank to demonstrate your ability and commitment to settle your debt. Try to negotiate a plan that will allow you to pay off a significant portion of the remaining loan amount before leaving Dubai, and then continue to make regular repayments from Singapore. To help your case, submit supporting documents such as your new employment contract as well as your new address and contact information. Once you reach a final agreement with the bank, make sure you have a written record of the revised repayment plan.

With the Dh40,000 you currently owe reduced to around Dh30,000 following your end-of-service settlement, combined with your new higher salary of Dh9,841 a month, it shouldn’t take long to achieve the goal of becoming debt free. However, be aware that when moving country there are always certain start-up costs and it is important to factor these into your budget.

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

I am pleased you intend to repay the money your borrowed and it is sensible to repay your credit cards in full and to cancel them.

The priority of any bank is that a debt is repaid as agreed, but as there is a history of people leaving the UAE and not making any further payment, banks are wary of this happening again happen and often try to take pre-emptive action.

When a residence visa is cancelled, banks are not informed of this. They only know you are leaving a job because your last salary payment must be marked ‘final salary’. They are likely to freeze your account and use any final salary payment and any gratuity paid to the account to reduce the outstanding debts, especially if they know you are leaving the UAE.

A bank cannot place a travel ban on an individual, but if they believe that someone is going to leave the country and not make payments, they can apply to the court for a travel ban. The bank has to make a case to court but as you have not missed any repayments, their case will not be strong. That’s if the lender even becomes aware of your intended departure. Having an outstanding debt does not prevent a person from leaving the country.

You should be able to keep your existing UAE bank account open upon leaving but it will need to be changed to non-resident status. Most banks will do this on request. If you reduce the debt, which is not large, with your end-of-service payments and show you have every intention to continue making the repayments from a higher salary, any sensible bank should be amenable given your situation. Get any agreement in writing so that you have a formal arrangement to pay from an account in another country and can set up a standing order once your bank account is set up in Singapore.

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 pf@thenational.ae

Updated: October 8, 2019 09:54 AM

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