Abu Dhabi, UAETuesday 16 July 2019

The Debt Panel: Dubai bank employee owes Dh235,000 and has been in debt since 2006

The Dubai resident owes Dh160,000 on 11 credit cards and two loans and a futher Dh75,000 to friends and relatives.
Clockwise from top left: Ambareen Musa, founder and CEO of Souqalmal.com; The National columnist Keren Bobker; Philip King, head of retail banking at ADIB; and Rasheda Khatun from Financial Life Planner, provide insights on why people are getting into excessive debt, how this situation can be resolved and where they can turn for help. Ravindranath K, Satish Kumar, Marwan Alhammadi and Mona Al Marzooqi / The National
Clockwise from top left: Ambareen Musa, founder and CEO of Souqalmal.com; The National columnist Keren Bobker; Philip King, head of retail banking at ADIB; and Rasheda Khatun from Financial Life Planner, provide insights on why people are getting into excessive debt, how this situation can be resolved and where they can turn for help. Ravindranath K, Satish Kumar, Marwan Alhammadi and Mona Al Marzooqi / The National

I am facing problems with my debts and need a loan to clear them. My liabilities include credit cards and money I have borrowed from others. In total I owe Dh75,000 to different friends and relatives and a further Dh160,000 to the banks. I signed up for my first credit card in 2006 and then borrowed money from credit cards to settle other cards and the loan for my marriage, and to send to India when my father was not well. My debts include the following:

Credit cards

■ Dunia Finance: Dh8,000

■ Emirates NBD: Dh12,000

■ Najm: Dh8,000

■ Abu Dhabi Islamic Bank: Dh7,000

■ HSBC: Dh15,000

■ Rakbank: Dh18,000

■ Finance House: Dh8,000

■ Union National Bank: Dh3,000

■ Dubai Islamic Bank: Dh8,500

■ Samba: Dh18,000

■ Noor Bank: 4,500

Loans

■ Emirates NBD personal finance: Dh40,000

■ Al Hilal Bank car loan: Dh10,000

While I work as an office manager for a bank earning Dh13,800, my wife works as a head teller earning Dh7,000. We have good salaries but Dh10,000 a month just goes on debt. We want to consolidate these debts, but I have crossed the debt burden ratio and cannot borrow anymore and my wife is on my visa, so she cannot take out a loan. Also my wife’s father is unwell and cannot manage his business at the moment. If we can clear our debts and stop paying so much interest, that will be a great help to my family. We also have a daughter studying in KG1 and to continue her studies here, we need to settle everything. KK, Dubai

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

Your top priority should be to dig yourself out of the credit card debt worth Dh110,000 that you’ve accumulated. This is the biggest drain on your finances and will only multiply further, owing to the high interest rates averaging about 40 per cent per year. The repayment strategy that will help you get out of debt faster involves making the minimum payment on each of your credit cards without fail, completely paying off the credit card that levies the highest interest rate first and closing each credit card account as you go.

Have you approached the bank where you work and discussed with them a debt consolidation plan? This could mean consolidating your most expensive loan and credit card debt into a fixed-tenure loan, lowering interest or extending the tenure to make repayments more manageable.

If you’re not able to qualify for debt consolidation, how about your wife applies for a loan in her name. Since she is employed as a head teller in a bank in the UAE, she should be eligible to apply for a salary-transfer personal loan at a competitive rate. The sponsorship details on her residence visa should not affect her eligibility in this case, assuming she meets all other qualifying requirements. You could use the personal loan amount to pay down a big chunk of your credit card debt.

Do you have any assets back home such as property, gold, investments and such that you can liquidate? Doing so will help you bring the extra cash here to settle your debts.

As a precaution going forward, make sure you put away a small portion of your monthly salary in an emergency fund. This way you won’t have to depend on debt to tackle unforeseen financial emergencies in the future.

Debt panellist 2: Rasheda Khatun Khan, a wealth and wellness planner

Unfortunately, with this number of creditors it is highly unlikely that a bank will provide further lending or a consolidation option. Your only option of consolidation may be with a specific debt management company. You can could try Lotus Loans & Overdues Rescheduling to see how they can help you. They have been referred to in previous articles.

It’s also time to cut right back and think about what you can say yes to and no to. Try not to increase your liabilities by taking on other expenses. Are there other options to your father-in-law’s medical expenses? Can you approach other family members? Sometimes it can be a tough decision, but you have to weigh up the consequences and long-term cost it has on you. Sure, if we have available money we are in a position to help. But when you are in the situation you are now in, you really have to think twice and this could cost you your family’s well-being. The outcome of unpaid debt here in UAE is jail time. Think seriously about increasing that debt.

I suggest trying the snowball effect for repaying your credit cards. This means taking the cards with your lowest balance – Union National Bank Dh3,000, Noor Bank Dh4,500 – and repaying them off in full with your allocated Dh10,000 you’re using every month towards all of the cards. Use the remaining Dh2,500 to put towards your ADIB card. The following month use the Dh10,000 to clear the ADIB card with a remaining balance of Dh4,500 and use the Dh5,500 towards another card with an Dh8,000 balance. This way, within two months you will have cleared three cards. Go back to repaying the minimum balances on the others for a month and then use your Dh10,000 again on one card at a time and so on. The more you repay, the better. This way you can wipe out your cards and only have your loans left. Be sure to do your numbers to make this work.

Ask yourself if there anything else you can cut back on and ensure your living expenses are not more than your income. If they are, even after you have repaid most of the debt, then you seriously need to consider alternative living arrangements – and this may mean leaving UAE, as you will always continue to accumulate debt. It’s time to make some smart choices.

The Debt Panel brings together four financial experts: Philip King, the head of retail banking in the UAE at Abu Dhabi Islamic Bank; Ambareen Musa, the founder and chief executive of the comparison website Souqalmal.com; Rasheda Khatun Khan, a wealth and wellness planner and founder of Design Your Life; and Keren Bobker, The National’s On Your Side columnist and an independent financial adviser with Holborn Assets in Dubai. Together they answer queries in a weekly online column to help readers better tackle their debts. If you have a question for the panel, write to pf@thenational.ae.

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Updated: July 21, 2017 06:41 PM

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