The Indian, who took on credit after his sibling's business failed, shells out over 80 per cent of his monthly Dh9,500 income on debt repayments.
The Debt Panel: Dubai banker bailed out his brother's debts and is now in crisis himself
I work in a bank and over 80 per cent of my Dh9,500 salary goes towards paying off my loans and credit cards. In total I owe Dh183,500 on three loans (two in the UAE and one in India) and six credit cards. Every month Dh8,000 goes on the repayments with just Dh1,500 for me, my family and the repayments for the loan in India. I built up this debt after my brother's business failed due to fraudsters and he was left with outstanding debts. I took out credit to help him as he had court cases against him and at one point was jailed; he is now back in India and still struggling to get back on track as he is suffering from depression. I am finding everything very difficult as I am the only member of my family working and I take care of everyone. My liabilities are:
Bank loan 1: Dh65,000
Bank loan 2: Dh21,400
Credit card 1: Dh10,800
Credit card 2: Dh12,000
Credit card 3: Dh14,500
Credit card 4: Dh5,900
Credit card 5: Dh5,900
Credit card 6: Dh18,000
Bank loan in India: Dh30,000
I have approached my banks for buyouts but because I work in a bank and my debt burden ratio is quite high I have been turned down. So how can I clear my liabilities?
Debt panellist 1: Ambareen Musa, the chief executive of Souqalmal.com
The first step is to figure out how to bring your debt burden ratio (DBR) down from the existing 80 per cent to well within the 50 per cent threshold mandated by the UAE Central Bank. Since you work for a bank, you already know the implications of having a DBR that's too high. You won't be able to qualify for a loan buyout or debt consolidation, and your credit report and credit score will be adversely affected too.
Make a list of all your loans and credit cards in descending order of interest rate. Now your credit cards will rank at the top of this list owing to the high interest rates prevailing in the UAE credit card market. Then you'll find your unsecured non-salary transfer loan next on the list, and the salary transfer personal loan from your primary bank will most likely feature at the bottom. This list will be your guide to which debts you should ideally be settling first.
Your aim should be to pay off the expensive credit card debt first. This is the fastest multiplying debt on your list and will only drown you in debt further the longer you leave it unpaid. As you focus on repaying one card at a time, make sure to not default on the minimum payments on the remaining cards. The penalties levied by banks are too severe to ignore.
Given the current interest rate structure in India, your bank back home is probably charging you close to double the average interest rate being charged in the UAE. How about you rope in your brother to help repay this one off at least? If he has any savings, assets or investments in India, he can liquidate those to get rid of this loan.
Now comes the big question: How exactly will you gather the funds to repay all this debt? First, try to negotiate a restructured repayment plan with the individual banks. Once you've tried that, you must find ways to cut costs and increase income: move to a cheaper accommodation, freeze all remittances to India, cut all unnecessary spending. Based on your current work situation, ask yourself if it's the right time to negotiate a pay rise with your employer or perhaps look for a higher-paying job elsewhere. Taking on some freelance work on the side could also be a good option.
Debt panellist 2: Rasheda Khatun Khan, a wealth and wellness planner
Taking cash out on credit cards is the quickest way to debt destruction, especially when you have no repayment plan or back up and are reliant only on a specific outcome. The odds are too high and more often than not, it will create more debt. As early as having outstanding balances on two credit cards is already a clear indication that unsustainable debt is looming. This is the time to restructure, cut back and budget. Burying your head in the sand is not the answer. Waiting to be backed into a corner because you can no longer afford to pay the repayments or can no longer get another loan to bail you out is also way too late to ask for help. Everyone must start to take responsibility much earlier.
Owing nearly 20 times your monthly salary is a huge burden and paying 84 per cent of your monthly salary in debt repayments is not sustainable. While you say you are supporting your family, now is the time to ask them to step up and support themselves while you resolve your issues. Then downsize everything you have: your home, car, expenses, utilities etc
Support your brother to find work. Help him turn his depression into determination to get you, his brother, out of this deep debt situation. You have to pull all resources together or you too may be facing court cases and indeed personal health issues. Contact every single bank, secondary bank and debt consolidation company in the UAE and India to see if you can consolidate what is already outstanding. Approach your employer and see if they are able to support in any way. Explain your situation and offer them a sustainable repayment plan. Be sure to work this out. Know your numbers and present it well.
Explore other avenues to raise your income. Do you have any assets you can sell? House, jewellery, a car? Is there a part-time job you can do that can bring you more income? Contact people you know and seek opportunities. It's time to get creative and pull on all possible resources.
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 email@example.com.