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Abu Dhabi, UAEWednesday 23 January 2019

The Debt Panel: Dubai travel agent with debts of Dh125,000 fears repercussions of travelling to her sister’s wedding

The Dubai resident, from Pakistan, earns Dh7,350 and is struggling with her monthly debt repayments.
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 in such a mess and do not know how to get out of it.

In total I owe about Dh125,000 and I earn Dh7,350 as a travel agent in Dubai. I built up these debts paying for medical treatments for my parents, renting apartments and supporting my parents and sister in Pakistan as I am the sole breadwinner for the family.

I now need more credit to pay for my younger sister’s wedding in June and to cover a few payments that have been overdue for a long time. I have managed to close two credit cards at the end of last year through payment plans – and will finish another next month.

Since January this year I have been trying to get a loan of up to Dh15,000 to Dh20,000 – but I am being denied due to my credit record. My outstanding debts are:

Credit card 1: Dh26,666

Credit card 2: Dh21,000

Credit card 3: Dh12,210

Credit card 4: Dh7,000

Loan: Dh59,000 with a monthly repayment of Dh2,155

I have had one case made against me that I only found out about because someone hit my car. I ended up behind bars but I had been making the repayments on time. With my sister’s marriage coming up, I want to travel, so I hope and pray there are no more cases against me. How can I find out if there are?

At the moment, I am making the repayments on time, but I am always worried and am scared about entering an airport. How can I solve my debt issues? SB, Dubai ​

Debt panellist 1: Keren Bobker, The National’s On Your Side columnist and an independent financial adviser

From the information provided it is clear that SB is trying to pay for too many things that she simply cannot afford on her income so she needs to be realistic. Borrowing yet more money to pay off an existing debt is not a solution as it becomes an ever-repeating circle with no end.

Under current UAE Central Bank rules, no one is permitted to borrow money where the repayments exceed 50 per cent of their monthly income, known as the Debt Burden Ratio, and SB has been declined further credit as it appears that the current payments are already at that level. It is not sensible to borrow in excess of this amount as the repayments are simply not affordable.

In addition, the Al Etihad Credit Bureau keeps records of debts and repayment records and if SB has missed previous payments and paid late, this will affect her personal credit record. Any individual can check their personal record by taking proof of identity (original Emirates identity card and a passport copy) to one of the Credit Bureau offices. Depending on the type of information required the fee starts at Dh60 for a simple score and goes up to Dh100 for an actual report.

I note that SB has repaid two cards and it is important she continues to repay the money currently owing. Making just the minimum payment on a credit card each month will not reduce the total outstanding as the payment will be just the interest. Additional amounts are required to reduce the outstanding debt. Going forward the focus needs to be on repaying debts and avoiding taking on any more. SB needs to consider if any savings can be made in her outgoings and see if she has any options to increase her earnings, either with her current employer or by changing job.

I am somewhat mystified as to why there could have been a police case registered if payments had been made on time as lenders only take this course of action if three months’ payments have been missed. If payments on the other debts are up to date there is no reason why there should be any other cases registered. But if she fears there may be then she can check at a main police station.

She will need proof of identity but must also be aware that if cases are registered then there is a risk of possible detention. If repayments are up to date, there should be no cases, and no issues with travelling in or out of the UAE

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

With a total credit card debt of more than Dh66,000 along with a loan of Dh59,000, and earning a salary of Dh7,350, it is clear that your Debt Burden Ratio is well above the maximum 50 per cent, stipulated by the UAE Central Bank. On top of that you already have a police case registered against you. This makes it impossible for you to get a new loan or credit card from any UAE bank. In fact, the biggest concern is that you’re considering taking on further debt, given the current state of your finances.

The good thing you’re doing is focusing on repaying your credit card debt, one card at a time, and closing those credit card accounts subsequently. You must keep doing so with the remaining four credit cards as well. Pick a repayment strategy you find the most motivating. This can either be paying off the smallest credit card balance first (known as debt snowball) or paying off the credit card debt with the highest interest rate first (known as debt stacking).

It is important to have a discussion with your family about your current financial circumstances. I’m assuming they are expecting you to help to pay for your sister’s wedding. Instead, look for an alternative solution, for example, can another close relative lend your family money for this occasion? Once you’re back on your feet financially, you can pitch in towards paying them back.

Furthermore, to know the status of any pending police cases filed against you, you will have to check with all the banks that you have a loan or credit card with. Once you’ve established contact with the bank, and if there is a case filed against you, the aim should be to negotiate a loan settlement or instalment plan with the bank in exchange for withdrawal of the police case. Once a solution is reached, you must also obtain a written proof of the withdrawn police complaint from the bank.

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.

pf@thenational.ae

Follow us on Twitter @TheNationalPF

Updated: April 25, 2017 04:00 AM

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