I signed up for a Dh270,000 personal loan 18 months ago and have been making the Dh6,528 monthly repayments on time ever since. I earn Dh15,000 as a quantify surveyor in Dubai, however I am struggling to find a good job opportunity to move to. Therefore, if I secure a big offer from an employer in another country I will consider moving. I plan to leave in about six to eight months but I still owe Dh193,000 on the bank loan. I borrowed the money to build a house in India and close four credit cards on which I owed Dh70,000 in total. I have no credit cards now.
If I left, could I deposit three months' worth of instalments into the account to cover the payments and then top up the account to pay off the remaining balance from overseas? Then, if I made all the payments on time, would the bank in the UAE still file a criminal case against me for leaving without paying back the debt in full? Also, once I am overseas how can I check if there is a case against me? I have also had interviews in the UAE where the salary is Dh30,000. If I secured that kind of salary, I would repay the debt within six months before eventually leaving the country. What is the best route to go about this? KT, Dubai
Debt Panellist 1: Philip King, head of retail banking at Abu Dhabi Islamic Bank
Firstly, you have made the correct decision to take out a loan to pay off your four credit cards, which typically charge a higher rate than a loan. In sticking to the repayment schedule for the last 18 months, you have also demonstrated to your bank that you can be financially responsible. Given this track record, and if you feel that you must move home later this year, you should have a conversation with your bank about finding a compromise in which you pay off a significant portion of the remaining sum before leaving, and then continue to make monthly payments from overseas. To support your application, take in your new employment contract and any other materials that demonstrate your ability and commitment to fulfil your repayment obligations.
The bank may not agree to this request as the amount you owe is still likely to be in excess of Dh100,000. Should you fail to make repayments in future, it would be extremely difficult for them to recover the outstanding amount from another country. However, if you have cleared it with your bank beforehand and have a letter confirming your new agreement, so long as your repayments remain current, the bank wouldn’t file a criminal case against you.
Overall, you should weigh up the cost/benefit of making such a move. Given the opportunity to secure a higher salary here, and one that may be twice what you currently earn, you need to evaluate what’s in your best long-term interest. If you can pay off all the debt, and then potentially save additional funds while in the UAE, there is a compelling argument for delaying your move for a couple of years. You can then move overseas debt free and in a position of financial strength.
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Debt panellist 2: Keren Bobker, an independent financial adviser with Holborn Assets
The priority of any bank lending money is simply that repayments are made in accordance with the agreement between both parties. Before you take any steps, check the small print of the loan agreement to ensure there is no stipulation to repay the money borrowed if you leave the UAE.
A bank can only file a police case if a borrower has defaulted on a loan and you have no intention of doing this and have explained how you intend to keep making payments. If you do not miss any payments the bank will have no real cause to take action. It has become harder to check whether a police case has been filed against someone who has left as the police will generally no longer provide this information to third parties, unless they are an accredited lawyer. A new system has just been introduced that should allow individuals to check whether there is a case registered with Dubai police via their app or website but this is designed for residents so may not work for someone whose visa has been cancelled.
Be aware that if a bank knows that a borrower has a debt and is planning to leave the country there is a possibility they could apply for an immigration ban if they think someone will leave and not make any further payments. This would prevent you from leaving the UAE, but unless your loan agreement states that you need to be resident in the UAE and make repayments from a UAE salary, you should not be obliged to tell the bank you are leaving the country.
Once you leave your current employment the bank is likely to freeze your bank account as your current employer will mark your last salary payment as ‘final salary’. Any end of service gratuity and savings may be used by the bank to reduce the outstanding balance, however, actions vary between banks.
Provided it is not contrary to the terms of the loan agreement, I would not be inclined to tell the bank you are leaving the UAE, but strongly recommend contacting them as soon as you are in your new country to set up a repayment arrangement.
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Read more:
[ UAE residents can now buy credit reports via a mobile app ]
UAE credit reports to include rent, salaries and court rulings
Bank customers must submit their Emirates ID or face suspension
Start-up will help UAE residents borrow money they can afford to repay
A nine-step guide to help you renegotiate bank debts in the UAE
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Debt panellist 3: Ambareen Musa, founder and chief executive of Souqalmal.com
Since you're planning to leave your debt behind in the UAE, even though you intend to repay it from overseas, there's a high chance things may go in a very different direction. Your bank will be prompted to freeze your bank account when your final salary and end of service benefits are credited. This seems to be standard protocol among lenders in the UAE and the aim behind it is pretty straightforward - to recover loans from borrowers who may potentially abscond and leave their loans unpaid.
Hypothetically, it is possible to repay your loans from overseas. But unfortunately, the UAE banking industry has (in the past) witnessed struggling borrowers hightailing it back to their home countries leaving a debt trail behind. This has made lenders increasingly cautious.
Your best bet would be settling your loan the conventional way. If you're able to secure a high-paying job in the UAE, that would make your life a lot less complicated. You can focus all your income and energy towards repaying the debt as soon as possible, and then you'd be free to move on to greener pastures.
Let's consider the other options you have: you could use your gratuity and end of service benefits to partially settle the loan. To clear the rest, you could tap into your savings, take an equity release loan against your property back home or rope in close relatives to help you out with an interest-free loan.
It may be a good idea to speak with your bank and explain your situation and intentions to them. The bank may be willing to cut you a good deal by offering an interest waiver or reducing the settlement amount if you offer to make a lump-sum payment.
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
