Illustration by Alex Belman
Illustration by Alex Belman
Illustration by Alex Belman
Illustration by Alex Belman

The Debt Panel: Graduate struggling with university debts after job loss from multinational firm


Alice Haine
  • English
  • Arabic

I owe the banks almost Dh180,000 and was paying properly until 2016, when I lost my Dh10,000 a month job at a multinational company. I struggled to get another job for four months before eventually joining the insurance sector to secure some income. While I was unemployed, I used savings to make my repayments. I signed up for the credit cards to make online purchases and for the loan to clear fees from my degree; some of it was also given to my family. In total I owe:

Loan 1: Dh90,000

Credit card 1: Dh60,000

Credit card 2: Dh20,000

Credit card 3: Dh7,500

Total: Dh177,500

I now earn Dh6,000 and stopped repaying my loan and credit card 1 in July last year and the other two cards in December. I started receiving threatening calls and letters and even sought help from charity organisations but they could not help. I am Pakistani but was born in Dubai and have lived here my entire life. I do not want to leave the country and want to keep my name clear as I have never been in such a situation before. My monthly expenses are:

Rent: Dh1,500

Groceries: Dh1,000

Mobile: Dh500

Family: Dh3,000

What can I do? SZ, Dubai

Debt panellist 1: Kunal Malani, head of customer value management at HSBC

It is important you understand and acknowledge the underlying issue, and make a promise with yourself to resolve this once and for all.

It is evident that you have borrowed far in excess of your ability to repay. Whenever circumstances change (i.e. income reduction, loss of employment) it is best to contact your creditors immediately to discuss your situation and together work on suitable repayment arrangements.

Stopping repayment of your debt obligations altogether is not the right move.

Reach out to the banks you are in default with and discuss debt consolidation options. Communicate your intent to repay the obligation and always be transparent about your financial circumstances to reach the right arrangement. For example, provide the lender with all necessary documentation to evidence your financial situation.

Among some of the options, they may suggest you pay a small lump sum up front as goodwill, and then restructure the rest of your outstanding loan. The interest rate on credit cards is typically higher than that on loans therefore you may also consider including outstanding amounts from your credit cards in this restructured plan.

Your current level of outstanding debt and ongoing repayment obligations plus expenses against your income, are unsustainable. You need to look at ways to reduce your monthly expenses. For a short duration, until you are able to bring down your debt obligations to a manageable level or find a job with a higher salary, you may want to consider reducing the amount you spend on family upkeep by half. There are many cheaper telecoms packages available out there; Dh500 on your mobile phone sounds high.

To further reinforce your discussions with the bank, if it is possible you may consider arranging to dispose of some personal assets you might have either here or back home to help contribute to repaying your obligations.

Most importantly, since you have accumulated large debts on your credit cards, consider cancelling them as soon as you pay them off.  This may even be a condition by your bank for granting you a debt consolidation loan.

Readers should note that since the launch of the Al Etihad Credit Bureau, banks in the UAE have been reporting defaulters to the bureau for the last two years now. Listed defaulters are unlikely to get further credit in the UAE. This is a positive step to help banks and customers discuss and manage individual debt obligations better.

______

Read more:

The Debt Panel: Single mother of four is being hounded by debt collectors over Dh43,000

The Debt Panel: Dubai business owner financed his failing SME with credit cards

It is possible to restructure debt directly with UAE banks, a Sharjah resident reveals how

The Debt Panel: Illegal fitness trainer weighed down by heavy debts has no job or visa

_______

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

The amount due on your personal loan and on the three credit cards is almost the same. However, if left unpaid your credit card debt will multiply much faster than the loan due to the significantly higher interest rates on the cards. Therefore you must prioritise repayment of your credit card debt first.

A good way to tackle your credit card debt would be to settle the outstanding balance in full, one card at a time. You can adopt the "Debt Snowball" strategy, wherein you use your savings and any extra cash you can come up with to pay off the smallest debt first. Make sure that you close the fully repaid credit card account before moving on to the next one. You must also keep making the minimum payments on the remaining credit cards to avoid incurring late payment penalties.

It would also be a good idea to negotiate with the bank to work out a revised repayment arrangement for your personal loan. You could propose an extension in loan tenure, which would automatically lower your monthly installments. But you must try to negotiate a lower interest rate as well, to keep the total cost of the loan as low as possible.

The bank may ask you to settle the debt in full, and if you can somehow manage to raise the funds through friends and family or liquidation of savings, you might be able to cut a deal with the bank, with some or all of your interest and penalties waived.

On the personal front, have you tried to cut your expenses? Your income has been slashed by 40 per cent, so you must aim to reduce your expenses accordingly. Adopt a strict budget and bring your basic living expenses to the bare minimum. Since half of your salary goes towards family support, can you cut back on this? Can another sibling or close relative pitch in to financially support your family? Explore all avenues to stretch your income and make every dirham count.

_________

Read more:

The Debt Panel: Dubai absconder wants to repay Dh170,000 but his lender refuses to negotiate

The Debt Panel: 'I will never clear my credit card unless the bank allows me to turn it into a loan'

The Debt Panel: 'I've repaid my credit card for two years but the balance barely reduces'

A nine-step guide to help you renegotiate bank debts in the UAE

_________

Debt panellist 3: Steve Cronin, founder of DeadSimpleSaving.com, which helps people invest their money sensibly

Unfortunately, there are thousands of other UAE residents in a similar situation. You want to keep your name clear but when you stopped repaying your debts it would be noted by your banks and the Credit Bureau. You also say you were paying properly until 2016 – I suspect you were making the minimum payments every month. This makes you highly vulnerable if anything goes wrong, such as losing your job, and others reading this should take note.

Currently your expenses total Dh6,000, which is your salary, making it impossible to pay any debts without major changes.

First, you must call the banks or visit them in person, and try to speak to the most senior person you can. You cannot hope they will just go away. Ask for a consolidation loan to cover as many of your cards as possible, with a clear time frame and monthly payment for paying it off. Meanwhile do not take out any more loans or use your credit cards

Two aspects of your monthly expenses stand out. Your mobile bill is twice mine – a data and international minutes package should slash this. Also you cannot really afford to send Dh3,000  per month to support your family. Have you been honest with them about your situation? Is there anyone in the extended family who can take some of the pressure off you, by supporting your family or lending you money? Even Dh1,000 extra a month would allow you to start paying off some of your debt.

Keep looking for a higher paid job and find other ways to supplement your income. If you find a job with a multinational company, renegotiate your debt as the interest rates should come down significantly.

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

MATCH INFO

Real Madrid 2

Vinicius Junior (71') Mariano (90 2')

Barcelona 0

The specs

Engine: 2.0-litre 4cyl turbo

Power: 261hp at 5,500rpm

Torque: 405Nm at 1,750-3,500rpm

Transmission: 9-speed auto

Fuel consumption: 6.9L/100km

On sale: Now

Price: From Dh117,059

Key facilities
  • Olympic-size swimming pool with a split bulkhead for multi-use configurations, including water polo and 50m/25m training lanes
  • Premier League-standard football pitch
  • 400m Olympic running track
  • NBA-spec basketball court with auditorium
  • 600-seat auditorium
  • Spaces for historical and cultural exploration
  • An elevated football field that doubles as a helipad
  • Specialist robotics and science laboratories
  • AR and VR-enabled learning centres
  • Disruption Lab and Research Centre for developing entrepreneurial skills
The five pillars of Islam
The burning issue

The internal combustion engine is facing a watershed moment – major manufacturer Volvo is to stop producing petroleum-powered vehicles by 2021 and countries in Europe, including the UK, have vowed to ban their sale before 2040. The National takes a look at the story of one of the most successful technologies of the last 100 years and how it has impacted life in the UAE.

Part three: an affection for classic cars lives on

Read part two: how climate change drove the race for an alternative 

Read part one: how cars came to the UAE

The alternatives

• Founded in 2014, Telr is a payment aggregator and gateway with an office in Silicon Oasis. It’s e-commerce entry plan costs Dh349 monthly (plus VAT). QR codes direct customers to an online payment page and merchants can generate payments through messaging apps.

• Business Bay’s Pallapay claims 40,000-plus active merchants who can invoice customers and receive payment by card. Fees range from 1.99 per cent plus Dh1 per transaction depending on payment method and location, such as online or via UAE mobile.

• Tap started in May 2013 in Kuwait, allowing Middle East businesses to bill, accept, receive and make payments online “easier, faster and smoother” via goSell and goCollect. It supports more than 10,000 merchants. Monthly fees range from US$65-100, plus card charges of 2.75-3.75 per cent and Dh1.2 per sale.

2checkout’s “all-in-one payment gateway and merchant account” accepts payments in 200-plus markets for 2.4-3.9 per cent, plus a Dh1.2-Dh1.8 currency conversion charge. The US provider processes online shop and mobile transactions and has 17,000-plus active digital commerce users.

• PayPal is probably the best-known online goods payment method - usually used for eBay purchases -  but can be used to receive funds, providing everyone’s signed up. Costs from 2.9 per cent plus Dh1.2 per transaction.

Medicus AI

Started: 2016

Founder(s): Dr Baher Al Hakim, Dr Nadine Nehme and Makram Saleh

Based: Vienna, Austria; started in Dubai

Sector: Health Tech

Staff: 119

Funding: €7.7 million (Dh31m)

 

If you go...

Etihad Airways flies from Abu Dhabi to Kuala Lumpur, from about Dh3,600. Air Asia currently flies from Kuala Lumpur to Terengganu, with Berjaya Hotels & Resorts planning to launch direct chartered flights to Redang Island in the near future. Rooms at The Taaras Beach and Spa Resort start from 680RM (Dh597).

NO OTHER LAND

Director: Basel Adra, Yuval Abraham, Rachel Szor, Hamdan Ballal

Stars: Basel Adra, Yuval Abraham

Rating: 3.5/5

UAE currency: the story behind the money in your pockets
UAE currency: the story behind the money in your pockets
The specs

AT4 Ultimate, as tested

Engine: 6.2-litre V8

Power: 420hp

Torque: 623Nm

Transmission: 10-speed automatic

Price: From Dh330,800 (Elevation: Dh236,400; AT4: Dh286,800; Denali: Dh345,800)

On sale: Now

Company Profile

Company name: Yeepeey

Started: Soft launch in November, 2020

Founders: Sagar Chandiramani, Jatin Sharma and Monish Chandiramani

Based: Dubai

Industry: E-grocery

Initial investment: $150,000

Future plan: Raise $1.5m and enter Saudi Arabia next year