I have a salary transfer account with one bank and a personal loan of Dh54,000 with the same bank. I also have two credit cards from two other banks. I work as a shift operation manager for a power company and my total monthly salary is Dh21,750. But my monthly loan repayments are:
• Dh12,500 for the loan repayment
• Dh6,200 for one credit card
• Dh5,200 for the second credit card
This takes my total monthly repayments to: Dh23,900.
I have managed these repayments every month by borrowing from my friends. I completely agree that I have not handled my financial situation well; I built the debt up by building a house in India and helping to fund my sisters’ marriages.
Until now I have not brought my family to the UAE because of the financial difficulties I am facing, but now my daughter is moving from India to join a school in Abu Dhabi. I am sure I cannot manage and I don’t want to also put them under stress. But I want to give my daughter a good education as she is the only one I have.
Last year I tried to top up my loan but my applications were rejected several times because of my poor credit report from Al Etihad Credit Bureau (AECB). But I visited the bureau to get the report, and found the data sent by two of the banks was incorrect and had been recorded twice in my credit history. Therefore it showed that I had owed about Dh900,000 to all the banks, which is wrong. I tried to correct this by visiting the banks but my efforts failed and the bureau also informed me that they cannot correct it as they are only recording input from the banks.
I now have three options before me:
1. To consolidate my loan and credit cards
2. To get a top up my loan so that I can close one credit card
3. To consolidate my loan and reduce my monthly payments so I can concentrate on closing one credit card.
My family and daughter's education will be doomed if I am continue like this in the coming years. SK, Abu Dhabi
Debt panellist 1: Ambareen Musa, the founder and chief executive of Souqalmal.com
First and foremost, did you know you can register a dispute with the AECB if you notice an error in your credit report? Here’s how. You have to provide the relevant documents to support your claim (account, card and loan statements from the bank). The bureau will investigate the information and provide you with a resolution within 20 working days. If the claim is verified, the disputed data will be amended in AECB’s database and on your credit report.
While the dispute process takes its course, you can start putting a plan together to tackle the debt you owe. Since your personal loan is a salary-transfer loan, it is most likely not a high-interest liability. And looking at how high the monthly instalments are, you seem to have taken the loan out for a short tenure. This would not be a bad thing if the loan was your only debt obligation. But there’s also the outstanding balance on your two credit cards, which is draining your income in exorbitant interest payments alone.
Loan consolidation is definitely an option. Start with your primary bank first, and check if they offer a loan consolidation facility. This should help reduce your interest payments significantly, and will also stretch out the loan tenure, making repayment more manageable.
Alternatively, you could put in a request to restructure your personal loan, which could get you an extended tenure and possibly a better rate too. This can help reduce your monthly instalments and free up some money, which can then be used to settle the outstanding amount on at least one of the credit cards.
Ideally, you should consider these two options, before the top-up loan one. This is because banks treat top-up loans as new loans, with new processing and insurance fees applicable. You will also be required to pay the early settlement fee on the existing loan amount, since that is treated as settled and closed.
Debt panellist 2: Jamal Alvi, chief credit officer at Abu Dhabi Islamic Bank
It is indeed everyone’s right to aspire for better things in life but one has to be careful not to overstretch and pledge future cash flows to fund the current lifestyle/needs.
There is a dispute process that you can follow at AECB for any misreporting by banks. You can get the dispute forms from the counters of the AECB office.
In terms of your debt situation right now, your current bank should be able to consolidate your debt – but given the level of total debt, getting additional cash to fund a new expense may be difficult.
The Debt Panel brings together four financial experts: Jamal Alvi, the chief credit officer 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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