The Debt Panel: Dubai administrator earning Dh5,000 owes Dh87,000 after taking ‘too many’ cash advances on her credit cards

The Filipino has Dh34,000 in credit card debt and a personal loan with an outstanding balance of Dh53,000.

Clockwise from top left: Ambareen Musa, founder and chief executive of Souqalmal.com, The National columnist Keren Bobker, Rasheda Khatun from Financial Life Planner, and Jamel Alvi, chief credit offiShow more

I have three credit cards with a total outstanding balance of Dh34,000 and a personal loan on which I owe Dh53,000. My salary for my job in Dubai as an administrator is only Dh5,000. I moved to the UAE from the Philippines four years ago and got into this situation because of my own irresponsibility – I took too many cash advances on the credit cards and spent the money on this and that. I want to consolidate all of these debts and convert them into a single payment but I have approached so many banks to settle this and they say that with this much on my credit cards, they cannot offer me a loan. Please advise what my next step should be as I do not know what to do. KM, Dubai

Debt panellist 1: Jamal Alvi, chief credit officer at Abu Dhabi Islamic Bank

As per the UAE Central Bank regulations, the maximum amount of loan that can be given to an individual is 20 times the salary, provided the repayment period is not more than four years and the monthly instalment does not exceed 50 per cent of your salary. With a Dh5,000 salary you can technically borrow up to Dh100,000. But this is subject to a 50 per cent monthly instalment cap where the interest rate plays a part. For example, if the bank charged 18 per cent on your total debt balance of Dh87,000, the monthly instalment would be Dh2,556, which will be more than the 50 per cent cap. It is also a credit appetite and internal policy matter for the banks. I think you will find it difficult for any bank to consolidate your card debt – given your salary and debt level. The best option is to get into a settlement agreement with your card issuers and raise cash to pay down from personal sources, like selling assets.

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

First, it is very important to address the spending pattern that made you accumulate debts that are more than 17 times your income. The only way forward is for you to have a better grasp of your finances by budgeting your income and expenses to enable you to lead a financially responsible life.

Credit cards are a very expensive way of borrowing money and they should not be used as a financing tool because of the high interest rates they charge in case the amount due is not paid in full within the interest-free period. What might be a good option is for you to approach the bank(s) with which you have your credit cards and check if you can restructure the outstanding balance into a loan. That would save you a hefty amount of money in interest payments, and your instalments will be more affordable. Once you manage to repay the outstanding amount on your credit cards, it would be advisable to cancel all your credit cards and just keep one for emergencies.

Another option to consider is approaching your friends and family. Check if they can provide you with an interest-free loan that you can use to pay off your financial obligations, especially the ones with the highest interest rate. You can also tap into any asset you might own that you can sell to repay a part of your debt. Can you also look into an additional source of income such as freelancing as long as this doesn’t violate your employment contract?

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 [e-mail].

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