I am a Filipino nurse and I have been working in Dubai for 11 years. In 2006, when I was new here, many of my colleagues took out loans and I was encouraged to do the same to build a house for my family and help my cousin move over here. I was not financially literate at that time and nobody offered any advice on being careful when signing up for credit. To cut a long story short, the initial loan I took out piled up and then another bank bought out the first loan. But the new six-year loan caused me a lot of trouble as I took advantage of the postponement facility a number of times during that period. Today I still have Dh147,000 remaining on the loan and an overdraft of Dh20,000. I also have a loan with another bank, which I cannot repay and five credit cards. The banks’ collection departments are now calling me to pay them and I’m afraid a police case has been filed against me. I owe my friends some money too as well as more money to a loan shark. I earn Dh10,196 and the outstanding debts are:
Loan one: Dh146,890
Overdraft: Dh20,000
Loan two: Dh20,000
Credit card 1: Dh27,955
Credit card 2: Dh5,000
Credit card 3: Dh9000
Credit card 4: Dh5000
Credit card 5: Dh19,211
Loan sharks: Dh30,000
Total: Dh278,056
The bank of loan one has been taking my entire salary since October and they have refused my application for reconstruction. I approached other banks as well but they refused to accept me as my bank statement is not good, nor is my credit report. I don't know what to do now as I don't have other means to pay all of this. Who will give me the chance to pay all this back and learn from this hard lesson? I am not planning to leave Dubai to run away. I just want to have another chance to correct what was wrong. I'm now suffering from hypertension and depression due to the stress and I have a young boy waiting for me back home and waiting for his monthly allowance, which I have failed to send for the last two months. AJ, Dubai
Debt panellist 1: Ambareen Musa, founder and chief executive of Souqalmal.com
So you’ve tried the conventional approach towards restructuring your debt and negotiating with your bank, and have not had any success with it. But how about loan consolidation? While you may not be able to consolidate all your debt due to the DBR (Debt Burden Ratio) restriction, you can definitely approach banks to consolidate at least 80 per cent of it. You should aim to consolidate all your credit cards and the loan with the highest interest rate, to avoid draining your income in massive interest payments.
If banks continue to turn you away, you can enlist the services of a legal representative to help negotiate the terms of your existing debt. One option is to get in touch with the Pro Bono Clinic run by the DIFC Academy of Law. This Pro Bono programme can be accessed by those who cannot afford legal assistance. Both Dubai Courts and the Abu Dhabi Judicial Department, also offer free legal advice to individuals who cannot afford legal and judicial fees.
Now coming to the next part of the broader solution, what can you do to tap into additional financial resources? Since you’re a qualified nurse, could you take up a part-time job working as a private nurse? This could involve providing at-home nursing care for the elderly or housebound patients.
You also mentioned that you used the money to build a house back home. Can you sell that property and use the funds to settle your debts here? It’s definitely a difficult decision, but can help you get rid of this cycle of mounting debt.
It is also advisable to stay away from illegal money lenders or loan sharks, as you could fall victim to extortion if you’re unable to repay and land yourself into a very messy financial situation.
Debt panellist 2: Rasheda Khatun, a wealth and wellness planner
The first thing to address here is your health. This will be challenging as it is your financial situation that is causing you to feel unwell. But know this, without your health in a fit state, both physical and mental, you will not get through this easily. In fact your debt is likely to increase due to more medical care and in some cases, because of too many sick days or job loss. So the ability to earn money is as crucial as the ability to repay it back. Stabilise your state of mind. Use your support circle to help you do this. This will give you the ability to think effectively.
Next approach each bank again offering a figure that you can commit to. Make sure you can commit over a long term. Get yourself a lawyer who can offer you advice re the police case. Find a friend to connect you to a lawyer who can give you advice for free. In some cases, courts have accepted the debtors repayment strategy and agreed a settlement with the banks. Make sure you work out your finances, know how much you can afford to settle to each debt.
While measures should be put in place to assist those already in serious debt situations, where does the problem start and who takes responsibility? Banks overlending or the person who has spent the money? I think both. Irresponsible lending and irresponsible spending has created this huge pile of debt in the UAE. The right message has to be conveyed; people cannot think that they can rack up debt expecting a bank to settle it if they fall into trouble. Responsible debt is ultimately with the person taking out the loan or credit card. Financial distress is the number one cause for ill health. Prevention is the cure.
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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