The Debt Panel: 'My salary was cut and I want to go home, so how do I clear my dues?'

I work in the insurance sector in Dubai earning Dh10,000 a month. This has now been reduced to Dh7,500 due to the Covid-19 situation. I want to leave the UAE and return to my home in India when the situation becomes more stable. I expect this to be possible in about two months time. I am unable to survive on my current salary as I have outstanding credit card debts and not enough savings to cover them. My debts are: Credit card 1: Dh15,000 Credit card 2: Dh15,000 Total: Dh30,000 I moved to the UAE in June 2015 and ran the debts up making everyday retail purchases such as groceries or paying bills including my phone bill or utility bill or spending on taxi fares. I only ever paid off the minimum balance so the outstanding balance accumulated over the years. I couldn’t pay off any more than that because of my low salary. My salary was reduced on April 19 and ideally I would like to exit the UAE in July. My employer said the lower salary will apply for three months and will be reviewed again then. I am 27, live alone in the UAE and have savings of Dh5,000. My total fixed monthly expenses for rent, phone bills, utilities and travel to the office, a cleaner and groceries comes to Dh4,000. My job involves going to a lot of meetings to different locations so I choose to go by taxi and the cost builds up quickly, as I don’t have a driving licence. What should I do? Can I negotiate with the bank? How can I ask my bank to reconsider? RB, Dubai If you are planning to relocate and leave the UAE permanently, you will be obligated to close both your outstanding credit card debts before you go. Banks have the right to demand immediate and full settlement of debts when you leave the UAE. This action on behalf of banks may be triggered when your final salary and end-of-service benefits are credited into your account. This transaction raises a red flag signalling the customer may leave the UAE, with their current employment ending. If one of your credit cards is with your primary bank, this bank may even withhold your benefits to ensure the recovery of your debts is partially secured. Making a lump-sum payment against your credit cards isn't just ideal for the banks, but for you too. Banks may be willing to lower your settlement amount and waive certain interest charges and fees in favour of upfront repayment. But with very little savings, you would struggle to make a lump-sum payment, even though this is the lowest-cost route available. The other option is to negotiate with your credit card providers to restructure your outstanding balance into a fixed-rate, fixed-tenure loan. This would convert your credit card debt into a personal loan-like arrangement, and help reduce the heavy interest you're accruing. But that also means you will have to continue working in the UAE, either with the same employer or a new one until you are able to repay and close both your debt commitments. If you decide to stay in the UAE until you are debt free, you could also explore the balance transfer option. Various banks are offering zero-interest balance transfer deals on credit cards, with some offering an interest-free tenure of up to 12 months. This could give you enough time to repay all your credit card dues without incurring any additional interest. Regardless of the option you choose, once your debts are paid off, obtain a no-liability letter from the credit card providers, as well as any postdated cheques returned to you. Also review your credit report to ensure there is no discrepancy in bank records. Remember, leaving the UAE without settling your debts, and without keeping your bank in the loop is a bad idea. Even if you fully intend to repay your debts from overseas, the last thing you want is to be stopped and detained at the airport on suspicion of absconding. For those who do manage to exit without any hurdles, it is worth noting that debt collection agencies can chase you across borders too. This is a very challenging time and the additional burden of pay cuts and financial pressures are indeed stressful. My advice is to weigh your options carefully. On the one hand, you have an existing job, albeit with a temporary reduction in pay. You could consider rationalising some of your personal expenses so you can save more towards paying off your financial obligations sooner as only paying the minimum amount due will increase your debt burden in the long run. If you consider staying in the UAE longer, you can also look at debt consolidation as an option. This allows you to convert your existing credit card debt to a lower interest rate personal loan, which would be payable in easier monthly instalments over a longer term. This facility is offered by most banks and will allow you to manage your finances more efficiently. If you are planning to leave the country soon, as a first step I urge you to check with your employer what your end-of-service benefits will be. These will have accrued over the past five years of your employment and given your salary this should have grown to a sizeable amount. This will help to meet a large part of your current financial obligations. The benefits, along with your savings, should allow you to clear a significant portion of your outstanding credit card balance. You are in this position because you only made the minimum payment on your card every month. Interest charges have made your balance swell to much more than you actually paid for these retail items. Please warn your friends and colleagues not to do the same. Like so many people building up debt in the UAE, you were one step away from financial problems, and your pay cut has tipped you over the edge. Instead, you should have been paying off your balance in full every month, keeping your expenses to what you could afford to pay off and saving as much as possible. It's your savings that give you resilience in a crisis like this. You are still young and hopefully you will never forget this lesson, so that you manage your finances more tightly in the future. Let’s sort out your current situation though. You have savings of Dh5,000 and can save around Dh3,500 each month, so it will take you at least eight to nine months to pay off your balance, assuming you don’t add to it. This makes leaving the country in July unlikely, unless you can borrow money from your family or some other reputable source (avoid loan sharks obviously). There is no strong reason for your bank to reconsider your outstanding debt – you signed up for the cards and have been paying only the minimum monthly payment. Now that your salary has fallen below Dh8,000, it may also be hard to get a consolidation loan, where the card balance is converted into a loan with a lower interest rate. However, you should be able to get an interest-free payment holiday in line with the Central Bank of the UAE's Targeted Economic Support Scheme (Tess). You should continue to pay off as much as you can anyway, but the outstanding amount will not grow during the holiday period. Many banks are offering a one-month holiday, but you should be able to secure a three-month holiday if you present evidence of your pay cut. Meanwhile, find ways to boost your income and reduce your expenses. See if your boss has any additional work that needs doing or find out if anybody else needs your skills in the evenings or weekends, though ideally get permission from your employer for this. Assess carefully where you can chop large expenses and the accumulation of small expenses, even if it means being uncomfortable for a few months. It will probably be too expensive and slow to get a driver’s licence, so try to keep taxi fares low by grouping your meetings by area where possible. 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

The Debt Panel: 'My salary was cut and I want to go home, so how do I clear my dues?'

The Dubai resident, from India, ran up Dh30,000 on credit cards spending on everyday expenses such as groceries and phone bills