It is well documented how banks in the UAE don’t take lightly to unpaid debts. The consequences can even result in jail – and many choose to flee the country, because they can’t afford to repay their debts.
In the UAE people tend to use loans for expenses, and because loans and credit cards have been so readily available for a long time, they are often thought of as a no-brainer.
A personal loan can certainly be a very viable way of resolving your financial issues, however you need to consider a few points very carefully in the UAE, before signing an agreement with a bank.
Could changes help?
You might not think it, but sometimes even the smallest of changes can help your finances. Think about your lifestyle overall – could you take a hit in some areas in the short term until you get on your feet again?
Cutting your cloth and avoiding little luxuries like eating out; making unnecessary purchases you don’t need like yet more shoes, clothes or video games; and even looking at your bills and comparing household bills to see where you can make savings can help. You could also consider whether downsizing your accommodation, or looking at less costly schools for your children could help – as well as even a part time job for you or your partner if one of you doesn’t work.
Borrow the least you need
Sometimes, if you’re lucky, you may be approved for a larger amount when applying for a loan. It’s very tempting to take it, but be careful. Remember, when you sat down to think about how much you needed, you probably used a loan calculator to carefully consider your incomings and outgoings, so stick to this to avoid negating the whole point of organising your finances to make them more manageable.
Base your lending on what you could pay back after a crisis
We never know what’s round the corner in life – redundancies, illness, and unexpected expenses like car or house repairs. So it’s always advisable to work out your outgoings, leaving a little room for manoeuvre. Be prepared in your financial plans for any event, and base your lending on what you could still afford to repay each month, even in the event something did happen.
Make your payments on time
This one’s VERY important. In the UAE, it is considered very serious to miss repayments on your loan or credit card – but at the same time, many do struggle to keep up with them. This then results in late payment fines as well as mounting interest, and bouncing cheques to repay your debts is considered a crime in the UAE. Anyone who does it can be prosecuted under the law.
However, there has been a lot of high profile campaigning calling for the decriminalisation of bouncing cheques, so watch this space. But in general, it’s strongly advisable to make your repayments on time as regulations in the region are very strict.
With no bankruptcy option under current law, many choose to flee the country. There is a draft bankruptcy law under way – which will be a flagship piece of legislation when passed – but there have been challenges along the way and as such, this is still in planning.
This then results in a catch 22 situation for debtors, however – you’ve lost your job, but are unable to get another due to being part of what is considered a criminal case. This is why making sure your repayments are realistically manageable is so important in the first place, as being in more debt is not something you want to happen in the UAE.