Buying dollars,

Our financial experts advise a Dubai customer service employee on how to renegotiate his loan repayment to balance the books

My Dubai employer switched my job from a warehouse position to a customer service role, cutting my salary from Dh8,000 to Dh4,600. This happened in January after the company experienced a fall in sales. I begged them to keep my salary the same but was told to leave the company if I didn’t like it. So I accepted the reduced salary and started searching for a new role, which I have still not found. This has left me very short, as I have a loan with an outstanding balance of Dh50,000, on which I repay Dh2,721 a month. Now if I pay that amount, I am only left with Dh1,879 a month – not enough to cover my monthly bills such as my room rent (Dh2,500), school fees (Dh1,000), transportation (Dh300) and groceries (Dh800). I am from Nepal and my family lives with me in Sharjah.

I took out the loan two years ago from the bank where I deposit my salary to buy land and build a house. I have already paid off half. I approached the bank for help and they advised me to go to the nearest branch with all my documents. But when I went in, my request was refused, I was told my salary is not high enough for a restructure. Now I am suffering and we are getting into more debt as I cannot afford my rent, the school fees or even food. Please help me find a way to restructure my instalment. AS, Sharjah

Debt panellist 1: Shaker Zainal, head of retail banking at CBI bank

The significant and unexpected reduction in your salary seems to have caused financial distress for you. Firstly, I hope you either get back to your previous position with your current employer or find a better job

soon to take care of your family’s livelihood. As a priority, I recommend immediately reducing your personal expenses, as much as possible. Your bank has apparently declined your request for a restructure due to lower income and higher monthly expenses. Hence as a first step, work towards reducing your expenses, such as your rental cost by perhaps moving into a cheaper accommodation. This would help you save some money from your salary to pay at least some part of your existing monthly instalment.

Secondly, explore different avenues to increase your household income. Your spouse may consider working as well and seek a suitable job to help with the family’s finances, at least until you get back on a higher salary.

Thirdly, discuss your situation with your employer and explore whether they might be able to offer you some advance salary payment.

Finally, if you have other assets in your home country that you might be able to sell quickly, consider selling them, as I believe your priority should be to retain your job and income in the UAE.

Once you have taken some of these actions to reduce your expenses and increase your income or cash inflow, you can then approach the bank, where your salary is credited again. Ask them to restructure your personal loan, based on your new finances and the fact that you have been a good borrower historically. Your revised financial plan might give more comfort to the bank and they may consider restructuring your personal loan at this time.

Debt panellist 2: Keren Bobker, an independent financial adviser with Holborn Assets

The first point to cover here is the actions of the employer. They are not permitted to cut your salary in this way and have acted unfairly. Where there are financial problems in a company, steps may have to be taken but a salary reduction can only be made in agreement with the employee. While undesirable, there are cases where a person will take a salary cut to keep a job on the premise that having a job is better than not having one. But an employer cannot reasonably expect you to manage on just 58 per cent of the former salary.

You have the right to register a case with the Ministry of Human Resources and Emiratisation, but as this happened over six months ago it could be argued that a lack of action to date means you accepted the salary cut and this has significantly weakened your case.

I note that you borrowed money to fund the building of a house, so for a good reason, rather than to supplement a lifestyle.

Clearly your current situation cannot continue, as making loan payments of Dh2,721 a month of a salary of Dh4,600 is simply not viable. You say you have repaid half of what you borrowed two years ago so you should be able to restructure the loan, extend the term, and reduce the monthly payments to an affordable level. If you have kept the payments up to date with your bank, I don’t understand why they will not consider this unless you have other debts. The Central Bank of the UAE has set a maximum amount for debt repayments that all UAE banks must follow. This is called the debt burden ratio and no one can borrow money where the repayments exceed 50 per cent of income.

I also suggest you step up your efforts to find another job with a higher salary as the amount you are currently being paid is not enough to support a family. There are also better employers who will not treat their staff in this way.

Debt panellist 3: Rasheda Khatun Khan, a wealth and wellness planner and founder of Design Your Life

It is certainly challenging trying to adjust and manage on a reduced salary, especially with a loan commitment. Make a second attempt to approach your bank. Provide them with a statement of your income and complete outgoings and make a suggestion of what you can afford as a monthly commitment. Ask them what options you have as the loan repayment is no longer affordable. Request an extended term to bring the monthly repayments down. Approach other institutions for a restructure request too.

You also need to focus your attention on other options. Consider releasing equity from the land you have bought to reduce the debt. Ask yourself if there are other assets you can sell.

At the same time, keep exploring other job opportunities with a higher salary. You need to stay in the right frame of mind to handle this situation, so stay confident and focus on the outcome to attract new job prospects.

Focus is also required to create a back-up plan. If you are not able to sustain your life here you need to seriously consider going home.

Planning for emergencies is absolutely crucial for any life in the UAE. Emergencies happen all the time, whether it’s a family crisis, medical emergency, redundancy or unexpected salary reduction. We must not be surprised by them and we must be prepared for them.

While undesirable, there are cases where a person will take a salary cut to keep a job rather than losing one KEREN BOBKER