The Debt Panel I am suffering sleepless nights as my savings dwindle away. Is my bank able to help?
▶ Our experts advise a Dubai resident who lost her job and is feeling severe financial strain on her tight budget
Ilost my job a few months ago and I am worried about missing payments on my credit card and personal loan. I haven’t missed any payments so far, but I have had to reduce the credit card instalments to the minimum monthly payment even though I know the interest is building and I risk owing more.
I haven’t been able to find another job yet, but the financial strain is beginning to take its toll on other parts of my life as I am burning through my savings quite quickly.
I have budgeted the remainder of my savings to last for another two to three months at most before my situation will start to affect my other financial responsibilities, such as paying for rent, food, utilities and phone. I am finding my situation very stressful and I can’t sleep at night because I fear that I will have no money left to live on soon.
I read that I might be able to ask my bank for help under the Central Bank of the UAE’s Targeted Economic Support Scheme, but I am unsure if that is still possible now that the Covid-19 pandemic movement restrictions have been lifted and life is beginning to get back to normal.
If the scheme is still open, should I request a payment holiday or even a consolidation loan to help me buy some time until I find a new job? Or would this make my financial situation worse in the long term? I would be grateful for any advice you can give.
TG, Dubai
Debt panellist 1 Steve Cronin founder of DeadSimpleSaving.com
There are many people in a similar situation and this shows the danger of having a credit card balance and a personal loan. Ideally, a cash buffer covering six months’ total expenses would protect you, as it would cover your loan and card payments while you search for a job.
However, you don’t have that luxury now and you must act fast to stop your situation deteriorating. Taking control of your finances will also help to reduce stress and sleepless nights.
First, track your cash flow in detail for the next few months, even daily. What major expenses are coming out on which day and what income, if any, will be coming in? Where you see the balance dipping too low, you know you have a problem ahead and you can plan in advance to prevent it.
You should try to get a payment holiday from your bank to give you more breathing space. Formally request it by email or phone, with evidence that you have lost your job. Be careful since they may freeze any money you have in your account, so you might want to place any spare cash in a savings account with another bank or even offshore.
The Tess scheme was officially extended by the UAE Central Bank until June 2021. In practice, banks may vary in their willingness to grant a payment holiday, even though they should in theory. Be persistent.
You should also ask for a consolidation loan to stop the interest payments on your credit card getting too high. But be aware the bank may be reluctant given your lack of salary.
You should also do whatever it takes to reduce your living costs and find ways to free up money, either by finding parttime work, borrowing money from friends and family or selling assets. This will put you on a much firmer foundation to prevent defaulting on your loans.
Debt panellist 2 R Sivaram executive vice president and head of retail banking products at Emirates NBD
You are going through an unfortunate situation and it is creditable that you are trying to be diligent in making your monthly instalment payments and managing your finances.
As a first step, contact the banks concerned to get a clear understanding of your dues. You should earnestly express your intention to settle your debts fully and request for a feasible repayment plan either through instalment holidays, restructuring of your loan payment terms, consolidating your debts into one loan or a combination of these.
It is important that you try to find employment soon, as having a regular income will be key to servicing the repayment plans. I also suggest you explore reducing expenses as well as disposing of any personal assets that can help in paying off part of the debts.
I wish you thebest with arriving at a suitable payment plan with your banks and in finding a new job quickly.
Debt panellist 3 Carol Glynn founder of Conscious Finance Coaching
Many will bury their head in the sand in these situations, unable to face up to what is happening. This almost always means their situation spirals out of control and adds thousands more to their debt.
Tess has been extended to June. However, each bank implements this in their own way, so there are no guarantees.
However, most lenders are still offering help in some form to people who have lost their jobs. You say you have not missed any payments to date, so this positive credit record will be an advantage.
You will need to show evidence from your previous employer that you lost your job because of the pandemic.
Speak with your bank’s relationship manager as soon as possible. Explain that you are actively seeking a new job. Ask what options are available and be prepared to negotiate.
A consolidation loan is likely to be the cheapest option in the long run, but this may be difficult to negotiate while unemployed. Most banks will offer a payment holiday on your personal loan, potentially up to three months.
Ensure you understand the terms and conditions of any arrangement you are being offered. For example, some banks charge an administration fee, so you will need to budget for this. Some offer interest-free periods during the payment holiday. Others continue to charge interest on the outstanding balance of the debt, allowing only for non-payment without charging you a late payment fine. It’s important to understand if what they are offering is truly beneficial to you.
Are there ways you can further reduce your expenses? Possibly stay with a friend to save on rent. If you have a car rental, return it and use public transport and cook at home as much as possible, for example.
Have you considered ways to generate income such as dog walking, freelancing or taking on short-term positions such as maternity leave cover?
Do you have items of value you no longer need or want that can be sold to generate some cash such as clothing or furniture? I would also suggest not using your credit card at all. Pay for what you need using a debit card or cash. This will help to limit your spending, and reduce the impact of compounding interest charges.
I’m also sorry to hear you are not sleeping well. This will have a negative impact on your mindset and health, adding to your stress levels. I know firsthand it’s easier said than done, but try to regulate your sleep as much as you can. Everything seems so much worse when we are tired. Lack of sleep will limit our creativity and ability to solve problems rationally. There are many free meditation apps that can help.
Putting a plan in place with your bank and a plan B, such as borrowing from family or seeking temporary, lower-paid employment, will hopefully help you feel more in control. Exercise also helps. Something as simple as taking a long walk can have a major positive impact. It’s proven to help reduce stress and improve quality of sleep. And it’s free.