8 of 10 UAE residents in debt; 25% defaulters

Almost 8 out of 10 people in the UAE are indebted to their banks, a new survey reveals, with more than a quarter of respondents admitting to missing a payment or making a late payment on their existing loans.

Around 77 per cent of respondents confirmed that they have some form of debt with UAE banks, according to a survey carried out recently by a UAE-based finance comparison website.

More than half of the respondents of the online poll run by compareit4me.com said they have a credit card loan (54.7 per cent), followed by personal loans (43.6 per cent), car loans (12.6 per cent) and mortgages (4.1 per cent).

Strikingly, more than a quarter of the respondents admitted to missing a payment or making a late payment on their existing loans. The poll reveals that that 5.8 per cent of the respondents have ‘often defaulted’ on their loans, while 19.3 per cent have missed or made a late payment once or twice in the last 12 months.

The survey was conducted between July and August 2014.

The UAE’s official credit bureau, Al Etihad Credit Bureau had announced last month that it will begin issuing consumer credit reports to banks from this month onwards.

Credit reports of UAE residents will include records about consumers’ debt levels, financial obligations, credit payments, history of default payments and late payments, it said.

“The results of this year’s financial survey are quite concerning as more than one in four of those polled also described their monthly debt repayments as ‘stressful’,” said Jon Richards, CEO of compareit4me.com.

The survey reflects the steady uptrend in consumer lending as UAE banks continue their recovery from the 2008 global slowdown. Global credit ratings agency Standard & Poor’s forecast a 10 to 12 per cent nominal growth in UAE personal credit in 2014 and 2015.

About 5.2 million credit facilities of individuals residing in the UAE have been added to the Al Etihad Credit Bureau’s credit reporting system. This represents 97 per cent of the total credit facilities provided by local and international banks and financial institutions operating within the UAE, including credit card and loans.

“Customers will have access to their credit reports through our soon-to-be-launched customer service centres,” said Marwan Ahmad Lutfi, CEO of Al Etihad Credit Bureau.

“The issuance of credit reports to banks and financial institutions is an important step in reducing credit losses resulting from non-performing loans and will in turn help individuals and companies to have a deeper understanding of their financial obligations and debt levels,” he added.

For those whose debt levels may be approaching the unmanageable levels, experts suggest consolidating your debt and exploring the refinancing option to make financial obligations more manageable. “Consumers need to be proactive when it comes to managing debt if financial obligations become a struggle,” Richards said. “Consumers need to act fast to find more manageable options.”

 “Refinancing debts should be the first thing people look into: as the banks compete with each other, rates inevitably come down leading to cheaper credit,” he says.

“If you have a loan which is over 12-months old, it is likely you will be able to get a better rate today, so make sure you look into it. Consumers also need to look at consolidating debts wherever possible, such as credit cards for example which have a much higher interest rate than a personal loan. This alone could save you thousands, particularly if you only make the minimum payment each month,” says Richards.

[Image via Shutterstock]

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