10.45 AM Friday, 29 March 2024
  • City Fajr Shuruq Duhr Asr Magrib Isha
  • Dubai 04:56 06:10 12:26 15:53 18:37 19:52
29 March 2024

Personal Finance: Zoom in on your debt crisis

Theda Muller

Published
By Theda Muller

Don’t take lightly the debt crisis you find yourself in. You ought to act immediately – Now, not tomorrow!
 
Don’t ignore your creditor’s calls. Answer them, explain, ask for time and get their approval because you need this time to take stock of your debt situation. Most of the time you are clueless and it’s a bad habit you must overcome.
 
Acting out and refusing to take ownership and responsibility of your debt-crisis results in engulfing yourself and your being with fear and once you reach that state of mind, no advice will sink in. Then you will need emotional transformational coaching. You can alleviate the latter if you just hold your intention without any fear to resolve your problems because no problem is too big or too small, they are all relevant as they negatively affect your life and existence.
 
Compile a debt schedule with the following headings so you can realistically see your financial exposure, accept the seriousness of it, which in turn will drive you to take immediate action:
 
a.      Bank (Creditor)
b.      Total principle
c.      Current EMI  (Equated Monthly Installment)
d.      Current outstanding balance
e.      No. of months in default
f.       Comments – insert the latest updates; i.e.
 
i.                   Last ‘promise to pay’ that you promised your creditor and specify the amount
ii.                  Date of last call received
iii.                 Name of the creditor representative you spoke with including telephone no
iv.                 Details of the creditor request pertaining to this promise
v.                  If you paid then record the date and amount and if you did not pay did you inform your creditor and list the details
 
 
If you are a retail customer i.e. individual/private then don’t get comfortable once you start getting delinquent for two months or more because this is the most critical stage and the delinquency months are now being minimized by creditors. Even if you are one month in default you could expect legal action or legal notices followed by this action.
 
If you are an SME customer then there is no comfort zone because once one EMI is returned via direct debit or your EMI cheque bounces, you must take immediate action on a very serious note.
 
Once your debt schedule is complete then educate yourself by reviewing your options where there are effective solutions, you just need to be aware of them so here they are:
 
a.      Insert another column in your debt schedule ‘Projected EMI’ and review your total exposure i.e. the total EMI you are paying monthly and calculate how much money you need to sustain yourself month i.e. personal expenses for food, rent, utilities, petrol, school fees, etc. Once this is done, calculate your new total EMI that is the remaining balance of your income to be the amount you can repay to your creditors.
 
b.      Review your current EMI’s and reduce them to finally derive your new total EMI. This information you present to your creditor for review because you have justified why you need this reduced restructured EMI.
 
c.       Compile a schedule of your monthly Income + Expenditure, because your creditor wants to see that you are not only willing to repay your debt, but that you are also able to repay your debt and here transparency is the key. Don’t speculate as it will not serve you because you will come short, be as honest as you can with yourself whilst completing this self-assessment, because once you secure a reduced EMI then there is no going back. You must learn to keep your promise and commitment to rebuild your credibility with the creditor, where your credit record will bear testament to this during your debt recovery process.
 
d.       Diligently follow-up with your creditor as to the status of your request and even if you must go there several times because you don’t get a timely response or none at all, go there as it is for your own benefit and ensure the request is approved. If not, ask for the senior management and if they won’t give you the details then search on social media, connect with the individual and present your case for immediate action. Do not stop until you get what you want as you cannot commit to anything else other than what you can afford.
 
e.      Once approved, maintain files for each account because you may need to refer to documentation in the future. This process is a form of new discipline, unlike in the past where you just put documents and pieces of paper anywhere with no knowledge where to find them when you needed them. This process is a key component in transforming your bad habits that got you into the debt-crisis in the first place and with that a renewed zest and energy to progress.
 
Realise there is no ‘quick-fix’ to get out of your debt crisis because most debtors expect a miracle and want the debt problems resolved in a week or a month. This is impossible most often because there are processes creditors must follow pertaining to their specific organization’s policy, which must be respected. Good things take time, nobody achieved any positive results in a day, week or a month so you need to have patience, follow the process and even if you get frustrated with receiving collection calls, remember, they are only doing their job. So take the calls and explain your current action and that you are awaiting an outcome from your request. One very key point is don’t stop paying your EMIs during this time, even if you don’t have the full EMI amount, pay whatever you can as this is a sign of intention and integrity and will always be reflected on your records. You must do your part, it’s your job!
 
[Note 1:  Theda Muller is a UAE-based author of two books: Embrace Financial Freedom Volume One: 10 Proven Ways To Release Debt And Emotional Fears In Today’s Economy, and Volume Two: Releasing Fear And Bouncing Back From A Debt Crisis. She also conducts webinars and workshops on debt recovery.]
 
[Note 2: The views expressed are the author’s own and do not reflect in any way, the views of Emirates 24|7. Readers are advised to carry out their own due diligence before taking any decision.]