I have been running on a tight budget since I moved to Dubai, making a marginal saving (approximately Dh2,000) every month. However, recently a personal emergency threw me into a debt of around Dh40,000 on two credit cards. Do you think taking out a loan to pay off the credit cards would be the solution? – Marcus
Robbing Peter to pay Paul… no doubt these words are familiar to many, particularly at the moment of financial turmoil.
Managing one's debts can be a tricky business, particularly if you are on a fixed salary and have no alternative means of making extra funds. Debt management is a skill that you may be forced to learn and getting to grips with the amount of interest you could be paying is key.
Perhaps shifting your debt to an alternative credit facility may save you on interest payments. Seeking finance using secured lending may be an option (if you can) since the interest rates are generally lower.
You may be able to achieve this too in a different currency which could lower the interest rate further. See a Financial Advisor if you need some guidance and be wary of getting yourself deeper into debt if it is not going to help your predicament.
Perhaps keeping an emergency cash fund is the best solution to avoid using your credit cards in the first place as the best solution. The UAE has the highest concentration of credit cards in the region according to a recent survey by MasterCard and we should all be aware of the potential perils of easy credit.
Do not compromise your credit record either since Credit Card companies do talk to each other now (internationally too) and when you need to apply for credit in the future (like a mortgage), be aware that a credit reference will be made on you.
Obviously this is easier said than done so take some comfort in the fact that not even the major financial institutions of this world can manage their debts properly too.