Dealing with debt trap in UAE? 5 steps to cut it out

The debt owed by expats in the UAE is for a whole manner of things from car loans, to boat purchases, to credit card debt and the banks seem quite happy to grant relatively large loans and credit cards to customers with limited income.

This, coupled, with a high level of consumerism and often poor financial literacy can be a recipe for disaster.

If the situation sounds similar, you may be heading for debt trap. Take note and get out of the rut before it becomes a vicious cycle of borrowing and more borrowing.

Here are a few quick tips on how to take control of your debt.

Know what all you have to repay

Know the exact value of the debt you have acquired and be completely honest about it.
Make a complete list of all of your debts (outstanding balances, interest rates and charges) and prioritize them in order of importance. Mortgage payments and vehicle payments are typically at the top of most lists.

How much can you repay?

Work out the absolute maximum you can afford to put towards paying off your debt each month and stick to it. Always remember that debt isn’t free and the interest rates are high. The sooner pay your debt off the less the debt will cost you in the long run.

It’s advisable to set a time frame for paying off your debt and stick to it. Not only will you be clearing your debt but you will be getting into a good habit of putting money aside each month so that once all of your debt is cleared you can turn the tables and begin to start saving in a disciplined manner. Face reality and do not ignore the situation. Seek professional advice and map out a clear plan of action. Do not let the debt spiral out of control.

Do not avoid creditors

Organise to meet with your creditors to establish all possibilities and solutions. Many of the banks in the UAE are extremely forthcoming with loan arrangements. A loan can help someone consolidate debt and make it far easier to manage.
Very common in the UAE is credit card debt sprawled across various accounts with different banks. A loan from one institution will enable you to clear credit card debt whilst allowing the debt to be easily managed.

Explore possibilities

Do your own investigating into cheaper options for paying back the debt. Remember your bank may not offer the best solution so it may be worth shopping around.

Make sure you shop around for the best deals. Explore if there is an alternative loan facility you are eligible for or see if you can transfer your debt as it could save you money. The account that is doing you the most damage is the one with the highest interest rate, and you'll take great pleasure in paying that down first.

Look for alternatives, cut debt

Seek out cheaper accommodation, schools, and transportation. The more cut backs you can make on your outgoings, the more you will be able to put towards paying off whatever debt you have. It is likely you will have to make some sacrifices but it’s worth it.
 

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