Can Dubai resident get debt consolidation with Dh290,000 on credit cards?

I work for a Dubai IT company and have an outstanding bank loan of Dh290,000. I also have credit cards with different banks amounting to Dh130,000. My salary is Dh15,450. I need a debt consolidation loan so that I can close my credit cards but due to the Central Bank policy, I cannot get a loan. Most of my money goes toward the credit cards’ minimum payments and I cannot support my family. Would any bank offer me a debt consolidation loan? VS, Dubai

The expert advice:

Preeti Bhambri, founder of, a price comparison website

Debt consolidation is the right approach towards reducing your financial obligations. This type of loan takes over an individual’s existing loans and credit cards, consolidating them into a single loan.

This usually results in lower interest rate payments. The loans and credit cards are then closed by the customer leaving them with only one loan to pay. Considering that you have managed to take out a bank loan and multiple credit cards, you are probably working with a company that is on the approved list with banks.

There are only two banks in the UAE that offer debt consolidation personal finance – ADIB with its Debt Settlement for Expats product – and DIB with its Liability Settlement Finance product. Both these Sharia-compliant products are salary transfer loans, in other words a customer has to transfer his salary to avail this loan.

Individuals working with listed companies can apply for these loans; however, these banks cannot consolidate other Sharia-compliant loans.

According to Central Bank norms, the maximum financial payments an individual can make, ie your equated monthly instalment (EMI) plus the minimum payment on credit cards, cannot exceed 50 per cent of your salary. In your case that is Dh7,225. Clearly, the EMI for a loan of Dh420,00 exceeds Dh7,225.

So you have two options:

1. If your existing loan is a salary transfer product, you could apply to transfer the loan, plus one of your outstanding credit card balances to one of the banks mentioned above.

2. If it is a non-salary transfer loan, you should transfer the balance from all your credit cards there and continue to pay off your personal loan as usual. This will bring down your interest payments on the cards from 36 per cent to 8 to 9 per cent per annum. To ease the pressure, you can also ask for a payment break two to three times a year.

The main idea here remains that you will be able to pay off and then close your credit cards, either one by one or in one go by transferring them to the debt consolidation loan. Once you are through repaying all the cards, you can actually shift your personal loan to a lower interest loan and keep making the repayments until they are complete.

The reader’s advice:

Jeff Simmons, Abu Dhabi

Is it me or do I see the same queries coming up again and again – people who have got themselves way over their heads in debt and then cannot afford to even meet the minimum payments? VS, my advice for you is to take out a consolidation loan and make it your final loan. Borrowing on credit cards is a mug’s game that always ends in tears due to compound interest – where you pay interest on your interest.

If a bank isn’t willing to take on all your debts, then at least consolidate your credit cards into one payment. Then manage those payments and change your lifestyle to live within your means.

Next Money Clinic:

A couple of months ago I was contacted by my bank to convert my credit card’s outstanding balance, charged at 2 per cent per month, to an installment loan whereby I would pay 1 per cent per month. Trying to reconcile what they are charging me, it is clear that the 2 per cent they were charging me was the compounded rate and the 1 per cent quoted was flat, which comes out to 1.7 per cent compounded. Now, the game that banks normally play is to quote a flat rate because it sounds lower. What I never expected to happen is that they would intentionally mix quoting me the flat and the compounded rate. Is that legal? SB, Abu Dhabi

Every three weeks The National features a reader’s personal finance problem. If you have an issue or would like to suggest a solution for another reader’s concern, write to

The advice provided in our columns does not constitute legal advice and is provided for information only. Readers are encouraged to seek appropriate independent legal advice

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