Pay overdue UAE loan before making any travel plans

My cousin is an overseas worker in Dubai. He has two loans that have blown up to Dh60,000 and he is not able to pay them as his company always pays his salary late. He wants to consolidate the loans to reduce his payments, but also wants to know if he can travel outside the UAE after doing so. He needs to go home this month to attend to a very important matter. Would a bank give him clearance to travel? AC, unknown

The expert advice:

Ambareen Musa, founder and chief executive of Souqalmal.com

Hi AC, the situation you describe is not totally clear. Has your cousin actually defaulted on his loan repayments? If yes, how many instalments were missed? And has the bank lodged a police case against him as a result? The outcome varies based on these factors as cases are treated differently by each bank. Based on my consultation with several banks, the best course of action is for your cousin to pay off any overdue instalments first and then check the bank before travelling. This is especially important if there is indeed a police case filed against him. You also mention that his salary is always late, so I suggest he explains the situation to his employer and requests that his salary is paid on time as per the contract. Then he should consult his bank to discuss how they can help him restructure his debts. Another option is to turn to another bank to consolidate all the debts into one loan.

If he decides to go down the route of consolidating his loans, there are a few things to be aware of. When looking up personal loan options, there are two types of rates that banks advertise – the reducing and the flat rate. Make sure he compares apples to apples and therefore reducing with reducing rates and not mix them up. Another important factor to consider is early settlement fees. Each of his loans will probably have a penalty, especially if this is being refinanced by another bank. The fees would on average be around 1 per cent, so he needs to account for this in the cost of consolidation and understand whether the lower rate is still worth the effort. He also needs to consider whether his company is listed with any of the banks, as the chances of him getting a loan to consolidate his debts from a bank is slimmer if his company is not on a bank’s approved employer list. Good luck.

The reader’s advice:

Nikhil S. Mittal, Sharjah

I faced this situation four years ago. I had two loans and two maxed out credit cards, then one of the banks contacted me to say a cheque for a car loan payment had bounced. I was due to travel to India on business that week and feared I would be banned from leaving the country. I called the car loan provider and they asked if I could make the repayment that day but I could not. So they told me they had no problem with me travelling that week, but insisted I make up the payment on my return. My good record helped my case as I had never missed a payment before. The incident motivated me to resolve my debt issues. I took out a consolidation loan from another bank, gathering my debt into a three-year loan with more manageable payments.

Next Money Clinic:

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 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

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 pf@thenational.ae

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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