How can I pay off my debts with a reduced salary?

Due to the Covid-19 pandemic, my salary was reduced by 30%. Before that, I managed my debts well and never missed any payments.

My bank granted my request for a three-month payment vacation under Targeted Economic Support (Tess). Although it has been a tremendous help, the payments have resumed for my personal loans and credit cards. I am currently struggling as my salary has not yet been fully reinstated.

My debts have become too much for me to manage. The credit card debt I owe increases each month, and I cannot afford to pay the minimum amount. I have almost exhausted my savings to cover the monthly payments. I am afraid that I will not be able to pay them off next year.

I have cut my daily expenses to the point that I don’t feel trapped. I considered filing for bankruptcy, but I’m not sure how or if it would be a good idea. Do I need to first apply for debt restructuring because my loan and credit card are from the same bank? DG Dubai

Panelist Debt 1: Steve Cronin (Founder of

It can be a terrible feeling to feel trapped in debt, particularly if you feel helpless. It is essential to see your numbers, understand your cash flow, and take action to end this situation. This should make you feel more in control.

People in debt believe everything is fine until they lose their jobs. They realize how difficult it is when they are in debt, especially if they don’t have a cash reserve for three to six months.

Credit card debt is one of the most dangerous because it can quickly increase if you don’t pay the minimum monthly payment. This is what you are experiencing right now. A consolidation loan should be possible if your salary is more than 8,000 Dh (or 7 000 Dh in some banks).

The loan will combine your personal loans debt with your card debt to create one loan. These loans have variable interest rates, but they will eliminate the high-interest rate on your card debt.

Your employment history, current salary, and ability to pay all your bills regularly will all impact your application for a debt consolidation loan.

R Sivaram, Executive Vice-President and Head of Retail Banking Products for Emirates NBD

As soon as possible, get in touch with your bank to discuss your consolidation loan application. So that you know how much you can afford each month, be sure to include information about your income and debt. Talk to other banks to determine if they are willing to take over your debts in a consolidation loan if you move your salary.

This is the best way to get out of this situation. It would be best if you put your energy and time into making it happen.

You can also check if there are assets that you can sell or if family members or friends can lend money to pay off your credit card debt. They may be willing to accept a lower interest rate since they don’t receive much from UAE bank deposits.

You might also consider other income streams, such as working overtime, volunteering in your local community, or seeking out other part-time jobs.

Bankruptcy can be a very serious situation. It is best to talk to your bank and other lenders before you make this decision.

Debt Panelist 2 – R Sivaram, Executive Vice president and Head of Retail Banking Products at Emirates NBD

It is a pleasure to see that you are responsible and conscientious in fulfilling your financial obligations.

First, contact your bank to discuss debt consolidation. This would allow you to combine all outstanding credit card balances with your loan to make one loan.

Most banks offer this financial solution in UAE. It would suit your needs. The bank might ask you to transfer your salary and close any existing credit cards to receive the benefits. This will allow you to control your monthly spending and is a benefit to you.

The factors that will impact your application for a consolidation loan include your current salary, professional status, and ability to pay all your bills regularly. With the longer term in mind, this will help you reduce your monthly payments. You will only need to pay one monthly installment, which will allow you to manage your income better.

You must address your financial issues promptly so that you can soon achieve financial stability.

Panelist 3 for Debt: Carol Glynn (founder of Conscious Finance Coaching)

You did a great job keeping track of your personal loans payments and making at least the minimum monthly payment on your credit cards. You have protected your credit score by avoiding late payment penalties, which can lead to additional interest each month. It is admirable that you are diligent and don’t ignore the problem.

Before you consider bankruptcy, I recommend restructuring your debt. Have you talked to your bank about the situation? If not, you can request a meeting to discuss the possibility of a consolidation loan. This is likely the best way to go based on what you have given.

If you are approved for a loan, I recommend that you cancel your credit card immediately after paying off the loan proceeds. While you pay off your loan, it is essential to avoid credit card debt.

This is a mistake that I often see in similar situations. After getting a consolidation loan, they feel relieved but then continue to use credit cards and find themselves in the same financial position but with more debt.

Talk to other banks if your bank isn’t helping you. Before considering bankruptcy. Many banks will offer transfer loans at lower rates and special offers.

Be sure to read all terms and conditions. Ask questions such as what is the interest rate? Is it fixed, or can it rise over time? What are the one-off or administrative costs? What are the late and non-payment fees? What will the interest rate be after the expiration of an interest-free period?

Are there assets you could sell to help reduce your debt? Credit card debt can quickly grow if you don’t pay it all each month. You must find a way to pay your credit card balance off as soon as possible.

Insolvency (or personal bankruptcy) is a relatively recent concept in the United Arab Emirates. On November 29, 2019, the United Arab Emirates Personal Insolvency Law became effective. The law may be helpful in some circumstances, but declaring bankruptcy should not be considered a last resort. It can have a negative long-term effect on your business—financial situation.

It would be best to understand that bankruptcy doesn’t automatically exempt you from paying your debts. You will still have an obligation to pay some or all of your creditors.

The Debt Panel is a column that appears weekly and is designed to assist readers in tackling their debts better. Send a question to the panel at [email protected]

Updated Aug 11, 2022, at 5:00 AM.


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