United Arab Emirates: I lost my job. How can I still repay my loans – what are my options?

A cashier in a bank in Dubai. How can you make sure you don’t default on your loans after losing your job? Let’s find out! Image used for illustration purposes only.
Image Credit: Ahmed Ramzan / Gulf News Archive

Dubai: Faced with a dire situation like losing your job in an uncertain environment such as the current pandemic, the first panic question that probably comes to your mind is: how am I going to repay my existing loans?

After losing your only source of income, the immediate priority is to look for ways to keep paying off your loans. The reason is that failure to pay your contributions poses a risk of default, resulting in a negative domino effect on your debts and related stress on your financial well-being.

Considering your job loss, lawyers confirm that you can contact the bank for a loan rescheduling or restructuring request with less EMI and longer term so that you can successfully pay it off.

If this is not done, the risk you run if you do not make the IME payment for 3 consecutive months or more, is that the bank deposits the security check that you signed at the time of your request. loan. If it is dismissed, there is a chance that criminal and civil proceedings will be initiated against you.

First steps to take in this situation

It is highly recommended that you hire an experienced lawyer to help you consolidate or settle your debts to UAE banks or finance companies. Let your lawyer communicate with the creditor on your behalf and advise you on the best possible solution to resolve the debt collection dispute.

If you have unpaid debts, your account is likely to be blocked. When you change jobs, your last salary will be marked as a final payment or severance pay by the employer.

The last thing you want is to be caught off guard with no access to funds and / or direct debits with rejected or declined standing bank orders.

Meet with your bank ahead of time to make sure they explain the process of getting a salary certificate and letter from your new business, to avoid account freezing.

Checklist on what to do when approaching banks about this

1. Check with your bank about their job change policies beforehand; this will prevent you from surprises. Contrary to popular belief, banks often offer realistic solutions to reduce your financial burden.

2. Check if your bank offers temporary and long term lower monthly repayment plans as debt counselors confirm that many banks or organizations in UAE offer solutions to debt problems. Don’t ignore the fact that you may be in financial difficulty; contact the supplier to see how they can help you.

3. Check to see if the terms of your loan can be changed if you are having difficulty making regular repayments. You will find that many banks are able to accommodate you if you have a good credit history with them.

How to manage finances while waiting

When you find yourself in a situation with no monthly income, financial planners often suggest that this is the best time than ever to make sure your budget is well established.

Create an expense spreadsheet or download one of the handy money apps to your phone. This allows you to keep tabs on your spending and spending around the clock.

It can be tempting to borrow money when you need it, however, you could get into debt much faster and deeper if you take out credit without work.

The obvious place for many to turn to here would be credit cards, but if you aren’t able to pay off all of the credit cards every month, they can become a sure-fire way to get into more debt.

However, credit counselors and financial planners agree that many turn to their credit cards as a last resort and it has been observed among their clients that this will only make matters worse as credit card debt has a very high interest cost.

If you’re strapped for cash, make sure you know which bills to pay first. It is important to note that the Al Etihad credit bureau now produces individual credit reports and is able to mark your account if you incur any bills and missed payments, which may affect your ability to take credit or a loan in the future.

It would be unwise to miss a credit card payment or rental check, so prioritize expenses like these. Consider repayment strategies such as accumulating debt (when you pay off the most expensive loan first) to lose debt faster, keeping the money you have in mind.

What if the bank deposits my post-dated check?

In the event that the bank pursues criminal proceedings for non-compliance with the check, the lawyers also confirm that you can present to the court the evidence which may indicate the continuation of the installments of monthly payments (EMI) that you made on the loan of which you. have made use of. form the bank.

Based on the evidence, the court may dismiss the charges against you if it finds that you have honored your loan payment obligations on schedule. Be sure to document all EMI payments made to the bank for the loan.

What to do with credit cards after a job loss?

Many credit cards offer some type of hardship program. If you are experiencing a temporary setback – like a job loss – it’s a good idea to contact the card company before you are 30 days late with a payment. The company can work with you on a hardship payment plan.

If you have no idea how you’re going to make your next rent or mortgage payment, you probably need to get a job right away.

Can insurance protect me in the event of a job loss?

Although in most cases, job loss coverage is not always available to borrowers and is not an option for all types of loans – even if your loan does offer it, in order to qualify for your benefits, your loss must be “unintentional”.

You will be asked to present a termination letter along with additional documents. To avoid surprises, be sure to read all of the terms and conditions so that you are aware of any other exclusions.

Also, keep in mind that if it is the insurance company that pays your UAE loan, the insurance company will enforce the financial institution’s right to collect it from you.

Insurance companies will only pay the minimum amount due for a specified period. In accordance with the law, layoffs or resignations are not considered a covering factor.

An important thing to remember is that you must file your claim and it is not an automatic process, so once you pay off an unpaid debt, it is your duty to contact the insurer and initiate the process.

Could I have prepared myself in advance?

You can anticipate unforeseen circumstances such as job loss the moment you apply for a personal loan or credit card. While there is a premium attached to such coverage, having an alternative to manage your debt payments will make a huge difference in the face of job loss.

Depending on the design of personal loan agreements in the United Arab Emirates, your bank may have the first claim on your severance pay from the employer.

It is common practice for the country’s banks to add a clause in personal loan contracts, which gives them full authority to offset and adjust the borrower’s performance based on possible delinquencies.

So if you are worried about losing your job in the future, make other arrangements to save money to help you get through a sudden spell of unemployment.

What are my other options?

Personal loan and credit card contributions can be combined into one new loan. The longer term of the new loan will help drastically reduce your existing monthly payments, thus increasing your disposable income.

This will help you save better despite a reduced salary. Counselors also recommend that you cancel your credit card, if possible, in order to better manage your finances and review your living expenses to save more in the event of potential job loss.

If you are a two-earner household, this works in your favor. You may want to consider redirecting savings from the second monthly income to your current debt. It would be best to pay off the small credit card debt you have first, as it is much more expensive than your personal loan in terms of interest.

There have been case studies in which the bank requires immediate and full repayment of the loan if you are made redundant by your employer. The only recourse then, the planners say, is that you have to find a way to pay the bank back the current loan minus your benefits by taking additional income or a job.

One of the main lessons from this pandemic among residents was the need to create more than one source of income, whether through investment income or as a side business – which has been a growing trend since the purse strings have tightened.

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