Dubai: When leaving the UAE with outstanding debts, you should exercise caution to ensure that you keep track of all outstanding dues and settle them as soon as possible to avoid adverse consequences.
Borrowers or debtors are legally and morally bound to pay their debts to the lending institution, but in times of hardship, debt settlement may prove to be the last option.
When a person in debt is unable to make payments due to financial instability, there are still options available. They can contact their banks to find a common outcome, which is an agreement on the repayment plan. But let’s first review some frequently asked questions.
Can I repay my loans in the UAE after leaving the country?
If circumstances force you to leave the country and return to your home country, should the fact that you have outstanding loans in the UAE prevent you from repatriating?
Contrary to popular belief, lawyers and legal consultants based in the UAE confirm that you do not have to repay all your loans when you leave the country and that those looking to return home have the option of leaving while being still in debt.
Although debt is not a process that stops at the border, keep in mind the impact of a default on your loans.
“As a borrower, you are not legally expected to live in the UAE until your loans are fully repaid,” explained Abu Dhabi-based legal consultant Shamri Yousef. “Additionally, you are allowed to leave the country as long as no police case or travel ban has been placed against them. So payments can be made while they are outside the UAE. “
“While debt is not a process that stops at the border, keep in mind that the impact of defaulting on your loans after leaving the country is a more serious and stressful matter compared to those who are in default while still in the country – and this may result in you having legal action taken against you.”
The reality is that banks prefer to have healthy balance sheets and want their customers to have a healthy credit report; therefore, banks are very unlikely to refuse settlements as long as the debtor has a clean criminal record.
What do UAE banks look at when settling outstanding debts?
If you are having difficulty repaying personal loans, student loans, etc., there is a list of factors that banks consider when settling bad debts in the UAE.
What is considered first when settling loans is your ability to repay the loan or what is known as your ‘capacity to pay’. Banks will also take into consideration the evolution of the borrower’s personal situation from the time he made the loan and his current financial situation.
Other factors that will be considered when negotiating include your current salary, whether you have a co-borrower or guarantor, history of any bad checks, assets in the UAE and/or country of origin, family maintenance needs, current residence – whether in the UAE or elsewhere, health and age.
Banks will review your payment history, current earning capacity (as well as your spouse), report if any action has been taken against you for NSF checks
– Ramesh Nair
“Banks will also take into account your payment history, your current earning capacity (as well as your spouse), report whether any lawsuits have been filed against you for bad checks and any other personal circumstances. All of these factors play a part important in the negotiation,” noted Ramesh Nair, a Dubai-based loan and debt researcher.
“It’s crucial to note that banks will offer more leeway if you have a good payment history. You can even request a suspension of payments for a few months.”
Legally, your lawyer will also check whether the lending institution followed UAE Central Bank regulations when granting your loans, lent you more than you could afford – this are some of the questions that will be weighed.
Debt repayment strategy: no one size fits all
It is often reiterated by debt restructuring specialists that there is no “one size fits all” in debt settlement or debt consolidation, as each case is unique.
Options such as one-time settlements and long-term payment plans based on customers’ ability to repay are explored, subject to lending institution rules and regulations.
Debt consolidation is dependent on banks’ credit policies, which are tightening given current market conditions.
Won’t the insurance company repay my loan if I lose my job?
No, and it is a common misconception among many borrowers that the insurance company will pay their loan in a difficult situation. If the insurance company pays your loan in the UAE, the insurance company will enforce the right of the financial institution 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 hedging factor.
One important thing to remember is that you must file your claim and it is not an automatic process. Therefore, once you repay an unpaid debt, it is your duty to contact the insurer and initiate the process.
It is crucial to note that banks will offer more leeway if you have a good payment history. You can even request a suspension of payments for a few months.
– Ramesh Nair
How can I repay my loans in the UAE, after repatriation?
Since no one strategy is right for all, there are several available options to consider, such as one-time settlements or long-term payment plans based on repayment capacity.
The main objective of banks is to provide a strategic repayment plan to allow their customers to become debt free. Banks often stand together when it comes to understanding the issues customers are facing, especially if the root cause is job instability, unexpected medical bills, etc.
Getting involved in the repayment plan will help you pay off your debts although there are legal and financial repercussions associated with it. Debtors should be aware that banks are governed by guidelines imposed by law. It is therefore always the judiciary which decides in the last resort.
“Contact the collections department of the bank you have a loan with and formally request a settlement,” Nair added. “With a good understanding of the different factors taken into account by banks, mentioned above, you don’t have to worry about your debts, you just have to find a repayment plan that suits you best.”
Analysis shows that most settlements result in the borrower repaying the principal amount to the bank, waiving interest, penalties and surcharges.
However, there have been circumstances where the negotiation reaches an impasse, which occurs when a bank does not accept the debtor’s offer and the debtor is unable to accept the offer of the bank.
It is in such cases that the lawyers step in and consider the reasonableness of the offer, while aiming to balance the commercial interests of the bank and the civil rights of the borrowers. It is advisable to take the help of a UAE-based lawyer when you are faced with such a situation, from the very beginning.