Drowning in debt

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Landlords often require up to a year's rent in advance in postdated cheques and arriving in the country as an expatriate means setting up a new life from scratch - buying a new car, furnishing your home, paying school fees along with the many other unexpected expenses.

The lack of an official credit bureau in Dubai means it is very easy to successfully apply for loans or credit cards - regardless of your previous financial history and how many financial commitments you already have.

That, combined with the rising cost of living in Dubai and the financial demands put on expatriates, means that it is easy for these debts to spiral out of control.

In this guide we explain how to manage your financial commitments so that you don't end up drowning in debt - and what to do if your find yourself going under.

Getting into debt on your credit card can have very serious consequences as the majority of banks will require customers to sign security cheques to the value of the full credit limit when signing up for a credit card.

If the customer misses a payment the bank has the right to cash the cheque - which then bounces - a serious criminal offence in Dubai which could land you in jail, as financial advisor Sandi Saksena of Nexus warns.

"Nine times out of 10, once you start missing payments, the bank's collections agency will hound you, threaten you and generally make life miserable for you until you pay up. And then if you still don't pay then the bank cashes your security cheque and you could end up in jail - it's that simple."

The type of credit card you pick will reduce your chances of falling behind on your credit card payments.

Cards with low interest rates, charges and a high number of interest-free credit days are obviously less likely to land you in serious debt, as Craig Holding, financial advisor with Acuma Wealth Management explains: "There are some important differences between the cards on offer and this can make the difference between whether you land up in serious debt or not.

"You can get into problems for instance if you have a card that offers 30 days worth of credit card rather than 55. It may not sound like a big difference but over time it really adds up.

"Low interest rates and annual fees are also important factors to look out for. These factors are far more important than what free gift or reward points the bank is offering."

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READERS' COMMENTS

Do's & dont's to avoid debt in Dubai
Posted by Still Safe on Sunday 16 December 2007 at 21:41 UAE time

Don't: Immediately bring your family over to Dubai, look to initially share accommodation unless it is paid by employer.
Do: Save as much as possible during your probationary period.
Do: Always take 'free for life' credit cards. Ask the bank to set a limit equivalent to your current salary.
Do: Ensure your security cheque has an amount mentioned on it and NO blank cheques.
And irrespective of what the government says expect to be paid 20% extra every year - this should match the rate of inflation and cost of living expenses including rent, school fees, etc.

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