‘Can insurance help me settle my Dh2.7m loan?’

‘Can insurance help me settle my Dh2.7m loan?’
Written by Publishing Team

I’ve had a loan since the late ’90s, as well as credit cards as well as another one I got a few years ago. However, I was not able to pay regular installments because I lost my job in 2015.

Both loans were restructured several times. One of the loans was 2 million dirhams and the other was 700,000 dirhams, and I was making monthly installments of 50 thousand dirhams. At the time, I was running a business and could afford the payments.

Since I lost my job, I’ve been working as a consultant on an ad hoc basis and paying less for loans.

However, I realized that I could not continue with this approach due to the cumulative benefits and penalties that were piling up.

Two months ago, a court froze my bank account and placed a travel ban on me. I currently have an attorney discussing my situation with the bank’s legal team, but I still don’t have a job and no way to pay the loan or support my family.

I desperately need to get a job and be in a position to negotiate and solve this problem.

My question is: If the loans are insured, are they settled through insurance companies? Or is there anything else you would recommend to solve my problem? SM, Dubai

Debt Discussion Team Member 1: R Sivaram, Executive Vice President and Head of Retail Banking Products at Emirates NBD

I am sorry to hear about your situation and it is commendable that you are trying to find a workable solution so that you can meet your obligations.

As a first step, please continue to discuss with the bank, directly or through your attorney, to reiterate your current situation and to seek assistance in arriving at a viable settlement plan.

Request a review of the accumulated fines and other fees, taking into account the long term of the loan. Evaluate, if you haven’t already, if there are any assets that you can liquidate in the UAE or back home that you can use to settle part of the amount owed.

While loan insurance usually covers any unfortunate events, please ask the bank for a copy of the relevant terms and conditions to understand if other coverages may be available.

I wish you all the best in reaching a good settlement plan with the bank and also in finding a new job soon that can help you in making the required regular payments while also taking care of your daily requirements.

Debt Discussion Team Member 2: Jaya Ratnani, Managing Partner at Freed Financial Services

Many people need loans and debts to make business investments or to fulfill other responsibilities. While these are justified, it is important not to allow them to turn into bad debt.

Loan restructuring is a short-term solution and is usually performed for a period of one or two years. There are central bank guidelines on the maximum number of restructurings that can be undertaken. In addition, one needs a stable source of income, which is salary or business income. Since you don’t have a stable job, this option is not possible.

While loan insurance usually covers any unfortunate events, please ask the bank for a copy of the relevant terms and conditions to understand if other coverages may be available.

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

There are debt settlement options that can be discussed with the bank. Since your loan is more than 20 years old, you have already paid a large amount of interest to the bank. Sometimes, banks are willing to conduct debt settlement negotiations where you get paid less than what is owed.

You can also seek help from professional debt negotiators who can help choose the right program for your needs.

If you make an ad hoc payment without an agreed-upon resolution of the bank, it will be considered a default and the bank will be within its rights to bring legal action. You can explore the possibility of your petition going through the court and you can file for insolvency.

Under this law, borrowers are provided with means of payment that provide protection from criminal prosecution. A court expert is appointed who will coordinate and develop a plan for the settlement of financial obligations and the fulfillment of all obligations under the prescribed plan.

Regarding personal loan insurance, you will need to check if the monthly premium you were paying covered job loss or if it was comprehensive coverage that only covers death or disability. This will be mentioned in your original loan contract, of which you should have kept a copy at the time of registering for the loan.

To improve your current financial situation and seek stability, you should look for a suitable job rather than take on work on an ad hoc basis. If necessary, seek help from your peer groups to find the right job opportunity. I hope you can navigate this difficult situation.

Debt Discussion Team 3 Member: Nathan MacFarlane, Founder

This seems to be a very difficult situation. Loans are large sums and pose additional difficulties.

For loans of this level, I suppose you will have other assets? If so, I would start looking at selling your other assets, including real estate, and reducing your lifestyle in the meantime to solve these problems.

In the event that you do not own any real estate or other assets, this actually makes your situation more difficult.

Loan insurance policies often cover temporary job loss payments, but I find that they are unlikely to cover such a long period of unemployment.

Getting legal advice at this point is definitely a smart move if you have access to it.

I think it’s always important to remember that banks want a refund and are willing to negotiate, especially when it comes to larger amounts of money.

As I always advise, keep in touch with the bank to minimize other issues. good luck.

Updated: December 22, 2021, 5:06 am

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