Financial problems were cited as the reason for most of the problems people in the UAE faced, according to information collected by police team through the investigation. There are so many expats going through the same state of affairs. Picture this scene: 2 to 3 years back it was easy to get loans at least 20 to 30 times more than your salary. You can get credit cards, mortgages and loans, even if you don't have the capacity to repay the bills.
You can borrow loans 15 to 20 times your salary and if you don’t disclose your liability, you can get the same sanction from different banks.
In most cases, all you need to secure a loan is:
1. A minimum income of Dh8,000
2. A valid passport and UAE visa
3. A salary certificate or pay slip
4. A 3 month bank statement
5. Post-dated cheques
6. An undated "security cheque"
You become a multi millionaire and feel proud!!
Suddenly one day you realise you’ve just lost your job, you can’t find another one and you get a 3 months’ time to change your visa. Your family is dependent on your visa. You have a loan for your car and another for school fees. You have to pay dues on your credit cards. Or you might have a much bigger mortgage for a property that is now in negative equity. Or your business may be in a loss, you can’t pay your workers, and you can’t supply. You don’t get credit from banks because you simply can’t make both ends meet. You despair, you’re in a foreign land, and you don’t know what to do! Things have changed overnight!
Some people stay on not knowing whether to go to their home country, because if you’ve not paid your dues and if there is a police case you can be caught at the airport and taken straight to jail. Some have concluded that their only option is to cut their losses, book a flight, accept that they’re never coming back and leave without paying the debts. It’s actually quite frightening – one minute you’re treated like a valued customer, then suddenly you become a criminal.
There were a lot of people living the high life, investing in real estate and a living lifestyle they couldn’t otherwise afford. Borrowing money has been an essential and integral part of life for most of the UAE residents. In August 2010, about 85% of the consumers in the country had loans. Unfortunately, debt overwhelmed some borrowers. Last year's data showed that one in every 20 cheques issued in the UAE had bounced. The punishment for defaulting on a debt is severe. Bouncing a cheque, for example, is punishable with jail. An estimated 85% of the UAE's population are in debt and, of those, around 65-70% are suffering from bad debt that they're struggling to repay.
If you break debt, repayment rules and schedules, the loan and all accrued interest become due immediately. Banks also charge late payment fees. They can submit your "security" cheque to the police and you can face criminal charges for writing an unfunded cheque.
Someone I know was stopped at the airport, while another had his passport confiscated by the CID. Another person I know couldn’t transfer the visa because there was a case registered against him and the overstay penalties are mounting daily. You need to pay penalty charges on a daily basis for overstaying beyond your visa period.
The bank’s logic is simple enough: Fail to pay them, and they cash the cheque and file a case which leads to your arrest and imprisonment. They may simply make you serve 3 months to 18 months or sometimes more for writing a blank cheque. But if you cannot pay the loan, the prison may become your new home. In fact, as I write this article 30-40% of those imprisoned in Dubai’s central jail are there for not having paid their debt.
A Filipino expat knows the risks only too well - he was in jail for more than 2 months over unpaid dues. He still owes over Dh120,000 - 20 times his monthly salary. An Indian executive who earns around Dh13,000, received a pitch of Dh200,000 in loan. If a borrower does not declare his liabilities, he will in effect be digging his own grave.
A Dubai based psychologist said tempted residents are living in a fantasy world, having already piled up huge sums in credit card bills alone. The problem is that people don't think about the consequences when it's payback time. In the UAE, the trouble can be very serious, said an Emirati lawyer. "The law here is very simple: If you bounce a cheque, only two things can happen - you either pay up or go to prison". Lenders use all sorts of enticements, but once you guarantee the loan with a cheque, you're hooked. Residents in financial trouble make up 60% of all the cases he handles.
Sometimes I feel that being taxed on your income in India is a blessing in disguise because at least you save on funds, or bonds or insurance so that you can avoid tax. Provident fund or gratuity is another form of saving which is forced on too. But this does not happen in the UAE. You’re not taxed on your income; you get your full package. But the irony is that at the end of the day you see your whole salary being paid out as EMI. If this is the scenario, one fine day if you don’t have a job or your business is in a loss, what would you do? Who would you go to?
A credit card or a loan gives you an illusion that you ‘can’ even when you ‘cannot’. It's a very dangerous mindset; I see many people who are overexposed and living off credit. Living beyond your means is a sure recipe for trouble anywhere in the world. Especially in a foreign land, it could be taxing. The public, the banks or the sales people who entice you – who’s to blame? That’s a million dirham question!
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Contributor : pravit
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