Dubai: Living an expensive lifestyle in the UAE is not difficult, especially because of the easy access to borrowed funds. A nice house, that latest car model, an upgraded gadget; everything is just a loan or credit card away. And easy-payment options and discounts encourage you to splurge that little extra on yourself.

However, a lack of understanding of loan eligibility, excessive borrowings and using multiple debt channels have sent many UAE expats running into debt traps in the past.

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Is it possible to escape the endless cycle of borrow to pay off?

It becomes an endless cycle of borrow to pay off. But, once caught up in it, is it possible to escape?

Yes, say three UAE expats. Here’s a look at how they found themselves in huge debts, but successfully rose back to financial stability.

‘I bought many things that I didn’t really need...’

Fifteen years ago, Filipina expat Melissa (name changed upon request) got hired as a sales executive in a multinational company in Dubai. Her salary and commissions totalled around Dh15,000 every month.

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A steady monthly income didn’t stop Melissa from getting 10 credit cards.

As a breadwinner, she took care of the tuition fees of her three siblings and provided financial assistance to her parents in the Philippines.

She had invested in a house and a lot in her home country, paying Dh3,000 a month for five years. She was remitting around Dh5,000 to the Philippines every month.

The rest of her salary was reserved for her extravagant lifestyle - mainly shopping sprees and luxurious globe-trotting.

I want it, I got it

Her monthly income didn’t stop Melissa from getting 10 credit cards. She said: “Although I was receiving a decent salary, I was swayed to get 10 credit cards from different banks as their promotions were very attractive. It was very easy to get credit cards in Dubai [at] that time. I

"magine, I used to have free valet service, free movies, air miles, discounted rates for dining, hotels and so on. I enjoyed my life to the fullest. As a single lady, I partied every weekend and travelled a lot. I must admit that I was a shopaholic back then. Discounts were tempting, I purchased branded bags, clothes, watches and shoes from Celine to Chanel, Chopard to Dior, Hermes to Gucci, Omega to Rolex, you name it, I had it.

"I bought many things that I didn’t really need, just to avail of the best deals, and it made me feel good. I even gave expensive gifts to family and friends. I swiped my cards everywhere, I earned points on my cards, which got converted into shopping vouchers.”

Although I was receiving a decent salary, I was swayed to get 10 credit cards from different banks as their promotions were very attractive.

- Melissa (name changed), Filipina expat

Bills, bills, bills

And then came the bills. In the beginning, Melissa was prompt in paying the outstanding amounts, but as times went by, the bills piled up. Soon, she was knee-deep in debt. Melissa said: “It was hard to cope with the mounting bills and maintain my lifestyle. I only paid the minimum due amount of my credit card bills, as I had other obligations back home and also had to spend on myself. I had to suffer paying the huge interest amounts in the end. Sometimes due to outstanding bills and interests, my cards went over the limit, so I got charged over limit fees.”

Hitting rock-bottom

Melissa’s situation worsened when she missed a payment once: “One time, I missed paying due to some emergencies. Then agents called, harassing me to pay and threatened that they would file legal cases. They were slowly killing me. It gave me high blood pressure. I was feeling down, drained and depressed. When my bills shot up to Dh200,000, I hit rock bottom!”

Breaking the habit

Melissa realised it was time to change her lifestyle: “I sold the branded items I had and borrowed money from friends to pay off the credit card bills, but the interests were way too much. I struggled to survive.”

I almost died due to debts, it was a tough learning experience for me. I should have paid my credit card bills in full every month.

- Melissa (name changed)

So, how did the 38-year-old finally cope with the situation? Melissa said: “I attended a seminar on how to manage your finances, there I learnt how to create a budget. I started jotting down all my expenses and income, spending wisely and kept at least 15 per cent of my salary as my savings for retirement.

"I completely changed my lifestyle. I refused to go to malls to avoid temptations. I went out with my friends only once a month, just to bond with friends, we dined at our homes. Also, my remittance lessened since my siblings graduated from university.

"I have fully paid my property, which I’m renting out now. This extra money goes to my retirement savings. More importantly, I followed the advice of my financial coach to approach a bank to consolidate all my credit card bills and close all 10 credit cards and just pay off one bank for my personal loan, wherein the interest rate got significantly reduced. Then I was able to get back on my feet again.”

Financial freedom

Melissa learnt her lesson the hard way. She said: “I almost died due to debts, it was a tough learning experience for me. I should have paid my credit card bills in full every month, or set up an auto–debit from my salary account to pay them off to avoid huge interests. I am indebted to the financial expert’s advice.

"I am now mindful and buy only necessary things. I am no longer an impulsive buyer. I decide on my priorities, and save automatically. Finally, I am debt-free and stress-free now.

"I am currently earning more, managing my own business and heading towards financial freedom. I chose to live life in a simpler way now, and share my blessings to others, and there I find true happiness.”

A banker with a debt of Dh80,000

You would think such situations can’t happen to someone who understands finance. But Indian expat Sujith Chandrashekharan, a banker by profession has a different story to tell - one about how he landed himself in a debt of Dh80,000.

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Before he knew it, the 35-year-old had five credit cards, an auto loan and a personal loan.

Chandrashekharan came to the UAE in 2008. His salary then was Dh4,500. He said: “I earned a decent salary and some months my incentives would go up to Dh30,000 or more.”

Chandrashekharan lived a comfortable life until 2014. But things began to change. Before he knew it, the 35-year-old had five credit cards, an auto loan and a personal loan. It was also the year he got married. But that wasn’t it. He took a loan out to help a friend.

Situation worsensed

A family emergency added woe to his financial situation. He started missing payments and the interest on the cards was high.

A never-ending cycle

Chandrashekharan said: I took another card with a higher limit. But faced a similar situation again. I was [getting] money from [one] source to trying to close another. I thought my sales incentives might help but [that] didn’t happen. And soon another emergency struck.”

Adding to this, in 2015, the couple had a baby and the family’s monthly expense increased. He added: “When I look back, I still don’t understand where I spent the money.”

Turning point

In 2016, Chandrashekharan lost his job, and his gratuity was meagre, not enough to settle any debt. This was Chandrashekharan’s turning point. He knew he needed to take control: “I budgeted everything. I didn’t spend even 25 fils unnecessarily. I ensured my family had everything they needed but nothing extra. We moved to [a] cheaper place and focused on slowly settling our debts.”

I budgeted everything. I didn’t spend even 25 fils unnecessarily. I ensured my family had everything they needed but nothing extra.

- Sujith Chandrashekharan, Indian expat

Chandrashekharan finally found a new job. He said: “I started using a major part of my salary to close the cards.” He took a personal loan at a lower interest rate to close every other debt. His incentives went into rent and he ensured that all expenses of the family stayed within a limit of Dh5,000.

Time to save

Now, Sujith and his family make sure that they save Dh7,000 a month. He added: “I am constantly aware now that I have one loan. I am paying it off properly on time. But, I am at peace now, I don’t have to borrow from anyone anymore.”

His 5 tips

The banker shared these tips to come out of debt:

  1. Financial planning is important. Live within your means, understand the difference between what is necessary and what is not. You can buy rice for Dh5 and Dh10. Buy the kind that you can afford without touching your savings. Find a house where you can afford the rent.
  2. Stay away from borrowing. And lend only if you have extra.
  3. Try to save at least Dh1 a day, slowly you will save more.
  4. Calculate your expenses ahead and save the rest. Do so in advance, before you start spending for the month.
  5. Stay away from deals and offers. They may attract you but buy things only when you need them.

Chasing the dream

Sharon Sison came to the UAE in 2009, working as a singer at one of the restaurants in Dubai. After her temporary contract came to an end, Sison did not wish to return to her home in the Philippines and decided to find another working opportunity.

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Image for illustrative purposes. Image Credit: Stock image

“I was very adventurous – Dubai’s lifestyle seems to suit my kind of personality. I thought to myself - how hard could it be? I’ll give it a go. And then I found out how hard it was,” Sison told Gulf News.

The first challenge she faced - not finding the right job quickly.

“I was staying with friends and taking loans. I didn’t have a bank account, so it was cash loans, which allowed me to just have a hand-to-mouth existence. That was my first year in Dubai,” she said.

Then, came some good news. She found a job that she described as “great” but a salary that was simply not enough to sustain the lifestyle she wanted. Unfortunately, she realised that too late.

“At that time, when they gave me the salary it was twice the pay that I was getting as an entertainer. So I thought: ‘Wow! This is great! This is more than I hoped for.’”

Add to that, the convenience of now having a bank account gave her loan options, and Sison quickly started living beyond her means. At that time, Sison felt she could afford to take a loan and pay it off because she had a stable job.

I was very tempted and took a huge loan and a credit card and used it to go travelling, to get a flat and to be at par with all the other people that I saw in Dubai.

- Sharon Sison, Filipina expat

“I couldn’t take a loan from the bank back then because my salary was not high enough. What I did was I took a loan from a financial institution,” she said.

In pursuit of the perfect lifestyle

“The thing with getting a tax-free income, which was never an option for me earlier, is that your mouth gets bigger than your belly. I was very tempted and took a huge loan and a credit card and used it to go travelling, to get a flat and to be at par with all the other people that I saw in Dubai,” she said.

In her pursuit of the perfect lifestyle, Sison ended up in a situation where her entire salary was being used to pay of the loan installments, with her overall financial dues going over Dh200,000. Soon, she found herself homeless again.

Reality check

That was the turning point in Sison’s journey. After a lot of introspection and a complete change of attitude, she decided to cut out all social activities and put a pin on her travel plans.

“Once you have experienced being able to do whatever you want, living in an upscale flat and then finding yourself at one of those bed spaces … that was the lowest of the low for me. It was a moment of awakening for me. I told myself: I don’t want to live this way I don’t want to live paycheck to paycheck and I need to sort this out and that’s what I did.”

Time to turnaround

Sison was lucky to have employers as well as friends who were supportive. Her manager helped her negotiate through the financial mess.

“I asked advice from my boss and he helped me understand ways to pay off my debt. I spoke to a bank and explained the situation. All of my loans will be paid by September of this year,” she said.

Sison, who is now married, said her then fiancé offered to help her pay off the debt. Sison refused.

“This was something I did recklessly and for me to learn my lesson, I needed to feel the pain. Also, it would be more fulfilling to know you got yourself out of the mess that you got yourself into. This is what I am most proud of.”