Struggling with Debt? Tips for dealing with heavy debt

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Neeraj Gupta, CEO, Policybazaar.ae
Image Credit: Provided

Almost everyone struggles with financial stress and uncertainty. Whether it’s financial worries related to job loss, increased debt, unexpected expenses, or a combination of these factors. According to the latest report from Amazon Payment Services (formerly Payfort International), a regional expert in payment processing technologies and solutions, nearly half of UAE residents are in debt and a significant number of people fail to save money. money.

Settling debts is not easy; it got worse during the pandemic. With a limited source of income, borrowers find it difficult to make ends meet – they end up falling into a vicious cycle of debt by making mistakes such as taking out another expensive loan to pay off an existing loan. People should consider the following when managing their debt:

Distinguish between “needs” and “wants”. Compulsive spending can put a strain on finances. Your credit card is meant to pay for the things you need, not just to borrow or stay in debt. It is intended to be used wisely and to take advantage of the benefits of the card (fuel, airline miles, meal benefits, etc.). Make sure credit card bills are paid on time, maximize your credit card refunds, set a reasonable credit limit, and regularly check credit card statements.

If you’re in a hurry to pay off debt, remember to set aside a portion of your income each month in a savings account to make sure you’re financially prepared for the unexpected in life.

If you feel like you are in deep debt, it is advisable to seek advice from the bank, as most banks in UAE offer debt consolidation service. This will help the borrower to consolidate all existing credit card loans / debts into one loan. This will give you the advantage of conveniently paying off your loans at a low interest rate and in small monthly payments. Also, remember not to borrow money from unregistered lending entities.

Control your debt ratio (DBR). This is the number of debt repayments you have compared to your monthly salary. Fifty percent is the legal limit in the United Arab Emirates. For example: if you have a salary of 15,000 Dh, make sure that the repayment of your debts does not exceed 7,500 Dh. Ideally, your DBR should be between 20-30% in case you need additional credit.

If you’re struggling to manage your spending and struggling to save / pay off debt every month, try the zero sum budget. Prioritize your expense categories, with loan repayments at the top, followed by basic household expenses, emergency savings, and all miscellaneous expenses at the bottom. The next step is to split your income according to these priorities, leaving nothing out. Remember that every dirham counts when you are on the right track to getting out of debt sooner.

Finally, never underestimate budgeting. Take a closer look at your financial statements – tracking your income and expenses can help you reach your long-term financial goals.

– The writer is the CEO of Policybazaar.ae


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