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Risk and Reward: Making Decisions about Personal Finance
New Products and Debt Management
Changing products
Once you know the repayments you can afford, you can consider:
- Changing their existing borrowing products for ones that cost less
- Negotiating with their existing providers to extend the term of their loans
You can approach your provider yourself or ask a debt adviser to negotiate on your behalf.
Aisha has been making repayments of AED600 per month on her credit card but still owes AED12,000. She has stopped making new transactions on the card but is frustrated that the 19.9% APR means her debt keeps growing. Aisha has a good credit history, so she applies for a 0% balance transfer to another card.
The 0% deal lasts for 18 months. Aisha uses an online calculator to work out that, with the monthly payment she will make, she will be able to repay the full debt in 1 year and 5 months. This is three months earlier than if she had stayed with her first provider and saves her some interests to be paid as well.
If you are struggling to repay a loan you may wish to consider extending the term of the loan. This is not always possible, but many providers would prefer that a borrower repay a loan in full over a longer period than not pay it. You should approach your provider with a plan of how you can afford to repay the loan over a longer period of time.
Alternatively, it may be possible for you to take out a longer-term loan to repay the shorter one and so reduce your monthly repayments.
Some of the factors to consider when extending the term of a loan or taking out a longer-term loan to repay an existing shorter one are as follows:
Debt management plan
If your debts are getting out of control, you can set up a debt management plan with a debt management consultancy (DMC).
A DMC will work with you to provide you with the most suitable options to reduce your debt burden through debt consultancy and consolidation.
Jamal owes money on his overdraft, three credit cards and a car loan. He has been struggling to repay his debts for the last six months and has had some telephone calls and letters from his providers pressing for payment. Jamal decides he needs help, so he contacts a debt consultancy service company. With their help he draws up a detailed budget that shows he can afford to repay AED750 per month.
Jamal then sets up a direct debit from his current account to pay the budgeted amount of AED750 per month. The consultancy pays the money on to his creditors. Jamal has not received any letters or telephone calls from his providers since his plan started. He has cut up the two most expensive credit cards he held and keeps the other one for emergencies only. Jamal knows it will take him years to repay all his debts, but he is determined to see the plan through.
Debt management plans are offered normally with a fee however, there are organisations that can do so without a fee.
The advantages of a debt management plan
- They combine the entire unsecured debt into one easy instalment
- They save money on the high interest rates paid across multiple credit cards and unsecured loans
- They are ideal if you are struggling to cope with multiple payments
- They help to keep your finances organised
- They help to prevent missed payments or over-limit penalties
- Provide compassionate advisors who deal with each case with absolute professionalism and understanding
Ask for help
Debt liabilities cannot be taken lightly, to ensure debts do not spiral out of control a debt management plan must be created and executed. Successful debt management cannot always be done alone, it is okay to ask for help. Free or paid for debt advice, can help you take charge of your debt, create a debt management plan to get you out of debt and put you on the road to financial recovery.
If you’re a FAB customer and you’ve missed a loan, or credit card payment, or you're concerned about your current overdraft position, or you're worried about missing one in the future, we can help. Call our team of credit counsellors on 600525529 to get a helping hand.
Visit Debt Management (Conventional Products) for more information on debt management
