📉 Debt management in the UAE: How to spot problems and take control
- Kacper Duda
- Sep 10
- 4 min read
We talk a lot about savings, credit cards, and making your money work better for you.
For some, there are bigger problems in the world: debt. Unmanaged debt can spiral fast. Instead of reducing what you owe, you end up paying ever-higher interest charges. Without strict budget controls, the money can run out quicker than you think. The consequences of that in the UAE are more severe than elsewhere.
Read on to find out:
What constitutes a debt problem
Our debt management toolkit
Consequences of unmanaged debt in the UAE
In the news - Revolut’s coming to the UAE and has its licence approved in principle
If anyone you know is having financial difficulties, please share this newsletter with them - you never know, it may be just what they need.
When is debt a problem?
Debt is a bit like your health - if you catch it early, your chances of getting out of it are much better.
Here’s a quick checklist to help flag problems early. If you, your friends, or family recognise these signs, the time to act is now:
⚠️ Overspending, i.e., spending more than the monthly income
⚠️ Letting credit card debt roll over, which means you could be paying 40%+ in interest
⚠️ Having more than 20% of your income go towards interest payments
⚠️ Taking out new loans to pay off older loans (unless consolidating, more on this later)
⚠️ Missing loan or credit card payments
Our debt management toolkit
Once the debt problem is identified, you need a very structured and rigorous approach to help you resolve it. It’s likely going to take some time. Support and discipline will be critical to the success of this approach:
Reach out for help - Debt is a serious issue. It is not something to be ashamed of, and not something anyone should be going through by themselves. Dealing with debt is mentally and financially exhausting. Don’t do it alone - lean on friends and family for support. If you can get professional support through debt counselling services, that’s even better.
Adjust your budget, restrict your spending - Now is the time to dial-back on any non-essential spending. That includes leisure, eating out, takeaways and any lifestyle purchases. You should focus on reducing your essential spend too. If you need help budgeting, you can use our Money Luna UAE Budgeting tool to help you.
Generate additional cashflow to repay debt -The faster you repay, the less interest you waste, and the sooner you’ll be out of the hole. If there are any assets you can sell (e.g., car, expensive belongings), now is the time to seriously consider it.
Create a debt ladder - Higher interest rate debt should be the priority (whilst also making minimum payments on other debt to make sure you don’t default). You need to understand which debt you tackle first and work down the ladder afterwards.
Consolidate your debt if you can - If you are still in a position where you can get credit, consolidating debt may reduce the overall interest rate you’re paying. This will make it easier to clear your debt in the long term.
0% balance transfer cards - These are very effective in giving you respite, as you can use them to pay off existing credit cards and enjoy a period of 0% interest on the new balance. We’ve written about them recently in this article.
Personal loans - Often at a much lower interest rate than credit cards, it’s another tool to reduce the overall interest you are paying.
Re-negotiate your loans - Banks would rather recover their money than see you default. They also have a regulatory duty of care for financially distressed customers. Engage them early to agree a repayment plan that is more manageable.
Declare bankruptcy - The UAE introduced a personal insolvency law in 2020 to help over-indebted individuals. This law allows residents to file for insolvency protection, letting the courts organize a plan to repay creditors over up to 3 years, without criminal penalties (no jail). Though it does affect your credit file, it should be used as a last resort.
Yes, this journey is often long and complex. Which is why getting help and support is so important. Without that, you’re unlikely to succeed, so start there.
Why debt in the UAE is different
Unmanaged debt is a serious issue anywhere you live. It can severely impact your credit score, and therefore your ability to obtain a mortgage, credit card, loans, or even mobile plans.
One factor adds to the seriousness in the UAE: travel bans. If you have unresolved debt issues, your creditor can request a travel ban to be put in place through the court system. It’s usually their last resort, but it does happen.
A travel ban can be applied if you’re in the country (stopping you from leaving), but also even after you leave. In that case, you’ll be prevented from re-entering or may even be stopped when transiting through the UAE.
IN THE NEWS - Revolut’s coming to the UAE and has its licence approved in principle
Many of us will be familiar with Revolut’s strong FX currency offering in Europe. We have some good news - it’s coming to the UAE.
While no date has been set for a full launch yet, the approval is a significant step in Revolut’s MENA expansion plans, and we can expect services to come online in the next few months. Read more about Revolut’s regulatory approval in this Gulf News article.
Disclaimer: Please bear in mind that this email does not constitute financial advice. Any choices you make you are solely responsible for. We always aim to provide highest quality, independent views but do your own research to ensure you’re comfortable with any changes you make to your personal finances.
