What you need to know about debt consolidation loan in UAE?

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Financial liability in terms of multiple loans or credit cards should be better managed using the option of a ‘UAE debt consolidation loan’. There are several banks in UAE that provide the services of a “debt consolidation loan”. According to the latest surveys, it is found that at least three in five UAE residents have unpaid debts of various kinds and therefore can benefit from debt consolidation services.

How it works:

Debt consolidation services are offered by almost all well known banks in UAE. As the term suggests, this service allows you to consolidate all of your unpaid debts arising from various loans or overdue credit cards into one consolidated liability. This process has some specific advantages, which go beyond the convenience factor of being able to manage all the unpaid liabilities together in a consolidated form; there are additional monetary benefits.

We would like to explain to you how debt consolidation works through this example:

Consider the example of a person who has unpaid debts as follows: based on two credit cards Aed 25,000 / – and Aed 20,000 / – respectively and a separate personal loan for Aed 150,000 / -. In a normal case, a separate percentage interest will apply to each unpaid liability, and a fixed down payment will apply accordingly for each. When you consolidate the loan, the bank treats it as an unpaid liability and provides you with a revised lower interest and payment rate at competitive rates, saving you considerable savings.

Hidden cost figures:

Often times, people end up spiraling into endless debt because they realize the hidden costs of interest rates on unpaid debt. As a market standard, the average interest rate applicable on a credit card is 2.9% per month. However, if you equate the same to an annual percentage rate (APR), it goes up to 40%. The annual percentage rate only applies if regular monthly credit payments are not repaid and when you carry your credit card balance from month to month. Often, this is not well understood and presents itself as a hidden cost for most people.

By taking out a debt consolidation loan, you can avoid the annual interest rates on your credit card debt and instead get a revised monthly amount that allows you to pay off your amount owed in a structured way while balancing your earnings. and your debts.

Benefits of Debt Consolidation:

  • It gives you more control over your finances by consolidating all of your unpaid debts into one loan. It allows you to forgo paying high interest rates on all of your liabilities by offering you a consolidated interest rate at a lower rate.
  • Flexible repayment plan
  • Better financial control
  • Creates savings on interest payments that would otherwise have been applicable
  • Allows you more disposable income and contributes to better finances.

New UAE Insolvency Law:

The United Arab Emirates introduced the new Insolvency Law No. 19 of 2019 introduced in August 2019. The Insolvency Law allows the concept of “voluntary settlement process”. The process was initiated to enable people facing financial difficulties to be able to seek out a structured payment plan using a court-led process. This process allows individuals to voluntarily file for insolvency and thus use their legal options to protect their assets and achieve a structured payment plan with their creditors. An individual can file a personal insolvency claim by going to civil courts under insolvency law. Through the Court-initiated mediation process, involving relevant experts who are approved by the Court through a step-by-step process to develop a structured disbursement plan.

An individual can file a personal insolvency claim by going to civil courts under insolvency law. Through the Court-initiated mediation process, involving relevant experts who are approved by the Court through a step-by-step process to develop a structured disbursement plan.

Voluntary settlement process:

Insolvency law allows a voluntary settlement process at the request of the debtor. Once a voluntary settlement plan is initiated, the debtor’s debts are not due and payable immediately but only on the basis of a structured settlement plan. Creditors are also allowed to actively participate in the settlement process. This law also prohibits individuals from filing an application for enforcement or liquidation against the debtor’s property. Thus, it secures the debtor’s assets while allowing for a more harmonious settlement plan. It is relevant to note that civil courts will not allow a debtor’s claim for settlement if the following factors apply, namely:

  • The debtor tried to conceal his property
  • The debtor tried to dissipate any part of his property
  • If a false declaration has been made by the debtor concerning his assets or liabilities
  • The debtor has not paid a debt owed for a period exceeding fifty consecutive working days.
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