I am getting married and have three credit cards that I want to pay off – ideally by taking out a liabilities loan to reduce my monthly repayments. However, my company is not on any bank’s approved employer list. Then one of the banks I have a credit card with (with an outstanding debt of Dh43,000) offered to register my company and offered me a loan of Dh94,000 to cover all my debt. When the final loan offer came through though, it was only for Dh51,000 and the sales representative told me this was because of my existing credit card debt with that particular bank. This loan amount will not decrease my monthly repayments but increase them, so how can I get around this issue? RB, Abu Dhabi
The expert advice
Preeti Bhambri, founder of moneycamel.com, a price comparison website
You have chosen the preferred approach of converting credit card debt into a personal loan. This reduces the financial payments by pulling the interest rate down from 36 per cent per annum to 8 to 9 per cent per annum. Considering that your company is not on a bank’s approved list, I can suggest two different scenarios for you:
Scenario 1: There are other banks that offer loans to individuals working for companies not on their approved list. Some of these banks are mentioned below:
• Citibank Personal Installment Loan
• Emirates NBD Personal Cash Loan
• DIB Salam Finance
You can connect with all these banks directly for a callback to discuss further. If you can get a loan that covers even two of your outstanding card balances, consider taking out a loan to do that. For the third card, do a balance transfer to a new free card that offers a 0 per cent rate for up to six months. The idea is to repay as much as you can in the interest-free period. Some free cards offering a 0 per cent balance transfer rate are:
• HSBC Platinum Select Credit Card
• ADIB Etisalat Credit Card
• CBI Rewards Platinum Credit card
Scenario 2: If you are unable to get a sufficient loan amount to close all the cards, use the loan you have already been offered to close the card with the biggest outstanding balance.
• Pay off the card with the balance of Dh43,000 completely. As soon as the bank acknowledges the payment, put in a request to close the card. Once you receive a closure confirmation letter from the card provider, get rid of that card. You will have saved an interest cost of at least 20 per cent on that debt.
•Then for the card with the lowest outstanding debt, use the remaining Dh8,000 from your loan to pay some of the debt off and continue to repay as much as you can. This will help you bring the number of active cards down to just one.
• For the final card, once you have closed the other two you can then apply for a balance transfer on a new card that offers a 0 per cent balance transfer rate and repay as much as you can in the interest-free period of three to six months.
The reader’s advice
Sally Bosnam, Dubai
Credit cards are evil. They lure you in with perks and offers and then, because many people often spend beyond their means – they hit you with ridiculously high interest rates. I have been there, done that and learnt a valuable lesson – only have a credit card if you can afford to pay off the full balance.
The next Money Clinic:
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The advice provided in our columns does not constitute legal advice and is provided for information only. Readers are encouraged to seek appropriate independent legal advice