“If I switch to an independent visa, will the bank use my car loan?” “
I lost my job a few months ago and haven’t been able to find another one yet.
I am still in the United Arab Emirates and I have a car loan of 25,000 Dh. I haven’t missed any payments yet because I am using my savings to pay the installments. My severance pay was also used for the loan.
To stay in the United Arab Emirates, I thought about applying for a freelance license in a free zone, which would allow me to work in CDD with companies.
If I switch to an independent visa, will it affect my loan and access to my bank account? Will the bank accept my change of status or require proof of income?
If the bank does this, I’m worried they’ll pay off the entire loan, which will deplete the rest of my savings and my ability to pay for living expenses until I start making money again. Is this a possibility and what do you advise me to do? GB, Dubai
Debt Panelist 1: R Sivaram, Executive Vice President and Head of Retail Banking Products at Emirates NBD
I am glad that you are conscientious about your financial obligations. Since you’ve made regular payments on your car loan, this is certainly working in your favor.
Once you have changed your status to an independent visa, you simply need to update your bank statements with your new residency status.
As long as you continue to pay your loan installments, the bank will not ask you to close the facility. In the future, if you are having difficulty meeting the loan payments, it may be advisable to sell the asset and pay your contributions.
I wish you the best in your new business and a return to financial stability soon.
Debt Panelist 2: Nathan McFarlane, Founder of AskHelpWith.com
First of all, well done for having set aside an adequate emergency fund to cover you in the event of this unforeseen circumstance.
You are in a position that many people have failed to achieve for a variety of reasons, which is to have a financial safety net to fall back on. By doing this, you have given yourself the freedom to continue making payments and prepare yourself to generate other sources of income.
You have also maintained a good credit rating with the bank by continuing to make payments on time. This can be useful for you later.
Regarding the visa change, this should not have an impact on your loan. In short, the bank doesn’t care who you are employed for or if you are self-employed. However, it’s important to note that getting credit can be more difficult when you’re self-employed.
The bank really only cares about your payments and as long as you keep your payments on time you shouldn’t have any problems.
However, if you miss payments, usually after three consecutive months, the bank has the option of cashing the security check you gave them when you took out the loan.
Debt Panelist 3: Felicity Glover, National Personal Finance Editor
Having a cash reserve of three to six months of spending, ideally more, is one of the most important financial safety nets a person can have in times of economic uncertainty.
Well done for recognizing this because it means you have been able to meet your payments, maintain your credit score, and pay for your daily expenses.
I don’t think you have a problem with your bank regarding changing your status from employment to self-employed. However, it is important to deliver copies of your updated documents to the bank when your independent visa is approved.
Under UAE Central Bank regulations, banks are required to maintain customer records to help manage risk.
You will need to provide your bank with copies of your updated documents, which will include your new Emirates ID card, valid proof of address such as an Ejari contract or utility bill, as well as your current passport and your residence visa.
You can submit the documents in person to your local bank branch, or this may allow you to upload them electronically.
This is an important process to complete as the bank may temporarily block access to your account until it receives the updated documents.
If you continue to worry about keeping up with your car loan payments while settling in on an independent visa, you may want to consider selling the vehicle and paying off the loan in full.
Being debt free can give you peace of mind and help you focus on what really matters: making money again and working on saving and investing for your future.
It’s worth considering the cost of having a car, like regular maintenance, annual registration, and monthly loan repayments, versus cheaper public transport options.
There are plenty of inexpensive transportation options for residents of Dubai, such as the metro or even paying per mile car rentals if you need to travel further afield for work or other commitments.
It is also important to research the type of business license and free zone visa that you need, which can also help you save money.
A number of free zones in Dubai and other emirates, such as Ras Al Khaimah, now offer great deals on business licenses, which can also be accompanied by a free residency visa for people planning to set up their own. business or become self-employed.
It is worth a visit as it could save you a few thousand dirhams.
In the meantime, it’s also worth considering the option of applying for remote workstations to save some cash rather than relying entirely on your savings for the expenses of daily living.
Depending on your skill set, check out websites like upwork, FlexJobs, We Work Remotely, JustRemote, and Pangian, which operates across five continents and connects companies with potential employees regardless of where they live.
FlexJobs also offers a free downloadable guide on how to find a remote job and start working from home, which could be a valuable resource for you in the first few months of your freelance journey.
The Debt Panel is a weekly column designed to help readers tackle their debts more effectively. If you have a question for the panel, write to [email protected]
Updated: September 29, 2021, 4:00 a.m.