Beware bad debt in Dubai
Chances are, if you're a young banker lured to Dubai a couple of years ago by the promise of big bonuses and a tax free salary, you wouldn't have been too prudent with your finances. However, now that the employment market is a little more shaky, it's worth bearing in mind the emirate's strict policy over debt repayment before splashing out on that new Hummer.
Dubai's banks were previously fairly liberal when it came to giving out loans, often letting proper credit checks go for things like car loans.
This seems at odds with the fact that, under Sharia law, if you default on your debt you face a prison sentence. Even a bounced cheque could result in jail until you're able to pay the amount back again.
The Times recently reported that an increasing number of expats (around 3,000 supposedly), faced with a change of fortunes, had skipped out of the country in order to avoid defaulting on their debts, leaving their cars at the airport.
The Independent goes one step further in attempting to paint a picture of the horrors of getting into debt in Dubai. It talks of expats sleeping in sand dunes (unlikely, admittedly) or living out of their car in the airport.
Obviously it's not illegal to be in debt, but if you default on it in any way you face a jail sentence. The slight upside is that once you're able to repay the debt, the slate is wiped clean and your credit record is left unblemished.
Karen Andrews, an expat interviewed by the newspaper, said she didn't know about the strict laws before it was too late. At this point, her husband Daniel was terminally ill and had racked up a mountain of debt:
"When we realised that, I sat Daniel down and told him: listen, we need to get out of here. He knew he was guaranteed a pay-off when he resigned, so we said - right, let's take the pay-off, clear the debt, and go." So Daniel resigned - but he was given a lower pay-off than his contract suggested. The debt remained. As soon as you quit your job in Dubai, your employer has to inform your bank. If you have any outstanding debts that aren't covered by your savings, then all your accounts are frozen, and you are forbidden to leave the country.
Calum McClure, managing partner for Decol Debt Collections in Dubai, says: "When you think about the amount of credit cards, personal loans, mortgages and auto loans out there, what we're seeing now is just the tip of the iceberg. When you get house prices dropping by up to 50%, who is going to cover that?"
How can you avoid the worst? Talk to your bank before it gets too dire, says McClure: "Ultimately they would like their money back, so I suggest you talk about rescheduling your payment plan."
