How to manage overwhelming Loans. Here are some solutions

The unforeseen circumstance like the pandemic has made a treacherous impact on the financial planning. The drop-in income due to delayed receivables, reduced salaries, job losses, rental yield has created a cash crunch situation. 

Challenges faced

The most extreme challenge faced in this scenario is the reduction in repayment capacity and the increase in the Debt to income ratio. Many people even resort to borrowing more money to repay the already existing pile of loans or may choose to relocate due to the fear of facing legal consequences.

But leaving the country will not help in getting rid of the Mortgage Debt. Instead, banks can legally pursue debt collection through various measures. With every passing month, the interest will only get accumulated to an amount that will become a monstrous sum.

Steps / options to manage the situation better

Though the situation can be extremely challenging, there are possible solutions for getting back on track:

Create a budget

Creating a budget helps in managing the situation. A track of monthly expenses can be kept to understand which ones come under necessity and the ones that can be reduced to tackle the increasing credit situation. But the budgets can only help if it reflects reality and should not be created vaguely.

Setting up financial priorities

Priority setting involves determining what needs to be done first depending on the problems faced; for instance, paying off the highest interest debt or consolidating the debt to a lower interest product. Setting priorities and appropriate actions can help to get on track.

Debt restructuring

Under the debt restructuring an in-depth analysis of the individual’s financial situation is conducted. The loan terms are modified in line with the repayment ability. The restructuring might include an extension of the loan tenure or a reduction in interest rates, and much more. It helps in improving the repayment capacity of the borrower.

Debt settlement

Under debt settlement, the asset is liquidated to make full and final repayment. In case the property value does not secure the loan outstanding a settlement is negotiated on the shortfall with the financial institution. Although this option may help in paying of the debt faster it will have an drastic impact on the individual’s credit score.

It is preeminent to seek advice from a professional to know the which is the best suitable option to the specific problem and how to implement it. The debt management service firms act as a representative of the individual to negotiate with the banks the best possible solution based on each individuals needs.


FREED Financial Services LLC – with its management experience of over 40 years and proficiency in the mortgage business with experts in banking and real estate – understand and represent the borrowers to provide mortgage debt management service in UAE and negotiate the best possible solution for its clients.