How to Avoid Debt and Money Trap Problems

How to avoid debts and money trap problems

If you live in the UAE, or are planning to move to the UAE, you’re probably curious about debts and how the system works. The best advice would actually enable you to avoid getting into debt in UAE; moreover, avoid getting yourself into a possible money trap problem or activities which could lead to possible fraud. Debts and failure of payments could cause you to be in serious trouble not only in the UAE, but anywhere else in the world, which is why it would be wise to take precaution; it is better to be safe rather than sorry.

The entire reason you would be needing to borrow money from the bank is either because your expenses are not proportionate to your earnings, you want to start a business or want to buy a home. The bigger purchases such as a car or a home would be impossible to attain without a loan for someone with an average wage, but there are certain things that can be put off for buying later when you can afford them, rather than taking a loan to purchase them immediately.

Can YOU return all the money?

Although banks in the UAE have sufficient criteria in order to apply for loans, so that they are fully guaranteed that you will be able to pay them back, it is still important that you personally reflect. Ask questions like:

  • Is the item that I am taking the loan for, an absolute necessity for the present?
  • Does my financial status give me the guarantee that I will be able to pay back the loans?
  • Will I have to take another loan to compensate for the loan I am taking now?

The following are the things that you should avoid taking loans for:

  • Shopping
  • Birthdays
  • Tickets for special events
  • Topping up your mobile phone
  • Repairs
  • Compensation for other loans

The main goal would be to live within your means. Say no to impulses. If there is anything that makes you feel like ‘you HAVE to buy it,’ sleep it off. If you still want it the next day, you can consider buying it, but keep your mind open to saying no to things frequently. This will help you save up on a lot of cash that you may end up spending unnecessarily. Having a monthly budget would further allow you to monitory your money and spending. Undervaluing budgeting could contribute to a great loss in the future. Feeling overruled by extravagance is another thing that you might encounter if you live or strive to live in a place like Dubai. Spending a sum of money on things you don’t need is not the solution to your wants it will only feed to them more. It is important to distinguish between the things you have been wanting, in comparison to the things that you actually need.

As said by Khaleej Times, the most expensive form of debt is a credit card debt. The moment you make a bank account, you’re bound to get emails and calls for easy loans. Ignoring these will prevent you from getting into the cycle of loans in the first place. The wrongdoer here, is the steep interest or profit rate on credit cards. Don’t let that seemingly small number of 2.99 per cent to 3.25 per cent per month lead you astray. When converted to an annual rate or APR, interest rates on credit cards in the UAE can touch a whopping 40 per cent on average.

Today’s generation has quite the obsession with having a credit card for convenience. Monitoring your money is much easier when you’re paying in cash, so the next step would be to pay in cash as much as possible. Having the reassurance that you have saved something out of being cautious is merely astonishing.

One of the most effective ways of avoiding the situation of attaining a loan all together, is looking for a way to boost your income. A secondary source of income aside from your monthly wage job will serve you well in terms of cash flow. Investing in real estate is an interesting way of attaining secondary income because it is passive. Once the property is rented, you will be sure to have money in your wallet at the end or beginning of every month. The most engrossing part about it, is that – with crowdfunding platforms like Smart Crowd AE, there isn’t a need for a large amount of capital in order to get your investments in place.

Create a secondary source of income!

With Smart Crowd, you don’t acquire debt to invest in a piece of property. You can build a simple & affordable investments portfolio starting from USD5,000. 

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