The banking laws of many countries permit expats to finance cars and other large ticket items. What most expats don’t realize is this: When you take out a loan in a foreign country and then fail to pay it off in full, you may end up in prison.
It has been reported to ISR that more than one expat is now serving prison time for failure to repay a loan, reporting that their banker never disclosed the severity of the consequence associated with an inability to make timely payments and/or pay in full.
If you are planning to go into debt overseas, you definitely want to have assets available from friends/family to pay off your loan should it become necessary to leave the country. Some countries won’t allow you to depart the airport unless all debts are satisfied in advance. And be aware: Selling off the car you bought to pay the loan is not an option since you cannot sell the car until the loan is satisfied. Obviously, a situation like this adds an entirely new dimension to the sense of being trapped at a school you may wish to leave.
Of course, there’s also the scenario where an expat debtor pretends to be leaving on vacation and then never returns. Although this strategy sounds viable, it’s not advisable as such debt can follow you around the world. For example: The UAE is a signatory to the Riyadh Convention and as such has the right to enforce a judgment in all other signatory nations. Furthermore, banks in Dubai have successfully sold debts to collection agencies in the UK, and the UK-based agency then successfully sued the debtors in their own country with significant collection fees added!
A “pro tip” on the Qshield web site warns that expats leaving Qatar should contact their bank 2 days in advance of departure in order to ensure a banking fee has not been levied that could result in being detained at the airport. You thought you had closed out your bank account, paid off any debts, utilitity/phone bills, etc., only to find the bank levied a minuscule fee which suddenly surfaced at departure time. Imagine being detained at the airport in Qatar for a few cents you owe your bank!
In an article entitled The Dark Side of Dubai, Karen Andrews tells how her husband’s health deteriorated while overseas and during that period debts mounted. Karen’s husband had planned to use a “pay off” he was slated to receive upon leaving his employment to satisfy his debt. But he ended up getting far less “pay off” than his contract indicated. For this he was sentenced to one year in prison and Karen is living in her car until he gets out. Not surprisingly, it has been reported that expats are found sleeping in the airport and behind the sand dunes as debtors’ prison applies not only to car loans but to local credit cards, personal loans and co-signing a loan for someone else (such as a host-national friend).
It’s never a good idea to get in over your head financially, but when moving abroad debt has a way of sneaking up on us. If you must buy a car or another expensive item overseas, it is highly recommended you take advantage of the personal loans many schools make available to their teachers. Often these loans are interest free with very manageable payments proportioned for the length of your teaching contract. At the very least, try to get your school to co-sign should you deal directly with a bank.
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Rule number one DON’T loan money when living or working outside your home country. Rule Number 2 DONT loan money when living or working outside your home country. Rule number 3 same rule number 4 same. I hope by now you get it!
A case in point, yes we are one of those expats soon to leave Dubai. We were in a position to be able to buy a car with our own funds great! Selling our 1 1/2 year old car a few weeks ago we of course lost bucket loads, depreciation and the fact that with no tax on cars, cars are cheap and there being HUGE car sales at the minute deals to be had. Still sell we did.
What I found endorses my opening lines… at a sell your car yard in no time ( name changed) a family were leaving and selling off their 4 wheel drive. They were getting less than what they owed the bank. What comes to mind is a few buyer beware signals.
Firstly, do you need a 4 wheel drive, sure everyone has them, sure you have to keep up with the neighbours, sure it looks good in the parking bay, sure the kids will be able to talk about their 4 wheel drive at school.
Secondly, ask yourself, if I was in my home country would I A be buying a new car when I know I’m only here short term? B Do I really want to see my hard earned cash ( which it is hard earned here believe me) going into a vehicle that sure will be impressive and cool, l all to sell it before I leave maybe with a bit of pocket money at the end or a debt to pay and then some?
Banks here are all too kind to want to take your money, we have some of the big named banks here, I am constantly called by one of them, telling me my hard earned salary can give me more benefits and flasher cards. No thanks! The fine print is very fine!
For sure, I’m talking about the Dubai scene, however having lived in a great many countries, more so than the cars I’ve owned, the UAE tends to generate the BUY BUY BUY theme, without due diligence on the DEBT DEBT DEBT consequence theme. While we are all adults and need to take responsibility, what about schools giving some advice in their handbooks or at orientation about the positives and negatives of making LARGE purchases. I don’t believe schools in Dubai will be there to assist you should you get into let’s face it, self inflicted debt. Think wisely. I was told by a colleague that,” Dubai does that to people, it’s what you have to do.”
Well sorry it’s not, you make the decision, just for goodness sake make the right one!
Off the Dubai topic, back to debt. In general overseas, teachers aren’t paid well, sure the package might addd up, but realistically most of us are not backpacker teachers, but tend to stay in a school for a few years only before moving onto the next continent. I think you need to way up the quality of life you want, and save before purchasing.
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A loan agreed in one country cannot be legally collected in another.
The whole exit permit and debtors prison thing is a breach of human rights. Its far too easy to get into trouble in these countries.
When a loan is taken out the bank asks you to sign security cheques, if you default then the cheques are presented. If the funds are not there then the cheque bounces. In many Arab countries issuing an unfunded cheque is a criminal offence and that’s is how easy people end up in jail.
At the time of the GFC many people left Dubai with debts after losing their jobs. It was jail or skip the country. What a terrible choice.
In Qatar even your rent can be in the form of post dated security cheques. Its a dangerous crazy system.
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I had credit cards in Malaysia. I made sure that the balance was paid off before I left. I remember almost fighting over the phone to pay of the bill before the end of the billing cycle. I was able too but customer service rep did not understand the rush. Thankfully, I have a clean record there in Malaysia. My School was thankful that I remembered to pay anything owed before I left.
One has to be careful with credit cards. The balance I was talking about to awhile to hit the account. It was about three months, leaving one billing cycle to pay. So, please be careful, the merchant has a grace period of six months to report the fee to credit card company. If you have a credit card overseas and see transactions made a not appearing on your statement, be vigilant and pay advance. A really bad situation is that it shows up long after you finished the contract and then there is a black mark or even a work ban in the country.
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I would suggest you be careful with items much smaller than cars. Recently I left a number of items behind intending these would support the incoming principal at my school, who was arriving from overseas. This included a modem and completed paperwork to assist the transfer of my broadband account. Back in my home country, I received emails from this person expressing thanks; however the account was never transferred (although it was used), and the monthly stipend was never paid. Responses to my regular emails stopped. After 6 months, the broadband company threatened to put my name on an international debters list, so I paid up (it was less than $US200). My mistake had been trusting a person from my own culture who would be in a leadership position. Legally I was still responsible, and like the other poster ‘I’m not like that’.
Don’t be ‘nice’ to anyone, trust no one, and be aware that in a connected world a very trivial amount could risk your international credit rating.
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I bought a car in Dubai but used a personal loan rather than a car loan. It was a bit more expensive but at least I was able to sell the car and pay off the loan with the proceeds before I left.
Having said that, I wished I’d just stuck with the long-term car rental agreement that I’d used in my first year there.
Some colleagues suggested I could just swan off without paying back the money but a) I’m not like that and b) I knew the UAE had far-reaching laws about debt and I didn’t want to stir up a big toilet of poop for myself!
Ultimately, unless you’re going to do a lot of weekend excursions to Oman/Abu Dhabi or go dune-bashing, I think it’s quite possible to survive Dubai without a car at all. The taxi service is very reliable!
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I agree with all these comments and Teachers are adults but banks and car dealers are very deceptive. They make it look so easy to get credit and as for the shock I got when at the last minute they wanted a blank cheque signed for a small amount on a new credit card. I always ensured that I had that amount in savings and I hardly ever used it unless I went on holidays. Cars are just a huge headache and the locals know that you are in a bind when you state you are selling the car for …………….reasons. They have lots of fun with you offering the poorest price still leaving one with a debt. I was very lucky. I bought a new car and paid it off in 2 years and sold it for a good price but I saw many a colleague in trouble and some left the country and took their chances. Communication and honesty with most banks does not result in jail anymore. At the time of the financial crisis Yes it did and it was widely criticized and business and government law advisors managed to get it changed. You still need another job or family to help out and if you do not have this then forget it.
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I’d would rather walk or take the bus than to get involved with the financial and or legal systems that govern some of these countries. Taking out a loan could be the mistake of a life time. In South America my host national neighbor missed two payments on his big TV. One Saturday afternoon two thugs in a pick-up pulled up. They knocked at his door, entered and took the TV in the name of the bank. They then proceeded to take his refrigerator which would be sold to cover the depreciation on the value of the TV. He never had a chance to work out a new payment plan or anything as he said the store that he bought the TV from refused to talk about it with him. He was dealing with medieval barbarians disguised as business people. It’s easy to be fooled by the very modern appearance financial instructions and some stores have overseas and to think you are dealing with the same mentality as back home. This is the mistake expats make. When the ***** hits the fan, you can be sure someone will be trying to stick your fingers into the blades.
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Let me guess. That person was in Dubai. We lived there. One of the only places left in the world that criminalizes a bounced check with jail time. You don’t go to jail for not paying the loan. You go to jail for bouncing the check(s) that secure the loan. We had to sign blank bank checks with HSBC to get a car loan. 36 of them (one for each month). We also had to sign a blank check to get a credit card with another bank. Teachers should be just as careful about things as everyone else. Just because you are there on a 2 year contract and get your housing paid for does not make you a child. Know the laws.
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Thanks very much for the advice!
I think it’s best to keep your life as simple as possible when living abroad – being debt free and staying debt free is the way to live. Taking risks like applying for loans to buy a car in places like the Middle East is inviting trouble and problems. I have never bought a car or took a bank loan in all the years I have worked abroad and I have no intentions of doing so. It is possible to live simply without all the extra luxuries and comforts we have back home.One is able to save a lot of money this way.
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I agree with this. I think that going abroad and then trying to replicate the lifestyle you had at home is madness. The only expat teacher I ever knew who insisted on having a car was a Texan who felt like an amputee without one. Even so, we all tried to talk him out of it. Of course, once he got the SUV, he promptly had an accident with it, just as he had had two accidents, one nasty, with the scooter he had already bought. (Driving in Korea is not for the faint-hearted.)
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