There are a lot of common mistakes found in people using debt consolidation. It is easier to understand this with an example. Let’s assume there is a person named Razzaq. His salary is already spoken for by five different banks. “I’m thinking of consolidating,” he says, almost like he was confessing to a crime. That’s the thing about debt. It creeps up on you in a place like the UAE. One credit card becomes two. A small loan for a wedding, another for a car, and suddenly you’re swimming with anchors. Debt consolidation often looks like a life raft. And sometimes, it is.
But I’ve also seen it pull people deeper into financial chaos when done wrong. So before anyone jumps in, here’s a list of very human, very real mistakes that people make when trying to consolidate debt here in the Emirates.
1. Believing it’s a magic eraser
This one’s almost universal. People assume once you “consolidate,” poof your debt is gone. But in reality, all you’ve done is transfer your obligations to another account, probably under a new interest rate and with a fresh timeline. The weight hasn’t disappeared. It’s just been packed differently.
You haven’t solved the problem yet just changed its shape.
2. Not checking the fine print (or pretending to understand it)
Ever sat through a bank meeting and nodded along like you understood every word? Yep, been there. Some loan agreements are worded like legal riddles, and unless you’re very familiar with finance jargon, it’s easy to miss hidden clauses like prepayment penalties or bundled insurance charges.
One friend of mine took a debt consolidation loan and was shocked to find an “early settlement fee” tucked into clause 14B. That clause alone cost him AED 3,000 extra.
3. Thinking a lower EMI always means a better deal
There’s a bit of emotional relief in seeing your monthly installment drop, but here’s the twist: lower EMI often means longer repayment, and longer repayment usually means more money paid in interest over time.
You might save AED 800 per month, but end up paying AED 20,000 more overall. It’s like buying a cheaper sofa on EMIs and realizing you paid double by the end of it.
4. Going to the first lender that says “yes”
I get it when you’re desperate, the first “yes” feels like a lifeline. But not all lenders are equal. Some might offer lower interest but come with higher processing fees. Others might stretch your loan over six years just to make it sound manageable.
You have to window shop for lenders just like you would for a new car. Don’t let urgency become your enemy.
5. Forgetting to close paid-off credit cards
Big mistake. Once your credit cards are paid off through the consolidation loan, the worst thing you can do is keep them all open and tell yourself, “I’ll only use them in emergencies.” Spoiler: that “emergency” usually ends up being a mall sale or a holiday package.
Before you know it, you’ve maxed them out again and now have a loan and the same credit card debt.
6. Ignoring your credit score
The UAE has the Al Etihad Credit Bureau (AECB), and your credit score matters. It decides what kind of interest rates you’ll be offered. High score? You win lower rates. Low score? You’ll likely get offers that barely feel like a relief.
And yet, a surprising number of people don’t even check their score before applying. That’s like applying to a university without reading the eligibility.
7. Going too long on the loan tenure
It feels good to push the repayment out as far as possible so your EMIs are lighter. But remember, every extra year is extra interesting. That “relief” comes with a price tag.
It’s okay to stretch it out a little if cash flow is a concern, just don’t stretch it until it snaps your financial future.
8. Not asking the hard questions
A lot of people are too embarrassed to ask their lender, “What’s the actual cost of this loan?” or “What happens if I miss a payment?” But these aren’t rude questions. They’re essential.
Ask. Get clarity. It’s your money on the line. You’re not being difficult, you’re being smart.
9. Relying on debt to fix spending habits
Debt consolidation services like IDMS can give you breathing space, but it won’t fix the habits that got you into trouble. If you haven’t set up a budget or curbed your impulse spending, you’ll eventually land right back where you started or worse.
It’s not a cure. It’s a tool. And tools need skill and discipline.
10. Not having a Plan B
What happens if you lose your job next month? What if your company delays salaries or you suddenly have a medical emergency? Most people never ask this.
If you’re committing to 3–5 years of monthly payments, you should at least have a couple of months’ worth of EMI saved up as a cushion.
A real-world story
Let’s assume there is a person who has five credit cards and a car loan, all running simultaneously. He is sinking in debt. He took a consolidation loan at 11% interest, and suddenly all he had was one EMI of AED 2,400 instead of the AED 4,000 total he was paying before.
First three months were great. Then he used his “now empty” credit cards to buy a PlayStation, a phone upgrade, and a short trip to Tbilisi. Six months later? Back in debt. Same pressure, new pile.
Moral of the story: consolidation helps only if you treat it like a second chance, not a get-out-of-jail card.
Quick checklist before you consolidate
- Did you compare at least three lenders?
- Did you ask for the reducing rate, not just the flat one?
- Have you read the full loan agreement?
- Are you planning to cancel/limit credit cards post-consolidation?
- Do you have a backup fund for 2–3 EMIs?
- Have you made a monthly budget that includes fixed savings?
Final thoughts
Debt consolidation in the UAE can be a game-changer or just another layer on your already tall debt cake. It all depends on how you approach it.
Be informed. Ask questions. Stay disciplined. And maybe talk to a human expert. Remember: it’s not about eliminating debt instantly. It’s about taking control of it, one smart decision at a time.
