Debt can be one of the biggest factors holding people back financially, often building up incrementally until it builds up to a large sum that seems impossible to resolve.
In the UAE, easy access to credit and rising lifestyle expectations means many residents rely on credit cards, personal loans, and Buy Now, Pay Later (BNPL) options to manage spending. While these tools can offer short-term relief, they can also make it harder to see the full picture of what is owed.
Relieving debt is easier said than done, but experts say the first step is understanding how it builds in the first place.
How do people fall into debt traps?
With various financing options available, many residents are utilising alternative choices to ease the burden of spending a large amount at once. These include BNPL options, like Tabby and Tamara, multiple credit cards, rent-to-own models, and salary-linked loans.
These smaller, often split, payments slowly start to accumulate without people fully recognising how much they owe in total, says Alexander Varghese, sales director of Alternate Channels at Continental Group.
The most common way people fall into debt traps is also not through a single, major decision. Rather, it is through small decisions that over time collect into debt that the person may realise too late, added Alexey Nuzhnyy, CFO of ESAB MEA, Russia, and CIS and visiting professor of corporate finance at Moscow University.
“When income stability changes or unexpected expenses arise, this structure quickly becomes fragile,” Nuzhnyy said, adding that easy access to credit cards, personal loans, and lifestyle financing creates a “false sense of affordability”.
Early warning signs
While it is possible to fall into a debt trap without realising it, there are a few telltale signs that appear long before debt accumulates. One of the clearest, says Varghese, is using BNPL services to pay for essential expenses like fuel or groceries.
“This indicates that income is no longer sufficient to cover basic living costs,” he explained. “Having multiple BNPL plans active at the same time is another strong signal of financial stress, particularly when repayment schedules begin to overlap.”
A more fundamental red flag that Varghese pointed out that shouldn’t be ignored is when income is not enough to service existing debt. “This is more common than many realise, and it tends to worsen quickly if not addressed,” he cautioned.
Nuzhnyy, the corporate finance professor, said that another important sign that debt is building up is losing visibility over total debt, when they cannot clearly state how much they owe across all products.
When is it too late?
A simple benchmark to know if you are on the safe side is how much of your income is going towards debt repayments. A good rule of thumb is if more than 25-30 per cent of salary is being paid to service debt, then it is usually a sign that financial flexibility is shrinking and risk is increasing, Varghese said.
Another indicator is day-to-day cash flow. “If your monthly income does not comfortably cover repayments, or if you are relying on additional credit to get through routine expenses, the debt level is no longer sustainable,” the sales director added.
Steps to avoid debt
1. Track spending
2. Limit BNPL usage to one platform
3. Avoid overlapping plans
4. Keep track of repayment dates
5. Avoid stacking loans
According to the debt collection agency AW Holding, not paying off your debt can lead to significant consequences, including the freezing of bank accounts, seizure of properties, harm to credit score, and wage garnishment, a method in which creditors can legally withhold a part of your salary to pay them back.
