Can You Pause a Bank Loan After Losing Your Job in the UAE?
Job loss doesn’t automatically freeze your loan — but banks may offer relief options if you act fast.
Losing a job is stressful enough, but having monthly loan payments on top of that can make things even tougher. If you’re wondering whether your UAE bank can pause your loan after a layoff or company closure, here’s a detailed look at what really happens — and what you can do.
Loan Payments Don’t Automatically Stop
In the UAE, banks are not legally required to suspend or freeze loan payments if you lose your job. According to Ahmed Odeh, Managing Partner at MIO Law Firm, a personal loan remains a binding contract under Federal Decree-Law No. 50 of 2022 (Commercial Transactions Law).
That means your monthly instalments are still due unless the bank officially agrees to defer or restructure your payments.
“Courts cannot postpone or divide instalments unless the creditor agrees, or the borrower proves exceptional hardship,” Odeh explained. So, there’s no automatic payment holiday just because you lost your job — but you can request relief directly from your bank.
What Banks Can Do to Help
While it’s not guaranteed, most banks in the UAE have hardship and rescheduling policies for borrowers facing job loss or financial strain. These are guided by the UAE Central Bank’s Consumer Protection Regulations (2021) and Notice No. 3692/2012 on Personal Loans.
Some relief options banks may offer include:
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Short-term deferment: Pausing payments for one to three months.
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Restructuring: Extending the loan tenure to reduce instalments.
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Adjusting repayment: Matching your new payment plan with a lower income.
However, these are discretionary measures, not legal rights. Approval depends on your payment history, overall debt, and proof of hardship.
How to Request a Deferment or Restructure
If you’ve just lost your job, timing is everything. Here’s what to do right away:
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Notify your bank immediately — before any missed payments.
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Prepare documents such as your termination letter, Emirates ID, bank statements, and end-of-service (EOSB) details.
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Submit a written request for deferment or restructuring, stating your reason and proposed period.
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Wait for approval and sign the revised repayment agreement if granted.
If your bank declines the request and payments are missed, the account may be classified as default, allowing the bank to recover dues through legal action.
What Happens If You Default
If payments stop without agreement, banks can file a civil claim under Federal Decree-Law No. 42 of 2022 (Civil Procedure Law).
This can lead to:
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Court-ordered recovery of the loan balance.
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Freezing or deduction from your salary account or EOSB (if the contract allows).
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Accrued interest or penalty charges — typically capped at 5% annually if no rate is specified, as per Dubai Cassation Resolution No. 1 of 2021.
While compound interest is not allowed, simple interest and delay interest can apply to overdue payments.
What If Your Company Goes Bankrupt?
If your company shuts down, your employment contract ends automatically, and you’re entitled to end-of-service benefits (EOSB) and final dues within two weeks, according to Emily Aryeetey, Partner at Stephenson Harwood Middle East LLP.
These dues are treated as priority debts, meaning employees get paid before most other creditors.
However, your loan obligations don’t disappear. Even if your employer goes bankrupt, you remain responsible for your repayments. Banks may agree to offset your EOSB or help restructure the loan, but only after proper discussion.
“It’s best to speak to your lender as early as possible,” says Sona Poghosyan, also from Stephenson Harwood Middle East LLP. “Transparency helps you negotiate temporary relief before your account falls into default.”
When to Consider Legal Protection
If repayment truly becomes impossible, you can apply for help under the Insolvency of Natural Persons Law (Federal Decree-Law No. 19 of 2019, amended by No. 35 of 2021).
This law allows individuals to:
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Request court-supervised debt restructuring, or
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Declare personal insolvency and liquidate assets to settle debts.
During this process, all enforcement actions are temporarily paused while a repayment plan is arranged.
The Bottom Line
You can’t automatically pause a loan in the UAE after job loss — but you can request help. The key is to communicate early, stay transparent, and provide evidence of your financial situation.
Banks are generally open to restructuring options if they see genuine hardship and willingness to repay. Acting fast can save you from penalties, legal trouble, and a negative credit record.