Residents have to be extra vigilant while applying for a personal loan given the uncertainty that has emerged as a result of the Covid-19 pandemic, experts have said. Borrowing to buy stuff we don't need might lead to selling stuff that we need in order to repay the funds, said Colin Dallas, head of Retail at National Bank of Fujairah.

"Think twice! A personal loan is a deferred obligation aggravated by interest charges," said Alexey Nuzhnyy, master trainer of Finance at UV Consultants Dubai. "Do you have other options such as relatives and friends, or even your employer's support? Only when all such options are exhausted, should one approach a bank.

"Define your time, target, and the bearable monthly payment. Match that with your personal earnings/spending budget," Nuzhnyy said.

"Consider your future capability of repaying the principal and the interest. Avoid putting yourself and your family in financially dangerous situation."

Terms one should be aware of

When applying for a personal loan, Dallas advised residents to be aware of the terms and conditions of each loan. "It is also important that people pay attention to the repayment schedule and dates to avoid any repercussions that can negatively impact a customer's ability to obtain credit in the future," he cautioned. "Customers also need to look out for the financial and reputational impact in case of any payment delay."

Check out the best interest rate

While the monthly payments may look small, it will add up, said Kamal Lalwani, senior consultant at Nexus Insurance Brokers. "Ask for a detailed payout which includes all charges. See what total you will have paid at the end of the tenure. Also, find out early settlement charges. If you get a good bonus within 12 to 24 months, it may be a good idea to pay it off," he said.

KV Shamsudheen, founder and director of Barjeel Geojit Financial Services, advised expats not to take a loan at all. "The reason is that after the Covid-19 pandemic, businesses might be in a bad shape. In such a situation, people may lose jobs and repayment will be tough."

He also advised people never to take a loan from credit cards as the interest and other charges are higher compared to personal loans.