An unplanned trip, a close friend needs help, a hard to miss vacation deal, a shopping festival, a special anniversary, a higher education, a medical emergency. Does the list sound familiar? We have all been through it - sometimes drawing cash from our savings account, swiping that credit card or even take a personal loan.

Applying for a Personal Installment Loans (PIL) without salary transfer or Salary Transfer loans (STL) is easy. A quick call or online enquiry, disbursal in a day and the money is yours. No collaterals, no guarantor; fast approvals, fewer documents compared to other loans. Easier said and done to get up to AED 250,000. What's not to like?

In anyway you look at it or justify the need, a personal loan is a huge liability, committment and legally binding contract with both short and long-term implications. Defaulting can affect your credit score with Al Etihad Credit Bureau or Emcredit, travel and a criminal offence in the UAE.

Before you apply for a personal loan, here are 5 things worth considering.

1. Why do you need one?

   Make sure it is for all the right reasons. Is it for an emergency that just cannot wait? If it is to settle higher interest loans, pay off credit cards, or consolidate debt in a way that's manageable with fixed EMIs - then personal loans are a reasonable option. With personal loans, you get the opportunity to create good credit score, by repaying your EMIs on time.

2. Do you know your repayment capacity?

   Calculate your debt-burden ratio. In plain English, it's the percentage of monthly income that you have to pay out on debts. Say, if you're earning 100 AED per month, but pay out 50 AED per month on credit card , car loans, then your debt-burden ratio is 50 per cent - the legal limit in the UAE. Lower your debt-burden ratio is, the better. Factor in monthly expenses, and planned ones over the next 6 to 48 months (the minimum and maximum tenure). Factor in fixed expenses (like rent, insurance, bills), inflation (2-3%), higher cost of living and savings. With what's left off it, will you be able to pay the EMI without breaking a sweat?

3. Did you do the number crunching?

   Don't take the shortest or longest tenure or tenor or borrow more just because the bank offers or shy away and take less. Put down all your expenses, repayment capacity in an Excel sheet or app. Choose the amount that meets your needs so you don't fall short. Choose a repayment tenure, that's within your reach. It's simple - if the numbers don't add up, nothing else will.

   #Tip:Use the Citibank loan calculator to reduce the guesswork.

4. Did you compare & weigh?

   Thanks to online comparison marketplaces and digital banking, its easy to get the best deal at your finger tips. Weigh your options, pros and cons, look at the processing fee, interest rates, early settlement charges and tenure or tenor. Read the fine print, all the clauses and understand their implications. If unsure (or too tired to read), ask the bank to clarify the key points and guide you. It's all in the details. Take a second or even third quote or opinion.

5. Look at options and exits

   Before applying, explore options like availing loan against a fixed deposit (FD), overdraft on your savings account, using collateral like gold/property/bonds as a security. Or try asking for a salary advance from your company. Ask the bank or insurance provider if they offer 'job loss cover' i.e. in the event you lose your job involuntarily; if your loan terms can be modified, deferred briefly (payment holiday) at a later stage, if you’re facing difficulties with paying your EMIs or in a scenario where you change jobs or have a windfall and want to close the loan early. While there is premium or charge for such coverage or options, its always good to know.

Now that you have given it a hard thought, go ahead and apply for the personal loan. Spend it wisely.

Talk to your Citibank Relationship Manager or apply online.