Coronavirus Hardship Loans: What Are They And Should I Get One?
As the unemployment rate decreases, more than 13 percent of Americans are still unemployed. Stimulus checks and unemployment benefits help, but it may not be enough to cover financial obligations.
Many Americans may be considering taking out a coronavirus-related hardship loan. Similar to Paycheck Protection Program (PPP) loans, which are aimed at businesses, this low cost personal loan was created for people who have experienced loss or reduction in their income due to COVID-19. .
Unlike a Personal loan that you can take out at any time, a coronavirus hardship loan is intended for consumers affected by the pandemic. If you have been laid off or on leave, you may be eligible.
Is a coronavirus hardship loan the only option?
Hardship loans can be a good temporary solution for financial hardship during the coronavirus. But this type of financing is not your only option. If your credit is good, you may be eligible for a personal loan that will offer a longer repayment term. A an online tool like Credible can help you compare personal loan rates from multiple lenders at once, and the check will not affect your credit score.
Or, if you own a house, you might consider refinancing which allows you to withdraw some of your equity, based on your loan balance and the value of your property. This type of loan is usually larger than what you can get with a hardship loan, which could put you off longer.
And contact the institutions in charge of your current financial obligations to find out if they offer any programs. Many mortgage lenders, utility, mobile phone or credit card companies, for example, offer deferral of payment. This could allow you to stay up to date on certain obligations without incurring new debt.
The positive outcome of the coronavirus is that many companies are adopting a ‘we’re all in the same boat’ attitude, which can help you when it impacts your finances. By being proactive, you can ensure that the coronavirus is a temporary setback, from which you will bounce back as soon as possible.
What to expect if you opt for this type of loan
Although business owners may have some of their PPP loan canceled, loans for difficulties related to the coronavirus will have to be repaid. Payments may be deferred for a period of time. The loan term is often short, for example 12 to 36 months. And the goal is to help you until you recover from your hardships, which often limits the amount available to less than $ 5,000.
If you are applying for a coronavirus hardship loan, pay close attention to the terms. They often come with user-friendly features, such as low or zero interest rates for a limited time and deferred payments. You’ll want to check when these benefits end. If your situation does not change at the end of your term, you will need to discuss your options with the lender.
Who is entitled to this type of loan?
This type of loan is intended for people financially affected by the coronavirus. Those who were laid off or on leave or who have lost their jobs may be eligible.
Should we consider this rather than a personal loan?
If you lost your job during the coronavirus and the stimulus payment is not enough to tide you over, you may want to consider taking out this low interest loan. Before signing the documents, however, determine how the debt might impact your budget. Although payment is deferred, interest may accumulate. Be sure to consider how the amount will match your current expenses when repayment is expected to begin.
Plus, if you’ve lost your job, make sure you have a clear path for rehiring before you incur any additional expense going forward. You will need to have a repayment plan. If you are unable to meet your obligation, you could incur late fees as well as damage your credit score.
Also check the lender. Some predatory lenders call their products “tough loans,” but they take advantage of vulnerable consumers. Be sure to check with the lender if they have any complaints with the Better Business Bureau and the Consumer Financial Protection Bureau.
Where do you get this type of loan?
These loans are available from credit unions and banks. the National Association of Credit Unions (CUNA) reports that about 80 percent of credit unions are offering new loan products in response to the crisis.
Many banks also offer coronavirus-related hardship loans, with fee waivers, smaller amounts and more favorable terms than a traditional personal loan. You can get a list of lenders from American Bankers Association.
How to apply for a hardship loan?
A great place to start is with a bank or credit union that you already have a relationship with, although this is not always a requirement. To apply, lenders will usually need a credit check along with documents demonstrating your financial hardship and expected repayment capacity. If you are approved, you will receive the funds within a few days.