The COVID-19 pandemic has shaken the economy hard to the point that lenders have to tighten their loan approval requirements. Taking out personal loans, installments, and other bad credit loans may be much harder than before the pandemic took place. Having said that, it doesn’t mean you can’t qualify for a loan.
There are still other lenders who took the crisis in a seemingly positive way. Several financial institutions chose to follow a more case-by-case approach for their consumers who are dealing with financial hardships, instead of going for catchall hardship plans. Regardless of your financial profile, here are five loans that you can apply for during the COVID-19 pandemic.
Table of Contents
Personal Loans
This bad credit loan is probably the most popular financing option amongst out-of-work consumers, and there are good practical reasons why they do so. First, personal loans usually have a payback period of 1 to 3 years. This gives borrowers enough time to rebuild their finances and make repayments for certain debts or expenses.
A personal loan is very versatile. There are no rules or restrictions on how you’ll use personal loans or what you can or cannot cover. You can use personal loans however you want. Also, lenders grant personal loans to almost anyone, regardless of whether you’re a borrower with bad credit, no credit, or even no income. The best thing is that, even if your credit score is really bad, personal loan lenders may offer you lower interest rates.
While you can rely on government assistance and cut down your expenses to the bare minimum, they’re not enough to cover all your costs. Taking out a personal loan provides you with extra funds to get you through the next couple of months.
Payday Loans and Alternative Payday Loans
Payday loans are best for its fast approval rate. Depending on the lender, you may only need a checking account, valid IDs, and/or an income source. However, the Consumer Financial Protection Bureau (CFPB) warns people to guard against predatory payday lenders.
Unlike personal loans, payday loans should be repaid in a single payment, usually by your next payday. Its maximum loan amount is only up to $500.
Due to these factors, borrowers might be unable to make repayments and might borrow more to settle these debts. Considering the pandemic, the last thing you want is to get drawn into a harmful debt spiral. In general, a payday loan isn’t a good option but could be worth trying if you’re desperate.
On the other hand, instead of payday loans, opt for payday alternative loans (a.k.a credit-union loans) from credit unions. You can borrow around $200-$1,000 and settle them within a short period of time, usually within 1-6 months.
HELOC
Despite the global economic downturn, homeowners are now enjoying high levels of tappable home equity lines of credit (HELOC). The average HELOC rate may vary depending on certain factors like a borrower’s creditworthiness.
Consider refinancing your home loans and cashing out a portion of your equity. Mortgage rates are now falling to a historic low. Refinancing may significantly lower your mortgage payments, allowing you to save thousands of dollars even upon factoring at the advantage of cashing out some equity. Evaluate your refinancing, especially if your mortgage rate is higher.
Credit Card Advances
Like payday loans, credit card advances come with higher fees and interest rates. Even worse, if you max out your card, you might put your credit rating at risk. Ideally, these are only great if you own a credit card with 0% APR.
If you call up and ask for help, your existing credit card companies may offer 0% APR periods of a year for new purchases. It’s not the best financing option. However, some people, especially the unemployed, 0% APR for a year might be sufficient to get them through around 3-6 months of emergency expenses.
Organizational Loans
Many churches, community foundations, philanthropies, corporations, and food banks are handing out grants or setting up emergency relief funds for those who need help. They provide basic resources and financial assistance to individuals across the country. Try to connect to your local communities and seek help. You might reach them by calling or checking their websites.
Takeaway
On top of everything, taking out a loan from a friend or family member is much more convenient than a formal loan. They may offer you lower to no interest rates and better leeway on repayment. At this time of crisis, nonetheless, they might also need financing as much as how you do.
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