COVID-19 has been hard on many- businesses have gone bankrupt, people have lost their jobs and plans have been forced to shift. In July 2020, 31.3 million people were unable to work due to the pandemic.1
Enter coronavirus hardship loans: personal loans designed to provide financial relief to people negatively impacted by the pandemic. If this applies to you, read on for the basics of this loan, how to qualify for it and whether or not you should consider it.
What Is a Coronavirus Hardship Loan?
The definition is flexible. Coronavirus hardship loans are offered by a variety of financial institutions. The basic premise is this: they’re personal loans with fixed, relatively low-interest rates designed to provide temporary financial assistance.2 As personal loans, the monetary amount is lower, typically less than $5,000.3
The loans are generally meant to offer immediate relief to people who would otherwise be financially stable and, in the future, most likely will be again.
Terms of the Loan
The terms of a coronavirus hardship loan depend on the lender. In general, however, the following terms apply:3
- Loan amounts less than $5,000
- Immediate relief
- Flexible repayment periods
- Low-interest rates, may be credit-dependent
How To Qualify for a Coronavirus Hardship Loan
In order to obtain a coronavirus hardship loan, you first need to find an institution offering them. Ideally, this should be a bank or credit union of which you are already a member.
To qualify for a loan, you’re going to need to prove that your financial situation has assuredly been impacted by COVID-19. For instance, you may need to demonstrate how your income has decreased and why this decrease renders you unable to pay for necessities, such as housing or groceries.
Different lenders will have different qualification processes and different terms. Be prepared to ask questions and compare all of the options available to you.
Are There Alternatives?
Perhaps you don’t qualify, or a coronavirus hardship loan simply isn’t the right option for you. Consider these additional alternatives for financial relief.
In April, unemployment rates hit 14.4 percent.4 Many people have applied for and continue to depend on unemployment insurance. If you lost your job for the foreseeable future due to COVID-19, this might be a better option for you. Unemployment insurance offers a consistent stream of benefits for an allotted time.
You may not qualify for a coronavirus hardship loan, but you could qualify for a standard personal loan. You can apply for a personal loan for a variety of reasons- you won’t get the COVID-specific perks of a coronavirus hardship loan, but you can still get financial relief. Interest rates may be higher, so only consider this option if you’re confident you’ll have a steady stream of income in the future.
A pandemic warrants flexibility. If you don’t want to go through the process of applying for a loan and only need a bit of time to get back on your feet, consider asking directly to defer your current payments. Many landlords and universities are currently willing to defer payments on rent, utilities and student loans for a few months.
Many people are facing unprecedented financial struggles. If you’re one of them, investigate all of the relief programs available to you and make use of what you can.
This content is developed from sources believed to be providing accurate information, and provided by Twenty Over Ten. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.
Paradigm Advisors is a fee-only financial planning firm based in Dallas, Texas and Fayetteville, Arkansas. Paradigm Advisors provides comprehensive financial planning and investment management services to help clients organize, grow and protect their wealth throughout life’s journey. Paradigm specializes in advising young professionals and entrepreneurs in the early stages of life and well-established career executives through financial planning and investment management. As a fee-only fiduciary and independent financial advisor, Paradigm never receives commission of any kind. Paradigm is legally bound by certification to provide unbiased and trustworthy financial advice.