COVID-19 has pushed the global economy to a standstill. Hence the governments across the world have been announcing the relief packages and empowering their financial institutions to provide the necessary funding to the general consumers and business owners impacted by the pandemic.
While there are a few sectors like travel, hospitality, entertainment that are affected severely, the other industries have felt the tremors of the economic downturn as well. Hence the governments must pump funds to the sectors so that there is an increase in buying behaviour among the general public.
The Indian government, in particular, has been quite active on this front and providing generous packages to the RBI so that the inclined NBFCs can offer quick loans to the consumers. One of the components of such types of financial assistance is COVID Personal Loans. CPLs differ from standard personal loans in various factors, and the below section would talk about the same in a detailed manner.
What are COVID Personal Loans?
The financial institutions understand the importance of funding during difficult times due to the global pandemic. They hence have floated several secured and unsecured loans for the benefit of the borrowers. COVID Personal Loans carry several advantages in comparison with traditional personal loans. We can understand the various aspects of such loans in the below section:
Personal Loan Eligibility:
To be eligible for Covid-19 Personal Loans, you need to be an existing customer or holding a salary account with the lending institution. Also, you need to have a good track record with your existing financial institution to qualify for such loans. Note that such a pattern is different from traditional personal loans as lenders do not mind providing loans to even new customers who do not have any association with them in the past.
The typical interest rate for a traditional personal loan ranges from 10% to 24% while the interest rates for Covid-19 Personal Loans can be as low as 7.2% and vary as per the lender. Most of the lenders seldom charge any processing fee for such types of loans in comparison with standard personal loans which carry 3% as processing fees.
The tenure for Covid-19 Personal Loans can be minimal in comparison with the traditional unsecured loans. For example, CPLs can have a limited tenure of 3 years which is in contrast with regular personal loans with a maximum tenure of 5 years. However, most lenders can make an exception to the tenure for CPLs based on the past association with the borrower.
Note that as a borrower, you can also take advantage of the moratorium scheme so that you can have some relaxation during the repayment phase. Also, note that there might be additional interest charged during the moratorium period. Hence, the borrowers need to decide on whether they would like to opt for the scheme based on their current financial condition.
Additional options for new borrowers:
As stated earlier, Covid-19 Personal Loans are limited to existing borrowers, salary account holders, pension holders and so on. Hence it becomes essential to understand the options for new borrowers or those not present in the mentioned siloes. Most lenders have launched instant personal loans for the benefit of new borrowers and have the process simplified for the benefit of such borrowers.
There are additional options available to the borrowers in the name of loans against credit cards. If you hold one, you can apply for a loan against a credit card to meet your immediate financial requirements. Note that there are subsets available for such credit card loans and you can pick and choose a loan type based on your repayment plans.
However, the above offerings can be made flexible for the borrower based on their credit score. Needless to say that credit score or creditworthiness of the borrower plays a vital role in any lending transaction, and it becomes crucial to have a good credit history.
The government of India has been advising all the lending institutions to provide necessary financial assistance to the individuals and business owners so that they can help the economy to bounce back post a severe economic crisis.