The ongoing global pandemic has caused many to lose their jobs. A notable finding from a recent Pew Research Center survey revealed that approximately half of Americans, who lost their job due to the worldwide coronavirus crisis, said they’re still unemployed.
Many Americans received stimulus checks issued by the federal government to provide relief from the pandemic-induced recession. Although this financial aid was welcome assistance for some, it may not be enough to weather the crisis.
One option that can fill this financial gap is to apply for a personal loan. Available from some credit unions, banks and online lenders, this unsecured line of credit comes in amounts starting from $1,000. Also, some lenders wire the loan money in 48 hours or less.
Is now a good time to get this loan, though?
Consider these questions first to help you make the right financial decision:
Can I qualify for an unsecured loan right now?
Many lenders conduct credit risk analysis and assessment to determine the probability of borrowers meeting contractual obligations. Given the pandemic happening now, there’s a high chance that borrowers may be unable to repay their debt or at least make the minimum monthly payments.
This, in fact, is one of the worries mentioned in a survey published in CNBC. Over half of the respondents stated that they might be unable to meet the minimum payment requirements on their debt.
As a way to manage risk, some lenders have decided to raise the income and credit score requirements. This means qualifying for an unsecured loan or getting a favorable rate more difficult for the borrower.
If you badly need a loan but are unable to qualify due to increased lender requirements, look for a family member or friend willing to co-sign an unsecured loan for you. Adding them to your application can help tip the scales to your favor.
Is applying for a personal loan a good idea?
Under normal situations, obtaining a personal loan may be a good move if you use the money to improve your financial situation and can commit to paying the debt back without ruining your budget. An example is a loan that lets you pay off your debt quicker by consolidating high-interest debts into one payment.
Borrowing money during this pandemic-induced crisis, however, requires some careful consideration. Using a personal loan to pay off medical expenses, rent and utilities is a costly option.
An unsecured personal loan, though, may make sense if you have a big, surprise expense that you need to pay off immediately. If this is the case, look for a loan with an interest rate and monthly payment that you can manage easily.
Are there alternatives to getting a personal loan?;
When you need more money to help you get through the current crisis, remember that a personal loan is just one option. Other alternatives out there are the following:
• Payment Plan Arrangement – If your medical costs and other expenses are piling up, try to come up with a payment plan to help you repay your debt.
• Local Resources – Check your state for non-profit organizations and charity institutions offering financial aid.
• Credit Cards with Zero Percent Annual Percentage Rate (APR) – Take advantage of this option if you have a good or excellent credit score. Just make sure that you repay the amount within the promotional period (usually 12 to 18 months).
Answer these questions to find out if a personal loan is best for your situation. If this option is what you need right now, remember to use the money wisely and make regular, on-time monthly payments. Defaulting on a loan can get you in trouble with the debt collector and significantly damage your credit standing.