Many US citizens have been struggling financially due to COVID-19. Millions have already lost their businesses. This also means a lot of people have experienced income loss due to lay-offs or furloughs.
If you are having trouble to cover your day-to-day expenses because of the pandemic, borrowing money might be the solution. Choosing a personal loan is one way to help you get the needed funds.
How Does a Personal Loan Works?
A personal loan can help you borrow money for almost any purpose. You can use it to pay off other debts, cover car repairs, finance home repairs, or even simply keep up with your bills. Moreover, this type of loan is repaid over a period with interest rates and fees.
Personal loans are generally unsecured. No collateral is needed for your loan application to get approved. This means your assets will not be put on the line for repossession if you fail to make loan repayments.
This type of loan usually offers the best loan deals to those who have good credit scores. However, some lenders cater to borrowers with low credit scores. Furthermore, interest rates and fees will vary by lenders.
How Can a Personal Loan Help You During COVID-19?
Personal loans are flexible. As mentioned, you can use it for almost anything you want. Moreover, it is always available since many lenders offer them.
You can get a personal loan through a bank, credit union, or an online lender like Credit Ninja. Personal loan interest rates are typically lower than credit cards. This is true, especially if you have a good credit score.
Taking out a personal loan is one of the most affordable ways to borrow money to help you get by during this pandemic. Besides that, this type of loan typically gets approved quickly. In fact, other lenders will deposit the money on the same day your loan application is approved.
Should You Get a Personal Loan During These Difficult Times?
Now is not the time to use a personal loan for unnecessary expenses such as purchasing a huge flat-screen TV. It pays to take out a personal loan if:
- You need help with your bills (groceries, rent, or utilities)
- You’re struggling to pay for childcare
- You have been having trouble paying for medical maintenance expenses or hospital bills due to its cost, which puts your health at risk
You can also get a personal loan to pay off your costly credit card balances. Using a personal loan to repay credit card debts can help reduce interest costs.
It is vital to note that failure to keep up with your loan can hurt your credit score. Hence, you will need to provide extra care. On the other hand, several lenders offer personal loans with flexible loan terms such as deferred payments and low-interest rates.
Risks of Getting a Personal Loan During a Pandemic
You are required to repay the total personal loan costs over a set period. A personal loan can help you out with your daily expenses. However, taking out a massive loan amount with a high-interest rate can bring you into financial trouble.
It would also be best if you repay your personal loan on time to avoid hurting your credit score. Lastly, always look for affordable options by comparing lenders.
Factors to Look At Before Applying for a Personal Loan
The following are the factors you will need to consider in applying for a personal loan:
Loan Term Length: A loan term is the length of time you have to repay the loan. This usually runs from 12 to 60 months when it comes to personal loans. Moreover, a shorter loan term carries a high monthly payment but will help you finish the debt quickly. On the other hand, a longer loan term carries lower monthly payment amounts but will cost you more due to interest over time.
Interest Rates: This is usually presented as an annual percentage rate (APR). A higher APR means a higher total loan cost. Hence, it would be best to choose a personal loan with a low APR.
Fees: Lenders usually charge fees in addition to interest. The fees will be combined in the APR.
Funding Time: The length of time for the approval process and receiving the funds should be considered. Online lenders usually approve loan applications faster than other financial institutions. Others even offer same-day deposits.
Extras: Some lenders might offer discounts by applying online or the like. Others will even lower your interest rate if your credit score rises. It would be best if you check on it.
Taking out a personal loan is sometimes an excellent choice for you to financially cope with this pandemic. However, it would help if you kept in mind to choose a personal loan you can afford. Furthermore, it always pays to widen your personal loan options by shopping around.