What are the COVID-19 specific personal loans? What are the easy options of payment and relief?And, here are some notable information you must read.
The COVID-19 pandemic has changed everyone in some way or another. It has spared almost no one when it comes to finances. There has been a notable increase in the unemployment rates of the country.
Many people are struggling to fulfill their basic needs, so they are turning to loans to make ends meet.
Most of them are taking personal loans or short term loans; as they tend to be the most beneficial in an unprecedented time like this. However, if you already have a personal loan, you may need help making your payments.
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Covid-19 Specific Personal Loans And Payment Relief
Options for the COVID-19 Specific Personal Loans
Many banks have launched COVID-19 specific personal loans for their existing borrowers and pension and salary account holders.
They have initiated this step to provide relief to customers from liquidity mismatches; that may have occurred due to the current pandemic.
The COVID-19 personal loans are different from regular conventional personal loans.
If a person wants to avail of a COVID-19 personal loan, he/she must be an existing borrower; or have a salary account or pension account with the bank.
Banks are also mainly for any person who applies for a COVID-19 personal loan; to have a safe record of loan repayments before the lockdown.
The loan amount for a COVID-19 personal loan has been decreased in comparison to a regular personal loan. The loan amount has been set in between ₹25,000 to ₹5 lakh.
This decision has been taken as Covid-19 personal loans have been designed; to meet the temporary liquidity mismatch due to the lockdown.
Interest Rate and Processing Fee
The best part about the COVID-19 personal loans is their interest rate and processing fee.
The lenders are charging a low-interest rate from their existing customers, starting at 7.2% p.a., going up to 10.5% p.a.
Also, most lenders are not charging any processing fee for Covid-19 loans.
This has been done because the borrower has a prior relationship with the lender. Furthermore, in situations like this, it is difficult for them to pay a high rate of interest.
The loan tenure for Covid-19 specific personal loans has a decrease.
Generally, personal loan tenure is between one to five years, with some lenders offering a maximum tenure of seven years. But Covid-19 personal loans are granted at a returning period of up to three years.
However, some of them offer a maximum tenure of five years, but these lenders are significantly less in number.
Options For Others
Only the existing borrowers and a selected set of depositors are offered COVID-19 specific personal loans.
However, customers with no prior lending relationship with such banks can still avail of loans by other Banks through instant digital personal loans.
Credit cardholders can consider pre-approved loans against credit cards to meet their financial shortfalls.
Banks offer this kind of loan at a bit higher interest rate to their existing cardholders with a good repayment track record.
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Post Pandemic Loan Payment Relief
In such unprecedented times, it is very much hard for people to repay loans as people have lost their jobs; or their salary has a deduction up to 50%. However, people have heaved a sigh of relief as the Central and state governments and RBI have announced relief proposals; to fight the financial fallout of the Covid-19 outbreak and alleviate the burden of debt servicing brought about by disruptions.
RBI has announced a six-month halt on payment of Equated Monthly Installments (EMI). Also, it’s mainly to reduce the repayment pressure on the borrower.
It will give them much-needed buffer time to understand their income status and their financial strategy. It will also benefit borrowers to have liquidity and avoid the defaulter tag.
The RBI has announced a moratorium of six months on payment of installments on all types of loans. That also includes the credit card dues that fall due between March 1 to August 31, 2020.
Besides, it applies to all types of lenders—commercial banks, including:
- Regional rural banks,
- Small finance banks,
- Local banks,
- Co-operative banks,
- Micro-finance institutions, and
- Non-Banking Finance Companies (NBFC), including Housing Finance Companies (HFC).
However, interest will continue to collect on the term loans’ outstanding portion during the moratorium period.
RBI has strictly ordered all the lending institutions to frame board-approved policies for providing relief to all eligible borrowers.
People may have to show some credentials to prove their income has been impacted due to COVID-19.
If a borrower wants to continue paying the loan, the bank may continue to auto-debit the EMI.
Borrowers who will apply for the moratorium will have to pay the additional interest( a simple interest rate basis).
The interest will get collected through the halt period. Also, borrowers will have to pay the accrued interest and their monthly payments from September onwards.
This was all about the COVID-19 specific personal loans options offered during the COVID-19 pandemic. Moreover, about the payment relief granted by the Central and State governments for people’s benefit. The government has been supportive of the financial arena. It is now our job to use it wisely and adequately.
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