The current outbreak of the novel coronavirus has abrupted the world economy by causing institutions, industries, stores and companies to shut down. With businesses coming to a halt, sources of income started shrinking. Presently, most people are relying on their savings to survive through this pandemic. Thus, it is reasonable to note that people are considering opting for personal loan at such times.
However, before doing the same, the in-house experts at Paisa Invest advice them to consider the implications of a personal loan during COVID-19 upon their overall financial well-being. Since the pandemic will subside someday but a wrong financial move can cost you in a big way down the line.’
In the article below, we will discuss the subject in detail. So if you are wondering whether you should opt for a personal loan during Covid-19, read this article to get a well-researched answer to your query.
4 Things to consider before opting for loans
Consider your loan repayment capacity: According to experts, a person should consider his/her loan repayment capacity before opting for a loan. Finance pundits suggest that the EMI of a personal loan should not exceed 10% of the net monthly income of an individual.
Opt for a short tenure loan: Long-term loans usually require less monthly installments. However, since the interest of the loan is spread over a certain period, the accumulated interest rates are higher than the ones in the short-term. Hence, it is advisable to opt for a short tenure loan rather than otherwise.
Don’t take a loan for discretionary spending: The financial experts advise that an individual should seek loans only when in dire need of the same. One should not opt for loans to splurge or invest as the interest rate of the loan taken will surpass the profit earned from the investment.
Analyse best interest rates loan options: Different loan schemes offered by different banks on different terms have a different interest rate attached to the same. An individual should analyse the market to be able to secure a loan option with minimum interest rates.
5 Facts about Covid-19 Personal loans
Purpose: To mitigate the current financial crunch caused by the outbreak of novel coronavirus, the government has provided many personal loan options. However, the individual should consider the need of availing such loans and should not opt for loans only to enhance their existing standard of living. Since the COVID-19 personal loans are not meant for business investments, one should also consider their possible loan repayment capacity after the situation subsides.
Interest Rate: The interest rate of a personal loan are set by taking into consideration the applicant’s credit score, employment, and more. However, the general interest rate of regular personal loan in the country range from 12% – to 20% p.a. The interest rate of a COVID-19 personal loan in the country currently stands at 7% p.a. and 10% p.a.
Offering banks: Banks, such as State Bank of India, Bank of India, Indian Overseas Bank, Indian Bank, UCO Bank, Bank of Maharashtra, Punjab National Bank, Bank of Baroda, and Union Bank of India are eligible for providing COVID-19 personal loans.
Eligibility: To be eligible to avail COVID-19 personal loans, an individual should be presently banking with the above-stated banks. Besides, the individual should have opted for a home or a personal loan before or should have a salary account with the lending banks, apart from having a good credit score and more.
Amount: There is no set amount for the COVID-19 personal loan. However, the general amount limit of the said loan is 50%-60% of the last registered income for self-employed borrowers. Salaried borrowers, nevertheless, can avail ten times their monthly salary.
Final Words
The current situation has created a financial crunch around the world. However, to ensure that you do not harm your future financial well-being by making a wrong financial move in the present, you should determine the pros and cons of the same.
In case you are finding it challenging to decide it on your own, you can seek the advice of professional financial planner in Kolkata at Paisa Invest.