If you’re struggling financially during the pandemic, it pays to see what relief you’re entitled to.
Millions of Americans have been laid off in the course of the coronavirus pandemic, and many are struggling with income loss. If you’re unemployed or your income’s been hit by the ongoing crisis, you may be able to take out a coronavirus hardship loan.
How coronavirus hardship loans work
Coronavirus hardship loans are special kinds of personal loans available to those who have been impacted financially by the pandemic. Like a personal loan, you can use a coronavirus hardship loan for any purpose, whether it’s to pay rent, buy food, or cover the cost of medical expenses. The main difference, however, is that a coronavirus hardship loan is a short-term loan designed to help those who can prove their income has been slashed by the pandemic. The repayment terms are often more favorable than traditional personal loans, though, on the flip side, the loans are generally capped at lower amounts.
Most hardship loans range from $500 to $5,000 — enough to get you through a few months of unemployment. These loans come with low interest rates starting at 3%, and they offer flexible repayment periods, ranging from six months to five years. The interest rate you get and the length of your repayment period will depend on the specific lender. Many credit unions are letting coronavirus hardship loan borrowers automatically defer their payments for 90 days, which is great if you’re in a financial crunch right now.
How to get a coronavirus hardship loan
Coronavirus hardship loans are largely available through credit unions, which you’ll need to join in order to explore this route. You can use the National Credit Union Administration’s credit union locator tool to find one near you (some credit unions require that you live in a certain area to qualify, so this tool will help you narrow down your options).
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Additionally, some online lenders and banks are giving out coronavirus hardship loans, so if you have an existing relationship with a bank, it makes sense to reach out. The American Bankers Association also has detailed information on which banks are offering relief during this time, and you can search by name on its website.
Of course, each lender will set its own coronavirus hardship loan requirements, and you may need to provide proof of income loss. There have, unfortunately, been many incidents of coronavirus relief fraud since the pandemic began, so don’t be shocked if you’re asked to share a lot of detail on your financial situation. Also, keep in mind that the better your credit score, the greater your chances of getting approved.
Alternatives to a coronavirus hardship loan
If you don’t qualify for a coronavirus hardship loan, you could instead apply for a regular personal loan. You may get stuck with a higher interest rate and less flexible repayment terms, but you’d still, generally speaking, pay a lot less interest than you would on a credit card. If you own a home, you can also try applying for a home equity loan or line of credit. Some lenders hit pause on home equity lines of credit earlier on in the pandemic, but you may have an easier time getting one at this stage of the game.
Of course, there’s also the option to reach out to the people or entities you owe money to and request direct relief. For example, if you ask for help, your landlord might agree to let you defer rent payments for a few months, your credit card company might waive a late fee if you need more time to make your monthly minimum payments, and your utility providers might give you extra time to pay your bills. Be sure to explore these relief options on top of a coronavirus hardship loan, especially if you’re really struggling to make ends meet.