Neon Funding has joined Cobalt Advisors and Apply Credit 9 and Saxton Associates in flooding the market with debt consolidation and personal loan offers in the mail. The problem is that the terms and conditions are at the very least confusing, and possibly even suspect. The interest rates are so low that you would have to have near-perfect credit to be approved for one of their offers. Best 2020 Reviews, the personal finance review site, has been following Neon Funding, Cobalt Advisors, Saxton Associates, Hornet Partners, Piper Funding, Carina Advisors, Corey Advisors, Pennon Partners, Jayhawk Advisors, Clay Advisors, Colony Associates, and Pine Advisors, etc.).
In light of the current COVID-19 pandemic, the U.S. government has introduced many relief programs for its citizens to help them tackle their economic setbacks caused by this uncertain situation.
Government-sponsored stimulus checks have been issued to thousands of Americans, aiding them with immediate relief. Although the relief fund is highly treasured by many, it’s not enough for the more severely-affected citizens.
If you’re in such a situation, then taking a personal loan might help you handle your financial troubles. Personal loans are provided by credit unions, a few banks, and some lenders online. Personal loans are unsecured loans that cover a minimum amount of around $1000. Some personal loan lenders provide funds as rapidly as the same day of applying or a day later.
But how does one determine, “Will taking personal loans help during the coronavirus crisis?”. At any other time, a person would make their decision based on factors like the interest rate on loans. Some would assess several lenders to get the best relative rate. However, these unprecedented times have pushed the lenders to make terms of eligibility inflexible and strict as a consequence of the uncertainty of incomes. So, what makes a person qualify for an unsecured personal loan? Let’s find out.
What makes you qualified for an unsecured personal loan in the current crisis?
More and more lenders are increasing the requirements of income and credit score, which makes it tougher for applicants to be eligible for low interest-rate personal loans.
The current crisis has made personal loans a bigger necessity than before. Here are some of the lender options to consider for acquiring a personal loan:
There are a few banks that offer exclusive, lower-interest-rate personal loans to their customers. Contact your bank to find out your options. In the case of non-customers, bank lenders usually have stricter requirements of income and credit score.
Credit unions usually have more flexible requirements than bank lenders. Along with your income status and credit score, unions also check your credit history.
The maximum annual percentage rate allowed on personal loans provided by credit unions is limited to 18%, which is a considerable benefit.
Another option provided by a few credit unions is alternative payday loans. These loans are divided into small installments and regulated by the National Credit Union Association. Therefore, the interest rate is limited to a maximum of 28%.
Online lenders are mostly favorable towards applicants with a high credit score and a stable income. There may be options with flexible requirements, for that you’ll have to dig deep and compare various online lenders.
Other options for personal loans:
If you have a co-sign when applying for a personal loan, like a consenting family member or a friend, then it can improve your chance of getting a low-interest personal loan.
Another option is to apply for a secured loan. A secured loan requires you to pledge an asset of yours, like property or something valuable that you own. However, in case you are unable to repay your loan, the lender can claim your asset.
Should you take a personal loan?
A personal loan would’ve been a good idea in a normal situation, to utilize it in improving your financial status if it didn’t exhaust your budget. For instance, a debt consolidation loan would help you erase your debt faster.
Under the current crisis, taking a personal loan isn’t exactly an ideal option. However, if you’ve already used all the alternative options and are still struggling to pay essential dues like rent, healthcare, etc., then you’ll have to resort to this choice.
Consider all the lenders with detail and choose one with a lower interest rate and installments, that you’ll be able to manage in your monthly budget. Remember, if you default on repaying the personal loan, it will drastically impact your credit score. You could also face severe legal repercussions from your lender.
Things to consider to choose a personal loan right for you
Each lender has a different set of criteria, offering different terms. Choosing the right lender would depend on a lot of factors like your income stability, credit score, etc. Here’s what you need to consider when looking for a personal loan:
- The annual interest percentage on your loan
- Any extra fee charged by the lender
- Structure of monthly installments under the light of your budget
- Total time that it would take to repay the loan
- The urgency of your need for a personal loan
- Any other specific terms set by the lender
Is it possible to take multiple personal loans?
The possibility of multiple personal loans mainly depends on the terms signed with your first lender.
Your debt-to-income ratio is a huge consideration for lenders when deciding terms of your loan. Based on that, your lender can limit the total amount of loans that you can take.
If the terms with your lender allow you to apply for a second loan from a different lender, the debt-to-income ratio impacted by your first loan will affect this deal. Lenders usually prefer borrowers with a debt-to-income ratio lower than 40%.
Few alternatives to prevent taking a personal loan
Personal loans should be a last resort when tackling your financial crisis. Here a few alternatives that you should consider before opting for personal loans:
Zero Annual-Percentage-Rate Credit Card: If you have a good credit score, then you might qualify for a credit card with zero percent APR. These credit cards let you repay your loan without any interest if you can manage to do it in the pre-determined promotional period.
Local Resources: Look for local resources around you. There are many NGOs, charities, and other reforming programs that provide financial assistance.
Informal Lending Circles: A lending circle of friends, family, or members of the community can be formed to help each other in times of crisis.