Coronavirus Loans: What are your Options During the Outbreak?

Chang Fu
March 25, 2020

Are you facing economic hardship due to the coronavirus (COVID-19)? If so, it helps to know your available options. And even if you aren’t tightening your financial budgets yet, it doesn’t hurt to be prepared for the economic uncertainty to come.

First, before we dive into your coronavirus loan options like personal installment loans and payday loans, have you looked into other financial options? You should only take out a new loan if you’ve already tried the below:

  • Delay your rent, utilities and phone bill. Most utility and phone companies have waived late fees and suspended disconnections for at least 60 days. Many cities have eviction bans for up to 60 days, allowing you time to work with your landlord to restructure your rent payments.
  • Delay your car, credit card, mortgage, and loan payments. Many car companies, credit card companies, banks, credit unions, and other financial companies allow you to defer upcoming payments for 60 or 90 days. Some folks can delay mortgage payments up to a year. Contact your credit card issuer and the loan servicer.
  • Applied and accessed substitute income such as unemployment benefits, family leave, disability claims, or side gigs. Be sure to claim all the federal and state benefits you qualify for.

You can discover what’s available on our full resource list on coronavirus (COVID-19) financial support and assistance.

What is the government doing to help with coronavirus-related financial hardship?

If you own a small business, you can access the Economic Injury Disaster Loan Program from the Small Business Administration (SBA) which offer low-interest loans up to $2 million for disaster assistance. This is a federal loan program offered to small businesses and non-profit organizations. Expect website slowness and longer application times at this time if you’re thinking about pursuing SBA loans for disaster relief.

For most of us, we don’t own businesses or have employees to pay. Unfortunately, the federal government hasn’t provided much aid to the majority of the population yet. The Families First Coronavirus Response Act (H.R. 6201) passed by Congress and the President provides for paid sick and family leave for certain individuals that qualify and need time off. CNN dives deeper into the specifics and how you can qualify for these benefits.

Currently, there’s a one trillion dollar plus economic stimulus package in the works by Congress and the White House that could provide a lifeline to you over the upcoming weeks. Stay tuned as that could affect your financial situation significantly.

Questions to Ask Before You Get a Coronavirus Loan

Here are some questions to ask yourself before you get a covid loan. The answers to these questions will determine the interest rate, usually calculated as an annual percentage rate (APR), the term or length, and the type of loan that’s best for your situation.

What do you need the money for?

If you are using the money to pay for emergency expenses such as medical bills, rent, utilities or childcare, you’re more likely to be OK with higher cost short-term loans that get you the money quickly. However, you’ll still want to pay the lowest annual percentage rate of interest (APR) you can get. Depending on the loan amount you’re approved for, you may want to only borrow enough to pay the emergency expense or borrow extra for a rainy day.

In contrast, if you need the money to buy something specific like a car or use the loan as a stopgap to supplement lost income, consider all of your options carefully. Can you forego the purchase or reduce your spending first? When do you expect your income to recover? We believe only low-interest loans should be considered in these non-emergency situations.

Do you have a good or bad credit score?

Your credit score has a big impact on what covid loans you can qualify for, especially during times of economic uncertainty with the coronavirus disaster. Banks and other financial institutions are reducing their risk - this means they are approving fewer people for loans and giving out less money overall.

If your credit score is above 700, you can likely qualify for personal loans, credit cards, and bank lines of credit. The APRs on these higher credit score products are under 36% and the loan terms can vary significantly.

If your credit score is under 650 and you have bad credit or no credit, these options may not be available to you. You might consider payday loans, certain types of installment loans, online title loans, pawnshops, payday advance apps, and no credit check loans. These products will have higher fees and interest rates but they might not check your credit score or run any type of credit check.

How quickly do you need the money?

Some loans, like mortgages, personal loans, and car loans have a longer application process. In most cases, a secured loan especially such as a mortgage or car loan takes longer because there’s an asset involved in the loan process. If you can’t repay the loan, your lender can repossess your asset and the lender needs that properly documented in the loan documents. In some cases, the lender would also require an appraisal (a recent property valuation).

The time it takes to disburse loan funds can vary as well. Some lenders like Possible Finance allow the borrower to link a debit card and get the money transferred in minutes onto the debit card. Other lenders will only allow for the transfer of funds via Automated Clearing House (ACH) which can take 1-3 business days.

Do you want to build positive credit history with on-time payments?

Most installment loans such as mortgages or car loans, credit cards, credit builder loans, and personal loans will build credit history. If you plan on paying your loan on-time, why not reward your credit score with the positive credit? You’ll want to check with your lender and see which credit bureaus they report to - some lenders do not report to all the major credit bureaus while Possible Finance reports to all three major credit bureaus - Experian, TransUnion, and Equifax.

Payday loans, payday advance apps, title loans, pawnshop loans, and many other short-term loans do not report payments to the credit bureaus. Borrowing from these sources may cause you to get stuck in a cycle of debt with no way to improve your credit score and graduate into better loan products.

Loans that build credit, when you need it most

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Types of Loans to Consider During Coronavirus

Personal Loan. Other than the SBA’s small business loan program and US Bank’s Coronavirus Loan program, we couldn’t find any other personal loans that have reduced fees during the coronavirus outbreak. US Bank’s coronavirus loan has a 2.99% APR and you can borrow $1,000 and $4,999 for a max term of 48 months. Most personal loans will have an APR less than 36%, be unsecured (no asset as collateral), have terms of 1 year to 5 years, and are due as monthly payments. If you have the credit score to qualify (usually above 650 or 700), this might be a good coronavirus loan option for you temporarily.

Payday or short-term installment loan. The majority of lenders in this category have APRs averaging 400% and no ability to build credit history. However, funding assistance is fast (usually in a few days or less) and the applications often don’t require a credit score. If this is the best option for you, consider a loan from Possible Finance. We have loans up to $500 that are under 200% APR with the ability to receive the money in minutes on your debit card. You’ll repay the loan in multiple installments over several months, allowing you to catch your breath during this coronavirus (COVID-19) pandemic. As you repay your loan payments, we report to the major credit reporting bureaus so you can build credit history.

Home equity line of credit or home equity loan. If you own a home or have equity in a home, borrowing against your home maybe your best option. The loan will be secured by your property so you’ll likely get lower interest rates than a personal loan, especially if you have poor or bad credit. A home equity line of credit (HELOC) is a revolving line of credit where you have a maximum limit and you can borrow against that limit as you need. The interest rate on a HELOC is usually variable. This differs from a home equity loan which is an installment loan that’s paid back over time similar to a mortgage.

Pawnshops, title loans, and alternative financing. Both pawnshop loans and title loans have high APRs (100%+) considering they are secured loans that involve collateral. A pawn shop loan involves a piece of property you “pawn” - jewelry, electronic, art, etc.- which is used as collateral until you can repay the loan. A title loan uses your car or vehicle’s title as the collateral for the loan. These types of loans can be dangerous in that if you can’t repay your loan, the lender can repossess your asset, causing you to lose your prized possession or your livelihood. Pawnshop loans, title loans, and similar types of loans are considered bad credit loans you would only utilize if your credit score is too low to qualify for better credit products.

Credit card balance transfer. It’s not a coronavirus loan but something you should strongly consider. Many credit card issuers are allowing customers to defer payments for up to 2 months. If you can transfer your balance from an existing card to a new card at no fee as well, you might be able to get through this difficult time without borrowing additional money.

When You Should Apply for a Possible Loan

A Possible loan is an installment loan that’s repaid over several months and builds credit history. Here’s a quick summary:

  • You can borrow up to $500 in most states ($250 in California)
  • Repay the loan in multiple installments over several months
  • We won't check your FICO or Vantage credit scores
  • Receive money in minutes using a Visa debit card or 1-2 business days via ACH
  • Payments are reported to Experian, TransUnion, and Equifax to build credit history
  • Can't make a payment? Simply reschedule your due date within the app

If you have an emergency expense or need to fill an income gap due to coronavirus (COVID-19), getting a loan from Possible Finance maybe your best option, especially if you have a bad or no credit score. Plus, you’ll be able to build up your credit history as you repay your loan on time. However, if you can access personal loans, credit cards, and other low APR credit products, a Possible loan will be a more expensive option for you.

Expect Federal Government Economic Aid

Don’t give up even when your finances look bad! There’s hope and help on the horizon. Our Congress and the White House are discussing and negotiating an economic stimulus package that should help everyday Americans like us.

Here are some of the economic relief that’s proposed:

  • One-time checks of $1,200 for every American, $2,400 for couples, with limitations
  • Payroll support and 3 months of unemployment benefits
  • $500 billion for corporations and important industries such as airlines and hotels
  • $200 billion for hospitals and other health providers
  • Reduction of federal student loans debt by $10,000 for every individual
  • Additional $350 billion in small business loans

We’ll keep our eyes out on what actually gets approved. Any help would still be a few weeks away before it arrives in your hands as cash.

Final Verdict on Coronavirus Loans

If you need cash quickly before government help comes or if you have an emergency expense due you cannot delay or defer the payment on, a loan from Possible Finance could be the best option for you, especially if you have a low credit score. Possible Finance doesn’t check your FICO or Vantage credit scores when you apply and you’ll be able to receive the money you need quickly at a reasonable interest rate.

But if you can hold over until the help arrives or you can make do with some temporary Coronavirus Financial Support, try to hold off. It might be better to spend less, budget, and plan wisely in the next few weeks for the uncertain times to come, rather than get a coronavirus loan right now. It doesn’t hurt to plan for the worst and tighten those belts during this coronavirus pandemic.

Chang Fu

Chang is an avid writer, among other things, at Possible. He grew up loving reading and writing, creating his own poems and even a book he's now hidden in an old closet, unpublished. His financial experience at a large bank along with his passion for technology to help underserved communities inspires him to write for Possible.

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