Is It Wise to Apply for a Personal Loan Amid COVID-19?

When the world was hit with a major health crisis, it created a domino effect, causing a tremendous economic fall. Everyone was caught by surprise with how the pandemic rapidly hit everyone, resulting in the closing of many business establishments, which eventually lead to employees losing their jobs.

Due to extreme financial instability, many individuals find it hard to cover day to day expenses, even more so with individuals who recently lost their jobs. Many are looking for different resources, while some are considering taking out a loan. There is nothing wrong with taking out a loan, per se, but at times like this, making wise decisions weigh a lot.

If you are considering turning into this option, this article will help you decide whether taking out a loan during a crisis works to your advantage or not.

Is It Wise to Apply for a Personal Loan Amid COVID-19?

Debt and Coronavirus: Major Financial Effects

It is important to remember that many individuals have applied for a loan for whatever purposes it has served in the past. However, taking out a loan in the middle of an ongoing pandemic is another story.

You’d be lucky enough if you can keep your work and thrive amid the crisis without having to worry about where to get your funds. But for individuals who just lost their jobs or on the verge of losing it, applying for loans can help them stay afloat.

There are a lot of risks that should be considered when taking out a loan during the pandemic. While it significantly aids a persons’ financial stability, taking out debt will add burden if not appropriately handled, especially at difficult times like these.

If you are not frugal and wise enough to manage your finances, you better think twice about taking out a loan now. One wrong move, and you will go right down to the bottom of a debt spiral.

Personal loans are helpful but consider other options first.

There is no harm in taking out a personal loan, especially when you badly need it. You can take out a small amount from financial institutions, such as at Nifty personal loans, to cover daily living expenses and pay it on installment.

However, proceed with caution. Although unsecured personal loans can provide quick cash solutions, it might also lead to a debt problem. Some loans come in at a high-interest rate and fees that might be too overwhelming for you to handle when worse comes to worst, like eventually losing your job.

As per Justin Pritchard, an expert financial planner, taking out a loan when you need extra cash is not the worst thing to do. However, people should look for and use relief aid programs instead of applying for a loan, which would only carry additional debt.

The good thing about unsecured personal loans is they don’t require collateral, so you don’t have to worry about risking your property and other valuable assets. But some personal loan rates go above 30%, which is not highly ideal for any borrowers. This kind of personal loan means you are not getting a good deal, and signing up is a bad idea.

Other options to consider

Understandably, taking out a loan is the easiest way to have extra cash, especially during tough times and crises. However, there are other resources that you can opt-out before considering applying for a loan. There are government aid programs that you can check and utilize to help you with your finances.

Coronavirus aid program

President Donald Trump signed a stimulus bill that would significantly aid families and small businesses in the middle of the coronavirus pandemic. This particular bill allows families to receive an amount to help them with their finances.

Though the bill faced criticism and arguments from advocates due to its insufficiency to cover rental fees and other expenses, the program is a one-time deal offer.

Paid sick and family leave extension

You can utilize this option if you are one of the lucky ones who still get to keep their job. The Senate passed a bill that includes a new policy for employees to receive a full 2-weeks of sick and family leave during quarantine and assisting family members with the disease.

There is also a total of 12 weeks paid leave for workers who have children in schools that declared no classes and closure. Employees will then receive 67% of their salary during this specific period.

Takeaway

Personal loans are indeed helpful when you need extra cash to finance your expenses. Even though there is nothing wrong with taking out a personal loan, you need to consider its risk and the situation you are currently in. You can’t afford to take out additional debts that can weigh you down. Maximize your resources by utilizing government aid programs before jumping into taking out a loan directly.

FG Editorial Team
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