Coronavirus hardship loans: What they are, how they work and how to get one
Everything you need to know about loans for people affected by the COVID-19 epidemic.
Even though the government has provided some intermittent assistance during the coronavirus pandemic -- stimulus checks and expanded unemployment benefits -- millions of Americans are having trouble making ends meet. Almost 32 million collected unemployment in July. The eviction protections secured by the CARES Act have now expired. And the $600 enhanced unemployment payments have now ended, too. Whether it's paying the mortgage, keeping the lights on or simply buying groceries, millions of people are in dire need of cash.
A coronavirus hardship loan can help. It's a personal loan that can help provide temporary financial relief from the impact of the pandemic. If you've lost your job, your income has been reduced or you've blown through the government stimulus money, a hardship loan could help you float until things stabilize.
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What is a coronavirus hardship loan?
Designed to provide temporary financial support during this turbulent time, a coronavirus hardship loan generally features lower interest rates and deferred repayment options so you won't need to start paying it back right away. It can be a helpful stopgap when you need money now and may not have the means to pay it back in the near term.
Becky House, education and communication director at American Financial Solutions, says a variety of financial institutions, including local and national banks, have begun offering this type of loan.
"Many banks and credit unions are offering small-dollar loans to help people bridge the gap between income and expenses during this time," House says. "I recommend asking the bank or credit union someone already uses about the loans they offer."
What are the terms of a coronavirus hardship loan?
Though the specifics may vary from case to case, these loans generally feature consumer-friendly terms:
- Loan amounts ranging from $500 to $5,000.
- Low interest rates, starting around 3%.
- Quick payment: Once you're approved, you should receive the money within two or three days.
- Delayed or deferred repayments for 60 to 90 days (though some may go as long as 120 days).
- Flexible repayment periods, ranging from 6 to 60 months.
- Approval for uses including rent and mortgage payments, car loans, paying off high-interest credit cards or buying food and other necessities.
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How much can you borrow with a coronavirus hardship loan?
It's flexible, with many lenders offering between $500 and $5,000, though House mentioned some loans of $10,000. Most institutions assess each loan on a case-by-case basis.
What are the interest rates for a coronavirus hardship loan?
If you have excellent credit, you may be eligible for a loan with an interest rate as low as 3%. A lower credit score means your loan may come with a higher interest rate.
How quickly do I need to repay a coronavirus hardship loan?
Repayment terms vary, dependent on factors including how much you're borrowing and your overall financial situation. House says that the repayment period generally ranges from six months to five years.
Coronavirus updates
How can I qualify for a coronavirus hardship loan?
Some hardship loans require you to document how you've been impacted. House says lenders are currently more focused on proof that you'll be able to repay the loan.
"For the most part, requirements are the same as they normally are when applying for a loan: a credit report and score that reflects a good payment history, and income that supports repayment," House says. "But many places are also offering loans to people who have less-than-perfect credit."
Credit unions are currently offering some of the lowest interest rates -- but you'll need to be a member to apply. And while most national banks offer these types of loans, you may be required to have an existing account in good standing.
Coronavirus hardship loan alternatives
If you don't qualify for a coronavirus hardship assistance loan, there are plenty of other avenues to explore. Many financial institutions and organizations are offering help. Here are some other options:
- Defer payments: Federal student loans are deferred until September and you may be able to temporarily stop paying rent or your mortgage. The Department of Housing and Urban Development suspended evictions and foreclosures through June 30, later extended to Aug. 31, but not all properties qualify. Contact your lenders to learn about your options for delaying payments without penalty.
- Unemployment insurance: If you've lost your job, you can file for unemployment. While you won't get the extra $600 per week on top of what your state currently covers since the CARES Act ended those benefits in July, you'll still qualify for some benefits.
- Food banks and SNAP: The Supplemental Nutritional Assistance Program provides supplemental food resources to families in need. Also consider applying for WIC. Feeding America is supporting local food banks as well.
- Get local help: 2-1-1 is a nationwide nonprofit providing financial support to those in need. If you call 2-1-1 where you live, you'll be connected with charities and other types of aid.
- Other types of loans: If you're able to pay your bills but are still struggling, you can borrow up to $100,000 from your 401(k) without any tax penalty, courtesy of the CARES Act. You may also be able to refinance your home loan to get a lower interest rate and a lower monthly payment.
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