The Covid-19 pandemic has swept the globe, reducing the income of many individuals and even leaving some without jobs. This is a serious issue by itself, however, if we are to also factor in the fact that unexpected expenses tend to appear relatively frequently, it is safe to say that some individuals may simply not earn enough to get through the current economic and health crisis. This issue has pushed many to get loans from banks, only to discover that they have a difficult time repaying the money.
However, this is usually the case when the borrowers act hastily and do not consider all the lending options that they have at their disposal. This having been said, we will look at what are the best loans to apply for during the Covid-19 pandemic.
Unsecured Personal Loans
Personal loans have always been the people’s choice when it comes to borrowing money from banks, and they are still extremely useful during the Covid-19 pandemic. They have low-interest rates, relatively high values and getting one does not require individuals to have perfect credit ratings. Furthermore, the application and evaluation process usually takes under 5 days, making them great for those who have urgent expenses that they need to cover. It is also worth mentioning that there are no restrictions on what borrowers can do with the money. This means that personal loans can be used to pay for medical treatments and procedures, home repair projects, household appliances, electronic equipment such as laptops and smartphones, and others.
Generally speaking, personal loans are the best go-to solution when an individual needs to pay for an expensive product or service. However, it is important to make sure that the loan is unsecured. This does slightly increase the interest rate of the debt but reduces the risk on part of the borrower.
Home Equity Lines of Credit
Many individuals look at HELOCs and think that getting a line of credit that is secured against the borrower’s home is not a good idea during a pandemic. However, this is exactly the reason why these loans are perfect for times of financial instability. Traditionally, HELOCs have very low-interest rates, making them one of the most affordable ways to borrow money. Furthermore, while borrowers gain access to the full amount that they borrow, they only pay interest for what they withdraw from the line of credit. In other words, if an individual gets a £100,000 home equity line of credit and the only withdraws £500, he will only pay interest for those £500. Furthermore, it is not necessary to repay the money by the end of the month.
HELOCs are designed to be used for several years, leaving borrowers to repay the money, at their leisure. The only condition is that the money needs to be repaid in full by the end of the agreement. In many ways, home equity lines of credit can be used as credit cards, but they have much lower interest rates. Furthermore, using them on a monthly, weekly, or daily basis will not affect the borrower’s credit rating.
Keep in mind that as useful as HELOCs may be, they can still cause individuals to lose possession of their home in favour of the bank. If you apply for a HELOC, only use it when it is necessary and try to always repay the money by the end of the month or the month after. If an individual withdraws only £500 during the first month, the interest rate will not be much, but it will be recurrent. However, continuing to withdraw money monthly without repaying it can lead to having to pay very high-interest rates.