Have you thought about getting a loan during the COVID-19 pandemic? It could be challenging to secure a loan in the past if you didn’t have a perfect credit score and everything organized perfectly. In a world where COVID-19 has ravaged most procedures and forced businesses and people to restructure their entire lifestyle to find new ways to adapt, it can be even more difficult to get that loan you need.
However, it is not impossible, and with the right advice and information, it can be a reasonable process. While it is always important to weigh the pros and cons of a personal loan, the resources are here to help you make a decision. As always, it is important to never take out more than you can pay back and to have the long-term consequences of taking out a loan in mind.
How to Get a Loan During COVID-19
Here are some things to do an consider when getting a loan today.
Verify a Stable Income
While you have always had to provide proof that your income is stable enough to repay a loan, in pandemic times, lenders are taking greater measures to verify your personal information. This can prove difficult as economic instability has never been more widespread in these current times.
A lot of this involves typical information such as W-2s and bank statements, but often lenders now will take more steps to personally verify the information. Sometimes, they will even go back three or four years into your history to determine if your income has remained constant and sufficient over an extended period of time.
It should be noted that some lenders have raised requirements for credit scores and income as a precaution due to the pandemic. Even the type of job you have could either help or hinder your ability to secure that loan you need.
Debt-to-Income Ratio
When making inquiries for a loan, keep in mind that the number one aspect the lenders want to see is that you have the ability to pay off the loan. That means one of the first things you should do is check your debt-to-income ratio.
This ratio essentially shows how much of your money is tied up in debt and how much is free cash for you to use as you will. Many times lenders want to see 50% or more of your money not tied down to other debtors. If they see that you have a lot more cash to work with each month, they are going to be more willing to trust that you can repay your debt to them.
To help you determine this amount, it’s a good idea to calculate a debt-to-income ratio worksheet. This will provide you with a visual chart with boxes to fill out to help discover what your ratio is. Usually, this involves taking your total monthly debt payments and dividing that by your total monthly net income (the actual amount of money you receive after taxes, etc.) The resulting number is the ratio that lenders will be considering.
It is always a good idea to adjust spending or pay off as many debts as possible to free up cash if you want to make a good impression on lenders. Make sure you can demonstrate that you have the ability to handle the added debt, and you should have success acquiring the loan.
The Importance of the Credit Score and Shopping Around
Your credit score helps determine what your annual monthly payment is or whether you can get a loan at all. It does not show faith in your ability to repay a loan if you have a history of bad debt, which is reflected in this score.
In pandemic times, banks have tightened up on their restrictions and are watching for missed payments more than ever. If a missed payment has occurred recently, it may be an indication that you are struggling with your bills. This is something they are not willing to take a gamble on.
You can improve your credit score, but it will take some patience. It’s difficult to get a credit card in order to pay the debt on time and improve the score, but if you look carefully, there are a few credit builder options you can find to help.
Keep in mind that requesting credit accounts can actually damage your credit score rating as it is considered a “hard check.” A “hard check” indicates that you are seeking loans and might be struggling financially. “Soft checks” involve you or an employer doing a personal credit check, which doesn’t hurt you at all.
Make sure to maintain as high a credit score as possible for the optimum chance of earning a loan.
Also, make sure to shop around before making a final decision on a bank. Diverse times cause diverse rates, so do yourself a favor and consider several options. You might find a better deal that will be easier for you to repay with a little research.
Other Alternatives
Personal Loan For Physically Handicapped People
If you have a physical disability that prevents you from working, and you are waiting for your Social Security Administration benefits, a loan for the disabled can help you with basic necessities in the meantime. Keep in mind, they may have a high interest rate and will also face some of the same requirements other loans need. Having a co-signer can help you here as well.
AA Credit Union Personal Loan
Here is another option that you can pursue as you shop around and look for alternatives. The American Airlines Credit Union has a few different types of loans you can consider.
Tips and Tricks
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- Shop around! Get pre-qualified for multiple banks if you can, as pre-qualification provides “soft checks” that won’t influence your credit score
- Consider the fees that come along with the loan as you compare rates
- Analyze the different annual percentage rates to find the best deal, as this is a good determination of what you will actually be paying
- Paying more than requested will lower the amount you have to pay in interest.
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Featured Image: Megapixl
