The Indian Government has released a number of relief packages in the wake of Coronavirus spread. But, only a little of that has reached the middle class. Thankfully, many banks have come forward to lend a helping hand in the form of COVID-19 personal loans. Not only is the process of loan application is easy, but the interest rates of these loans are also lower than other personal loans.

What are 'COVID-19' personal loans?

Many banks and non-banking financial companies (NBFCs) have started to give a special type of loan. Named after the pandemic virus, these loans are called COVID-19 personal loans. The difference between a regular personal loan and a COVID-19 personal loan is that the latter's rules are somewhat relaxed.

The interest rates of regular personal loans start from 12% and go up to 20%. While the interest rates of COVID-19 personal starts from only 7% and goes up to 10%.

Right now, Bank of Maharashtra, Punjab National Bank (PNB), Indian Overseas Bank (IOB), Bank of Baroda (BoB), Indian Bank, Union Bank of India, UCO Bank, State Bank of India (SBI) and Bank of India are providing the facility of COVID-19 personal loans.

Eligibility Criteria

Different banks have different eligibility criteria. But, most of them have some commonalities. Like, you must have a salaried account or personal account with the bank. And, you must have an excellent CIBIL score.

In case you have already taken a loan with the bank, your repayment history must be good enough. Some of the banks are giving COVID-19 personal loans only to the customers who already have borrowed home loans.

Those who are self-employed can get a loan of limit up to 50% to 60% of their last filed profit, while the salaried persons can get loans of limit up to 10x of their monthly salary.

Should you take the loan?

The classic answer- Yes and No. If you are in dire need of it, you can opt for the COVID-19 personal loan. But, if you are taking the loan just because the interest rate seems lucrative- it's a big NO-NO.

The interest rates of these loans are indeed quite reasonable, but you still have to pay that in the future. You don't know when this crisis will end, and when will your business or job will get back on track. Do not pay interest rates to banks for a time period that is unknown to you.

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Less informed about guarantors in personal loan? Read here for full detail

As you know personal loan is an unsecured kind of loan which never needs a security or collateral to lend you money. But, you may be asked for a guarantor sometimes to get the loan approved. This majorly happens when the bank is not fully satisfied with the credit repayment ability and financial worth at the time of loan application’s approval status. When a bank has a guarantor for your personal loan, it can have him/her to cover the loan repayment in case you (primary borrower) fail to do so.

Therefore, a guarantor is someone who guarantees the borrowers capability of repaying the loan taken. She/he doesn’t only verify the borrower’s identity but is responsible for the repayment of the loan as well.

Below are some cases when a bank may ask for a guarantor from your side:

• Primary borrower’s credit history is not satisfying.

• Job is unstable or temporary

• Less impressive academic background

• Irregular income

• Frequent transfers to different cities for job

Mostly, all the banks and other financial institutions have their own set of conditions and norms of loan guarantors. In most of the cases, they ask for somebody who has stable income with a secured job. This is to recover the loan amount in any event of default or inability to repay it on time. Banks often consider the borrower and guarantor are from the same organization so that their employer could be coordinated in case of any disagreement or default.

Apart from the above, the personal loan lender organizations have the following guarantor requirements to be fulfilled before the loan application gets approved:

• The minimum age eligibility is 18 years

• Good CIBIL score and repayment record

• Should be in the best state of mind, not forced or tricked into the guaranteeing of the loan

• Knowledge of the borrower’s loan amount, tenure and accumulated gratuity, interest rate and monthly EMIs etc.

• Guarantors are to be given the loan copies, right to legal advice before signing the agreement

The after effects of being a guarantor are important to know before being one. If you are blindly agreeing on being a guarantor to your friend without even knowing the details, you may be directed towards paying a heavy price for that. When a default case happens, the banks wait for quite a time before sending a legal notice to the guarantor to repay the amount borrowed by the primary borrower. If you deny the repayment agreement signed at the time of loan approval, you will be considered and termed as ‘willful defaulter’ and your credit score will definitely be at stake. Your denial will throw an adverse impact on the credit behavior report sent by the bank to the financial regulatory authorities. So, be careful and safe while being a defaulter for even the closed ones.

It's never a fun task to go from pillar to post to collect funds. After all, scrounging for money can lead to one sleepless night too many. How much has your vacant bank account or all the unpaid debts that have accumulated over the years been moving?

Well, for a personal loan you could always apply. Today, it is easier than ever to secure a personal loan, as the whole process is totally unpapered and your loan can be approved with a few days.

However, if the interest you have to pay for the loan scares you, you can borrow money here other ways without worrying about the interest spectre above you.

• Asking friends & family: While borrowing money of friends and family can be bit of a hesitation, ' it is likely time to swallow your pride and ask them to rescue you from your difficulties if you are financially in the dumps. While you're here, some grovelling might go a long way too. Usually your friends and family will help you more often than not financially and will probably not ask you to pay interest on the amount you borrowed unless it's a bunch of thieves. They also allow you to refund the amount for a significant period of time, which can give you the leeway to get back on track with your finances.

• Getting a credit card: You can use your Credit Card to make payments or purchases without paying an interest jackpot on your expenditure, whether you believe it or not. Well, it's really quite simple if you're wondering how. Credit cards give you a free interest grace period that begins with the purchase with the card, until the minimum payment has been due. The duration usually varies between 21 and 28 days. During that time, you can make payments and purchases by using your credit card without any interest.

• Balance transfers: Balance transfers are great ways to borrow money for an extended time frame without paying any interest on the amount. Check out a credit card with a rate of 0 per cent for the first 6 to 12 months or beyond. These are usually introductory rates that are offered to entice customers to make the switch from one Credit Card issuer to another.