The coronavirus pandemic hit the job landscape hard—even worse than what’s being reported. The unemployment rate across the world is raging unabated. Just in the United States, roughly 40 million Americans are now out of work and in dire straits since mid-March this year.
Unfortunately not every citizen can get unemployment benefits, especially the self-employed and gig-economy workers. Currently the United States doesn’t have a nationwide system to adequately assist all those who are jobless, furloughed, and laid off.
Federal regulators are seeking ways to help, and encouraging lenders to offer responsible loans and make policy adjustments are among the bold initiatives they’ve taken. Thankfully, a lot of lenders responded positively.
That said, experts remind consumers to still carefully assess their financing options before signing on the dotted line. Here are a few financing options that you can look out for:
If you have decent credit but are currently cash-strapped, small-dollar loans can be a great option, with an exception. It’s only recommended if structured to have inexpensive installment payments with a reasonable repayment period.
The Simple Loan offered by U.S. Bank is a good example of a reasonable small-dollar loan. This loan offers up to $1,000 for a three-month loan term. What’s more, the U.S. Bank is cutting its fees in half in response to the current crisis. They’re currently charging $6 per $100 loan, which is about a 24% APR for $500 borrowed.
Repaying loans in a single payment should be your last choice. Even before the pandemic, very few consumers could afford to do so. Alternatively, you can fare better if you can make repayments in installments, rather than in several months.
Bad Credit Loans
Another kind of loan that offers installments is a bad credit loan from direct lenders. It’s typically the go-to financing of consumers who particularly don’t want lenders to pull a hard inquiry in their credit. As its name implies, it’s a catch-all term for various loans aimed for consumers with poor credit.
For instance, some FinTech companies based in America offer installment loans with no prepayment penalties. Like any bad credit lender, these companies typically go over a borrowers’ creditworthiness based on how likely they’re going to repay a loan in the future, rather than solely based on their credit score.
Bad credit loans can improve your creditworthiness, as well. Taking out a loan can prompt positive information on your credit report. Plus, you can establish a stronger financial standing if you make your repayments timely. You can also get a larger amount of loan in a shorter period. However, keep in mind that bigger loans come with higher interests.
Credit Union Loans
Credit union loans are among the financing options with lower interest rates. On average, most of the loans offered from credit unions are usually capped at an 18% interest rate. Specifically, a three-year advance has a standard 9.37% interest rate.
One example of this is the FORUM Credit Union. It’s based in Indianapolis, and it offers a 10.24% APR for a $500 loan, payable within six months. In addition, borrowers of credit union loans aren’t strictly required to make their first repayment until after 45 days.
While credit union loans have lower interest and a practical repayment period, they are limited to credit union members only. Some unions are only open for residents of an area or employees from a certain company. However, there are other unions that allow anyone to join, commonly, through making a donation.
Credit Card Loans
Believe it or not, credit cards are among the financing options with the lowest interest rates. Credit cards can even have an introductory 0% purchase APR for up to 21 months. With this, holders can temporarily carry interest-free balances for a period of time.
For example, Citi® Diamond Preferred® Card could be your lifesaver during this pandemic. It’s one of the best credit cards to use when paying off debts. This credit card offers 0% for 21 months on balance transfers, making your APR as low as 13%. Although it doesn’t offer point rewards, it doesn’t ask for annual fees.
If you opt for a credit card with a 0% offer, make full monthly repayments. Since you’re paying in full, you’ll never pay a dime in interest, so APR is of no use for you. On the other hand, if you make delayed payments and carry them over a month to another, issuers may cancel your 0% rate and move you to the ongoing rate right away. To learn more on how to manage credit card debts check Loan Advisor for more helpful tips.
Borrowers can be exploited even in their best times. How much more now that we’re in a state of vulnerability? Just because you’re in need doesn’t mean you should be susceptible to avaricious lenders. Always take your time in meticulously reviewing loan terms, regardless of who you borrow from.