Getting A Loan In The Coronavirus Era
During tough times, a loan can be a life preserver. It can help you stay afloat during tough times if you do not have an emergency savings account.
With Covid-19 and all of the furloughs and layoffs that have occurred, getting a loan is not as easy as it used to be. How do you get a loan when you have no job or a credit score that has taken a hit? It can be tough, but you have more options than you thing. Here are some areas to consider.
1) Cash Out Refinance
Let’s start with something that can help you in a variety of ways. If your credit is still in good standing, now might be the time to consider a cash out refinance of your home mortgage. If you can swing it, you can benefit in a number of ways.
Rates are at historic lows right now and refinancing could substantially lower your mortgage payment. Cutting down your monthly spend will help make up for any loss of income that you might have had.
Taking money out of your homes equity also has the benefit of being one of the cheapest ways to borrow. Where else can you find a long term loan with less than 4 percent interest. Use the money to pay off credit cards or just to keep in reserve in case you are impacted int he future.
Even if you have not currently lost income due to Covid-19, you may bot be out of danger. Companies are still evaluating their work force and you could be on the chopping block soon. A refinance could give you the money that you need to weather a future storm and who knows, it could drop your monthly payment by three hundred bucks.
2) 401K Loan
If you have money in your 401K, now might be the time to tap into it. You will have to pay it back but you will be paying the money back to yourself and the interest that you pay will go back into your retirement account.
The Cares Act has made getting your 401K even easier and with it, you may be able to withdraw up to 100,000 dollars from your account without the typical 10 percent penalty. Not all plans have adopted the act, so check with your plan administrator for details.
In any case, if you are facing a financial emergency, paying the 10 percent penalty and taxes on the loan may be worth it.
3) Personal Loan
A personal loan can get you the money that you need to get by but it will generally come with a higher interest rate and you will generally need some source of income. This means that it is probably only a real option if you still have income or if you are a married couple and only one of you has lost their job.
Just like with any loan, the better your credit is, the lower your interest rate will be. For this reason, if you anticipate needing to take out a loan, you should do so before you fall behind on any payments or bills.
In addition, only take out as much as you need. If getting four thousand dollars would be enough, do not take out ten thousand. The more that you borrow, the more interest that you will pay and the higher your payment will be.
You can get a personal loan easily online and we can even get you a free quote. Additionally, you may be able to get one locally from your bank or credit union.
4) Credit Card Advance
Charging up your credit cards is never advisable, but if you do not have access to another source of money, it might be the option that you have to take.
In general, you should attempt to avoid an actual cash advance. A cash advance will generally incur a higher interest rate and may involve a fee as well. A better option is to use the card itself to pay your bills. You will then pay your standard interest rate and may even qualify for rewards such as cash back. Cash advances do not earn rewards with most cards.
If you must take out a cash advance, take just what you need. If you only need two hundred dollars, don’t take out four hundred. The more you take out, the more money you will have to pay back at the higher rate.
5) Title Loan
This is more of an option of last resort. A title loan is one of the easiest loans to get because you only need to put up a free and clear vehicle title.
Your vehicle title acts as collateral for the loan which makes this a secured loan. If you do not pay back the loan, this means that your lender can and will seize your vehicle.
Unlike most secured loans, this one will have high fees and/or interest. Despite the fact that the lender has a way to recover their money, the APR of these loans often exceeds 200 percent.
Only use a title loan if you have no other way to get the money that you need and are sure that you can pay it back.
There you have it, 5 ways to get a loan during the time of Covid-19. Some of them are obviously better than others, but not everyone will qualify for the best options. Sometimes you need to have a loan option, even i it is costly.