How COVID-19 Coronavirus Is Affecting Personal Loans
Whether you’re looking to get a personal loan due to the spread of the COVID-19 coronavirus, or you’re a financial services professional, you may be wondering how this pandemic has affected personal loans in America. Let’s take a look now, and examine the effects of this virus on the personal loan industry.
More Americans Are Taking Out Personal Loans Due To Unemployment & Layoffs
Unemployment in the United States has spiked in a way that’s never been seen before, due to widespread quarantining, shutdowns of “non-essential” business, and the impact of the COVID-19 coronavirus on gig workers, performers, bars and restaurants, and more. More than 3.3 million Americans filed for unemployment in a single week – bringing the overall unemployment rate to more than 5%.
While unemployment can help with bills and a $2 trillion stimulus package is on the way to provide emergency cash, some Americans still need help making ends meet, and personal loans are one of the options that borrowers with good credit are taking advantage of.
However, if you don’t have good credit already, this might not benefit you as much as some with good credit. In this case, it’s important to compare bad credit loans rates.
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25% of people between the ages of 24-35 have taken money out of their 401(k) retirement plan to pay down debt – and taking some money from your retirement savings to pay off your debt may seem like a good idea if you’re not sure how else to get out of debt.
Falling Interest Rates Have Driven Loan Rates Down
Another indirect effect of the COVID-19 coronavirus outbreak is that the Federal Reserve has dropped interest rates to record lows. An emergency rate cut to 0% indicates that rates may actually turn negative in the future. This rate cut has affected the cost of a number of different loans, including mortgages, auto loans, and personal loans.
Due to low-interest rates, personal loan interest rates have been relatively low for a long time – and continued rate cuts may drive APR even lower for some borrowers.
Banks Are Offering Lower Personal Loan Rates For Qualified Borrowers
The Fed cutting interest rates is not the only factor affecting personal loan rates for qualified borrowers. Some banks are taking steps to help their customers get the cash they need to get through these difficult economic times and are cutting personal loan rates accordingly.
US Bank, for example, is offering 2.99% APR personal loans to qualified customers, and many other traditional lenders and online personal loan companies are following suit, providing customers with access to the cash they need.
Some Lenders Are Offering To Defer Payments & Interest
For individuals who are already repaying a personal loan and may face hardship and difficulties repaying due to job loss and the COVID-19 coronavirus lockdown and quarantine, many banks are offering to defer payments on an individual basis. This guide from Bankrate has information about many of the banks participating in hardship relief programs.
Know How Personal Loans Are Being Affected By COVID-19 Coronavirus
Whether you’re a current or potential personal loan borrower or you’re in the financial services industry, it’s important to understand how COVID-19 coronavirus is affecting the personal loan landscape.
While it remains to be seen how this outbreak will play out, it’s already had some major effects on financial companies – and this trend is likely to continue in the future.
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Brian Allen has been helping people make smarter financial decisions for over 10 years. As the Editor-in-Chief for Goloans, Brian writes about sage financial advice, “how to” articles, and reviews about lenders and creditors.
FAQ’s About Loans During COVID-19 Crisis
All banks and lenders are continuing to operate as usual, for the most part. Which means, they are still lending money to borrowers. If you need a loan, it’s best to apply at well-known online lenders such as Credible, LendingClub, and Prosper.
Before the COVID-19 crisis, personal loan interest rates were, on average, 18% – 36% APR. With the Fed introducing zero percent interest rates, personal loans are now being offer for around 11% APR…and if you have good credit, it can be as low as 5.6% APR.
There’s a chance you are still eligible. With new government programs coming out daily to ease the economic burden inflicted on working families, it’s possible it will not be an issue. It is best to check with each lender, as it is on a case-by-case basis right now.
Good question. Most lenders are deferring payments for their customers – anywhere from 30 days – 90 days out. This doesn’t mean you aren’t responsible for the loan payment in the future – it is simply deferred, which extends your loan out further.