LOANS: Check out Covid-19-specific personal loans

Published: May 1, 2020 1:30 AM

Banks are offering Covid-19 personal loans only to existing borrowers and pension and salary account holders

Personal loan eligibility depends on borrower’s job profile, monthly income, employer’s profile, credit score, etc. Personal loan eligibility depends on borrower’s job profile, monthly income, employer’s profile, credit score, etc.

By Gaurav Aggarwal

Many banks have launched Covid-19- specific personal loans for their existing borrowers and pension and salary account holders. The aim is to provide relief to customers from liquidity mismatches, if any, due to the current lockdown. Here’s a comparative nalysis of regular personal loans and Covid-19 personal loans.

Loan eligibility
Personal loan eligibility depends on borrower’s job profile, monthly income, employer’s profile, credit score, etc. Most banks and NBFCs do not require loan applicants to have any existing relationship with them. However, Covid -19 personal loans are for existing borrowers or those maintaining salary accounts or pension accounts with the bank. Moreover, applicants need to have a good track record of loan repayments prior to the lockdown.

Loan amount
Loan amounts for personal loans usually range from Rs 50,000 to Rs 20 lakh. As Covid-19 personal loans have been designed to meet the temporary liquidity mismatch due to the lockdown, the loan amount is on the lower side, Rs 25,000 and Rs 5 lakh.

Interest rate & processing fee
The interest rate for regular personal loans is 9-24% per annum, basis the lender and your credit profile. Processing fee can go up to 3% of the loan amount. As lenders are offering Covid-19 personal loans to their existing customers, they are charging lower interest rates, starting at 7.2% p.a., going up to 10.5% p.a. Most lenders are also not charging any processing fee for Covid-19 loans.

Loan tenure
Personal loan tenure is between one and five years, with some lenders offering a maximum tenure of seven years. For Covid-19 personal loans, most lenders are offering a tenure of up to three years, with just a couple of them offering a maximum tenure of five years. Additionally, most banks are offering moratorium of up to 3-6 months in Covid-19 specific personal loans. Borrowers are required to just service the interest component during the moratorium period. The moratorium period is aimed at providing relief to Covid-19 personal loan borrowers till the normalisation of their liquidity position.

Options for others
The scope of Covid-19 specific personal loans is limited to the existing borrowers and select set of depositors of the banks offering these loans. Consumers sharing no banking or lending relationship with such banks can consider instant digital personal loans offered by other banks. Many banks have also started offering instant digital personal loans to a select group of their existing customers.

Credit cardholders can consider pre-approved loans against credit cards to meet their financial shortfalls. Banks offer these loans to their existing cardholders with a good repayment track record. While these loans are also disbursed within the same day of making an application, their interest rates are a bit higher than the regular personal loans.

Existing home loan borrowers usually have the option of availing top-up home loans. While these loans also do not come with any end-usage restrictions, they usually have a much longer processing time than personal loans. As all banks and other lenders are working with limited working staff and working hours during the lockdown, availing this loan option has become very difficult.

However, some banks have started offering instant top-up home loans with very quick disbursals. The interest rates of top-up home loans are usually lower than the regular personal loans. Their tenures usually depend on the residual tenures of their original home loan.

The writer is director & head of unsecured loans,

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