Several public-sector banks are offering COVID-19 Personal Loans. While these may be cheaper than regular Personal Loans, their eligibility criteria are different. Here’s everything you need to know before taking the plunge.
We are living in unprecedented times thanks to COVID-19 that snuck up on us and pulled the rug out from under our feet. As social distancing, increased hygiene measures, working from home and so on become the new normal, personal finances too reel under the impact of furloughs, job losses and salary cuts.
If you are looking for a Personal Loan to bolster your cash flow in this difficult time, you may be considering some of the COVID-19 Personal Loans that a few public-sector banks have rolled out. Are you eligible? How do they differ from regular Personal Loans? And should you opt for one? Let’s break it down for you.
Additional Reading: How To Tide Over A Cash Crunch Amid COVID-19
What Is A COVID-19 Loan?
Some public-sector banks have unveiled a new Personal Loan product called the COVID-19 Loan, generally priced lower than regular Personal Loans, which aims to help their existing customers survive temporary cash-flow problems due to COVID-19.
Some of the banks offering this product are Bank of India, Bank of Maharashtra, Union Bank of India, Punjab National Bank and Bank of Baroda.
What Is The Eligibility Criteria?
The eligibility criteria for a COVID-19 loan differs from that of a regular Personal Loan. Only existing customers, who hold a loan, pension or salary account with the bank, are eligible to apply for a COVID-19 loan, subject to other terms and conditions. You will need to check with your bank for further details.
What Is The Rate Of Interest?
The interest rate for COVID-19 loans ranges between 7.2% to 10.5% per annum vis-à-vis an interest-rate range of 9% to 24% for a regular Personal Loan.
What Is The Loan Amount?
The loan amount for a COVID-19 loan typically starts from as little as Rs. 25,000 up to a maximum of Rs. 5 lakhs. The minimum and maximum loan amount being offered varies from bank to bank.
What Is The Processing Fee?
These loans generally do not have a processing fee.
Should You Take A COVID-19 Loan?
The initial response to the launch of this product was highly positive, with Bank of Baroda sanctioning around 3,500 such loans and UBI disbursing almost Rs. 26 crores in loans in early April 2020, indicating that this timely new product has several takers.
A COVID-19 loan makes sense if you are looking to consolidate your debts. For example, if you have a Credit Card outstanding, a loan of this nature with a low rate of interest, may make sense to clear your Credit Card dues. When used smartly, COVID-19 loans can help you replace high-cost loans and lower your debt burden.
However, if you are considering a COVID-19 Personal Loan to meet your cash-flow needs, be very certain that the problem you are facing is only temporary. As we move from lockdown to lockdown and the virus continues to spread, nobody can say with certainty that a cash-flow issue is temporary or likely to extend further.
Additional Reading: Money Management During The Coronavirus Crisis
At the risk of painting an overly bleak picture, if the situation continues and companies are forced to further reduce salaries or cut more jobs, it isn’t very sensible to take on more liabilities. Even if the low cost of a COVID-19 loan makes it more attractive, it’s probably a good idea to avoid taking on fresh debt in the current coronavirus-ridden scenario.
That said, let’s take a closer look at the COVID-19 Personal Loan details that some of the public-sector banks are offering.
Bank of India COVID-19 Loan
Name of Scheme: COVID 19 Personal Loan (CPL)
Eligibility: Bank of India salary account holders, drawing a salary through the bank account for more than one year are eligible. All existing standard housing loan customers and standard Personal Loan customers are also eligible.
Loan Amount: Salaried individuals and existing Home Loan/ Personal Loan customers can avail up to three times their last drawn gross salary, up to a maximum of Rs. 5 lakhs, while self-employed individuals can borrow three times their monthly income based on the latest ITR, up to a maximum of Rs. 5 lakhs.
Rate of Interest: Repo Benchmark Lending Rate (RBLR) floating with monthly rests. You’ll need to refer to the BOI website for the latest rate.
Tenure: 36 months including a moratorium period of 6 months.
Processing Fee: Nil
Punjab National Bank COVID-19 Loan
Name of Scheme: Sahyog Covid-19 Personal Loan Scheme For Public
Eligibility: All salaried confirmed/permanent employees of Central/State Government PSUs and all reputed companies/ institutions including schools, colleges, universities, autonomous bodies, hospitals/ nursing homes, who are drawing a minimum net take-home monthly salary through accounts in PNB branches of Rs. 15,000 (metros) and Rs. 10,000 (semi-urban or rural areas).
Loan Amount: Up to Rs. 3 lakhs. For existing Personal Loan borrowers, the limit will be within the overall limit of the Personal Loan scheme which is Rs. 10 lakhs.
Rate of Interest: Repo-Linked Lending Rate (RLLR) + 2%
Tenure: Up to 36 months
Processing Fee: Nil
Union Bank of India COVID-19 Loan
Name of Scheme: COVID 19 Union Personal Loan Scheme
Eligibility: All government and non-government employees of reputed private organisations in India, who have been drawing a salary via UBI for the last one year, are eligible. In addition, existing Home Loan, Car Loan and Personal/Cash Loan borrowers of the bank are also eligible. A minimum CIBIL Score of 650 is expected.
Loan Amount: Up to Rs. 5 lakhs or 6 times the last credited net salary or pension.
Rate of Interest: External Benchmark-based Lending Rate (EBLR) floating, with monthly rests, currently at 7.20%.
Tenure: 60 months including a moratorium period of 3 months.
Processing Fee: Nil, although applicable stamp duty for the security documents and CERSAI charges as per actual cost will need to be borne by you.
Bank of Baroda COVID-19 Loan
Name of Scheme: Baroda Personal Loan COVID 19
Eligibility: All existing retail asset customers holding a Home Loan for at least 6 months, Loan Against Property for at least 6 months or a Car Loan for at least 12 months are eligible provided they have a minimum CIBIL Score of 650.
Loan Amount: Between Rs. 25,000 and Rs. 5 lakhs.
Rate of Interest: Baroda Repo-Linked Lending Rate (BRLLR) + Strategic Premium (SP) + 2.75% per annum with monthly rests.
Tenure: Up to 60 months including a 3-month moratorium period.
Processing Fee: Nil. Prepayment charges are also zero. However, unified processing charges of Rs. 500 plus GST are applicable. A penal interest if 2% will be levied on any overdue amount or for any non-compliance of the applicable terms and conditions.
Bank of Maharashtra COVID-19 Loan
Name of Scheme: Emergency Credit Line – Personal Loan Scheme – COVID 19
Eligibility: All standard Housing Loan customers of the bank where security charge is completed in favour of the bank and the repayment has begun are eligible. Existing Housing Loan customers with a running Personal Loan are also eligible.
Loan Amount: Salaried individuals can get up to 10 times their latest monthly gross income, up to a maximum loan limit of Rs. 3 lakhs, while non-salaried individuals are eligible for up to 60% of their latest annual income as per their ITR, up to a maximum loan limit of Rs. 3 lakhs.
Rate of Interest: Concessional rate of interest of RLLR + 1.00%
Tenure: Up to 36 months including a moratorium period of 6 months. The repayment schedule is fixed in such a way that the loan will be fully adjusted 3 months prior to the closure of the existing Home Loan.
Processing Fee: Nil
Note that the above information is valid at the time of this writing. Ideally, you should double-check the details with the concerned bank before you apply for a COVID-19 Personal Loan.
Additional Reading: Loan Moratorium: What Different Banks Are Offering
If you are looking for a Credit Card or a Personal Loan amid the COVID-19 outbreak, it’s probably advisable to opt for a product with a contactless process, meaning that everything end-to-end is done online without the need for you to meet anyone in person, hand over any physical documents or sign anything.
BankBazaar has the perfect offerings for you. Choose from a range of pre-approved, contactless process, lifetime-free Credit Cards or opt for a contactless-process Personal Loan with no requirement of income documents. You’ll have the money credited to your bank account within one working hour. It is as simple and safe as that.