The coronavirus pandemic continues, and despite unemployment rates reaching record lows in some states, many people still face financial distress. In September 2022, the U.S. unemployment rate was 3.5 percent, compared to 4.8 percent in September 2021 and a pandemic-era high of 14.8 percent in April 2020.

During the early stages of the pandemic, some financial institutions developed coronavirus hardship loans to assist those struggling to pay their expenses. Many have since done away with these loan products, but personal loans are still an option.

4 basics of coronavirus hardship loans

Coronavirus hardship loans provided much-needed financial relief if you lost all or part of your income due to the pandemic. While there were no uniform requirements for coronavirus hardship loans, they typically had the same features as you’ll find with traditional personal loans:

  1. They were a type of personal loan. A coronavirus hardship loan was a short-term personal loan designed by banks and credit unions for those experiencing financial hardship.
  2. They came in small-dollar loans. The loan is generally for a small sum of about $1,000 to $5,000. However, some financial institutions offer a higher loan limit.
  3. They came with low or 0 interest. The interest rate and repayment terms vary by lender, but coronavirus hardship loans typically have lower rates than other personal loans.
  4. They were generally available at credit unions. While some banks and online lenders also offered this form of relief, it was not as common.

Common uses of coronavirus hardship loans

Like other types of personal loans, coronavirus hardship loans were used for nearly any purpose. These loan products look different now, though. They are advertised as personal loans instead of loan products for consumers impacted by COVID-19.

Still, you can typically use the loan proceeds the same way you might use an emergency loan. That includes living expenses such as rent, groceries and gas for your car. The loans can also cover costs such as medical or utility bills and education expenses. Some consumers turn to personal loans to make costly car or home repairs.

Coronavirus hardship loan vs. traditional personal loan

Because a coronavirus hardship loan was a type of personal loan, many of the same rules and features apply to both. They’re both installment loans that require you to repay the money you borrow and any applicable interest within an agreed-upon time frame.

Here’s more on the similarities and differences between coronavirus hardship loans and traditional personal loans:

Ways you can use loan funds

While both have great flexibility on how you use the money, some restrictions exist. Some lenders won’t allow you to use a personal loan for business purposes or to fund higher education.

Rates

Since they were meant for people in need, hardship loans charge low or even 0 interest for qualified borrowers. Traditional loans have varying interest rates that typically range from about 5 percent up to 35 percent, depending on your financial history.

Loan amounts

A traditional personal loan may often provide as much as $40,000, and some lenders loan prime borrowers up to $100,000. Hardship loans usually offered up to $5,000, making them less useful for big-ticket expenses. The COVID hardship loans were intended to be small bridge-style loans meant to help people get back on their feet or keep up with bills — like covering medical expenses or paying off credit card payments. That level of support might be insufficient for those with longer-term debt or financial struggles.

Terms

The terms for a traditional loan will likely be longer than those of a hardship loan. Traditional loans offer several term options lasting anywhere from one to seven years. Hardship loans usually give one to three years for repayment, and some lenders only offer one-year loan terms.

In most cases, hardship loans had more favorable interest rates than personal loans. Hardship loans are designed for people already in short-term financial trouble.

Payment deferrals

Hardship loans may have a payment deferral period, while traditional loans usually will not. Some lenders allowed up to 90 days when you didn’t have to make loan payments. Deferments are possible with personal loans if you communicate with your lender and provide documentation of your circumstances, but this is less common.

Where to apply for a hardship loan

Many credit unions, some banks and online lenders provided coronavirus hardship loans. However, personal loans are now the recommended solution for individuals facing financial hardship.

You can generally apply for a personal loan either online or by phone. If you’re applying through a credit union, you’ll need to become a member first before you can be considered for funding.

Once you apply, the lender will review your application, income, credit and ability to repay the loan. If you’re approved, you can expect to receive funds quickly, within two to three days in many cases.

How to qualify for a hardship loan

While the eligibility criteria and application process depend on the lender, here’s what you need to know about applying for a personal loan:

  • You may be asked to provide documentation proving your employment status, report your income, and show what you will use the funds for.
  • Qualifying for a loan will depend on your credit score and history.
  • You’ll need to provide personal information such as your name, address and Social Security number.

Be careful of scams

The Federal Bureau of Investigation (FBI) has reportedly seen increased scams during the coronavirus pandemic. Ensure you are not giving out personal or banking information to an unknown source. Most financial institutions will not ask for credit card information over the phone. If you are unsure about the identity of someone contacting you, contact your lender directly to verify.

Next steps

To get a hardship loan, research the loan amounts, interest rates and terms available from multiple lenders. If you’re interested in joining a credit union and exploring affordable personal loan options, use the National Credit Union Administration’s Credit Union Locator tool to find one near you.

Frequently asked questions

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