Top Things to Know About Hardship Loans

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When the COVID pandemic started in 2019, few thought they would still suffer problems caused by it years later. The Small Business Administration (SBA) worked with lenders to offer loans for small business owners to help them cover their losses. Many people also received stimulus checks from the federal government, but those funds did not last very long. Hardship loans are available for those who still feel the pressure of COVID and those who need help paying for other things because of hardship. Anyone looking at applying for these loans should know a few things about them.

What is a Hardship Loans?

A hardship loan is a type of loan designed for people who experience any type of hardship. For example, an individual might apply because they lost their job and need money to cover their bills until they find a new one. Someone else might apply because they recently took time off work to care for a sick loved one. Though some lenders only loan money to people with full-time jobs, some hardship loans are available for unemployed people. There are also hardship loans that are suitable for borrowers with bad credit.

Small Amounts

One important thing to know about these loans is that they come in small amounts. For example, someone cannot take out a hardship loan to pay for a new car or cover the cost of renovating their home. Most lenders offer loans of $1,000 to $5,000. The funds help the borrower cover their top bills, such as their mortgage or rent and car payment. While some lenders offer loans of a higher amount, they may have more steps that borrowers need to go through to get them. In addition, the lender may only offer a higher loan to a borrower with a high credit score.

Repayment Terms

According to Lantern by SoFi, those looking at what is a hardship loan should also consider the repayment terms, which “are between 12 and 36 months.” The amount of time that borrowers get often relates to the amount of money they borrow. For example, someone who borrows just $1,000 usually has 12 months to pay off their loans, while those who borrowed a larger amount have a full 36 months or longer to repay it.

Lantern by SoFi also warns borrowers about taking out loans with higher interest rates. Some payday loan lenders take their existing loans and claim that they are now hardship loans. As a result, they often have fewer requirements and are easier to get than other hardship loans, but they charge so much in interest that borrowers can easily fall behind. It’s usually best for borrowers to apply for these loans through credit unions and other financial institutions.

Hardship loans give individuals who need help some or all of the money they need. These loans go to borrowers who face some type of hardship and need help recovering from it and paying their bills. Borrowers should read the terms and work with a suitable lender when applying for a hardship loan.

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