If you have a salaried account or an existing loan for which you have not defaulted even once in equated monthly instalment (EMI) in a public sector bank (PSB), then you might be eligible for a new personal loan product which is known as Covid-19 loan. The biggest USP of Covid-19 loan lies in it being much lower priced than regular personal loans. The purpose of the Covid-19 loan is to help the existing bank customers overcome the temporary cash crisis that has arisen due to the Covid-19 pandemic.     

Bank of Baroda (BoB), Punjab National Bank (PNB), Union Bank of India (UBI), Bank of Maharashtra (BoM) and Bank of India (BoI) are some of the banks that offer Covid-19 personal loans.

The Eligibility Criteria Of Covid-19 Loan

The eligibility criteria of Covid-19 loan are also different from regular personal loans. BoI, for an instance, offers Covid-19 loan to such customers who are either drawing their salaries through the bank for minimum one year or to those who have existing home or personal loan with the bank.

PNB, on the other hand, has named its product Sahyog Covid-19 and is offering loan to those of its customers who have been drawing their salaries through the bank.

UBI is offering Covid-19 loan to those of its customers who either have a salaried account with the bank or to those who have availed housing, mortgage, vehicle, personal or pension loan from the bank.  The loan amount UBI bank is disbursing is equivalent to six times the last credited salary or pension of the applicant.

BoB is offering Covid-19 loans to those who have availed home, mortgage or car loans from it. The EMI of the existing loan determines the loan amount that an applicant can avail. The maximum amount that one can take will be 10% of the sanctioned limit of existing housing or mortgage loan and 20% of an existing car loan. So, if you are paying an EMI of ₹30,000 for an existing home loan, then the bank will sanction the loan in a manner that the EMI of the Covid-19 loan will be ₹3000 (10%) or less.  

Most of the banks have put up a maximum limit in the range of ₹3 lakh-5 lakh for Covid-19 loans and there is no processing fee charged either. The minimum loan amount, on the other hand, varies from bank to bank. BoB, for an instance, is offering a minimum loan amount of ₹25,000. Those who have sought a moratorium on their existing loans are also eligible for Covid-19 loans.

An Enthusiastic Response Indeed

The initial response that BoB’s product received was quite enthusiastic and within six to seven days of the launch, the bank had given a go ahead to at least 3,500 loans.

UBI, on the other hand, had disbursed ₹26 crore in the first few days of the launch in early April.

The average ticket size of the loan also varies from bank to bank. BoB’s expectation is that of ₹1.5 lakh while UBI has received applications for an average ticket size of ₹3 lakh.

Should You Opt For Covid-19 Loan?

Covid-19 loan can prove to be useful for those who want to consolidate their debts. For an example, if you have a credit card outstanding then you can use Covid-19 loan which can be availed at much lower interest rate and repay the credit card issuer. If used judiciously, Covid-19 personal loan can be used for reducing the debt burden.

However, if you intend to meet your cash flow requirement then opting for Covid-19 loan would not be a good idea because for this you have to be absolutely certain that the cash crunch you face is temporary. However, as there is no certainty as to when the lockdown will be lifted most people will not be confident whether the cash crunch will be a temporary problem or whether it will stretch further. 

If the situation does not turn for the better then the companies can further slash the salaries or reduce the workforce. When there is so much unpredictability and the future appears to be uncertain then it will not be wise to opt for more liabilities. It would therefore not be a good idea to get enamoured by a project because of its lower price.