The coronavirus pandemic has swept across the world and wreaked havoc on human life. This pandemic has caused millions of individuals to become isolated, severe changes in social interactions and it is also damaging the economic viability of many nations. COVID-19 (the formal name of the coronavirus) is now forcing the financial sector of the United States to restructure and reorganize when it comes to loans. The following information will explain how businesses and individuals can get a loan during the COVID-19 pandemic. This material will also describe some of the major changes from lenders during this troubled era of world history.
What type of loans are being offered during the coronavirus pandemic?
Before we can discuss the strict loan policies that have come into effect because of coronavirus; we must talk about the kind of loans that are available. Various financial institutions including banks are still providing traditional loans to businesses and individuals. These loans are for housing, automobiles, investing and opening businesses. They are also used to help support or to expand businesses. Basically, borrowers can still get a loan; but the qualifying process will be much harder.
Why are financial institutions making it harder to get a loan?
While financial institutions continue to make loans, they are restricting the number of loans for businesses and individuals. Ultimately, borrowers can continue to get a loan because they help the economy to keep moving along. However, they are going to have to have a harder time securing them. Payments.com reports that lending institutions have a tightened their access to credit because of the pandemic. These stricter lending policies are designed to avoid another financial meltdown, housing crisis or major recession.
How are financial institutions going to make borrowing harder to accomplish?
The Peterson Institute for International Economics states that lenders are going to utilize stricter measures to keep borrowing under control. First, they are going to vet lenders to ensure that they can pay back loans. A person or business will have to realistically prove they will be able to pay back the loan even though the pandemic might continue for longer than expected. They will also be required to have a higher credit score and they might be required to have highly valued assets or need a co-signer as added insurance. The The American Banker website reveals that certain lending institutions such as Bank of America has increased its credit rating for homeowners who want to borrow against their equity. Again, these tighter lending policies will help to keep money from being hoarded by borrowers. It will also help to keep many people from taking out loans they cannot afford to pay back.
Payroll Protection Plan and other Government COVID-19 Relief Loans
The government loans for businesses being impacted by COVID-19 will be handled by banks and lending institutions. These organizations will set standards for businesses being impacted by coronavirus. KOTATV states that businesses can get up to $15,000 in relief but that does not mean that they will automatically qualify for the loan. The news site also reported that certain businesses probably won’t be able to pay back the money or they will have to struggle to do so. Situations such as these prove the importance of making lending policies harder to accomplish. According to Smart Asset Smart Asset, institutions will be more lenient with the funds for federal lending programs. This is because the government will back the loans in the event that a business can’t repay. However, lending institutions are not going to be irresponsible with government money by simply giving the loans to just any business regardless of their ability to repay a loan.
COVID-19 has the Potential to cause Another Major Housing Crisis
If you want to sell your house during the coronavirus pandemic, you might have to hold off on this activity. Unless buyers are soundly qualified to purchase a home; they probably will be denied a loan for this type of sale. If you think you can get a real estate agent to sell my house fast during the coronavirus pandemic, you are not being realistic. People are being ordered to stay at home and to be quarantined.
This simply means that they you probably won’t sell your house at all at this time. Los Angeles is one of the major U.S. areas hit by the coronavirus. Houses for sale in the Los Angeles area still being purchased through this crisis but not many of them are selling at all. Realistically, home sellers are going to have to wait until the pandemic is over before people start purchasing homes again. Financial institutions will also be easing qualifying criteria to get more people into homes once that happens.
People are More Concerned about Getting Loans to Keep their Homes than Making a Purchase
Houses for sale in Arizona and houses for sale in San Francisco will experience a tough time in the market. Right now, people are concerned about saving their homes and not trying to get a new place to live. Very few people will be moving into a new home during this pandemic. CNBC states that banks will provide homeowners with a 90-day grace period. The fact that they are offering this type of extension proves that the housing market is in trouble. This is why they must slow loans and keep people from borrowing too much money.
Businesses can Still get Help and Don’t Have to Panic
CNBC.com CNBC reports that many businesses believe that they will not survive the pandemic. The lending criteria for businesses are stricter but that doesn’t mean they can’t get a loan. The same is true for individuals. They can still get funding to help them through this tough time. They just have to prove that they are capable of repaying the loan.
Federal Regulations and Laws Pertaining to Loans During the Coronavirus Pandemic
PIllsbury Law site says that the federal government is encouraging lending and financial institutions in making lending criteria easier for businesses and individuals. However, they want lending organizations to be wise about the borrowers they qualify. There is not an easy solution to this problem. However, many financial institutions will continue to make loans, but they just won’t allow anyone to get money that they cannot payback or refuse to spend.