COVID 19 personal loan vs regular personal loan. Which one is a better choice?

While personal loan for long has been an extremely handy financial product bailing you out of your financial shortfalls, the recently launched COVID-19 personal loan is aimed at serving the same purpose with a difference that it is only meant for the bank’s existing customers facing a liquidity crisis due to COVID-19 pandemic. With relaxed norms, COVID-19 personal loan comes with various factors and features distinct from regular personal loans. Here is a comparative analysis of both options:

Loan eligibility

Personal loan’s eligibility depends on the borrower’s job profile, monthly income, employer’s profile, credit score and other eligibility criteria and no existing relationship with the lender is required while applying for it. However, COVID-19 personal loans are specifically offered to existing customers with ongoing loans, salary accounts or whose pension accounts are maintained with the bank. With Bank of Baroda setting a credit score cut off of 650 in its eligibility criteria, a credit score is a crucial loan eligibility criterion considered by lenders while evaluating your COVID-19 personal loan application. Moreover, in the case of SBI personal loan (Kavach SBI Personal loan Scheme) and PNB Sahyog RIN COVID (personal loan scheme for the public), applicants are required to submit his/her COVID positive report, which should be no more than thirty days old. 

Loan amount

While loan amounts for personal loans usually range from Rs 50,000 to 20 lakh, there are some banks and NBFCs claiming to sanction higher loan amounts of up to Rs 30-40 lakh. Note that the sanctioned loan amount essentially depends on the repayment capacity and loan repayment tenure of the loan applicant. In the case of the COVID-19 personal loan, as the loan is particularly designed to meet your temporary financial mismatch owing to the COVID-19 crisis, the loan amount is on the lower side, wherein most lenders offer as high as Rs 5 lakh personal loan amount to their applicants. For instance, SBI Kavach personal loan, Baroda personal loan COVID, Union personal loan scheme for Covid treatment, BOI COVID 19 personal loan – all the lenders offer up to Rs 5 lakh personal loan amount. In the case of PNB Sahyog RIN COVID – Personal Loan scheme for the public, the highest loan amount offered is Rs 3 lakh, with their scheme validity being 31.03.2022. 

Interest Rate & Processing fee

While a personal loan’s interest rate can range between 9 – 24% p.a. based on the lender and your credit profile, its processing fee can go up to 3% of the loan amount, with some lenders waiving it off during the festive season. On the other hand, the COVID-19 personal loan being launched with the aim to help individuals tide over short term cash crunches comes with lower interest rates and processing fees. Their interest rate can range between 6.85 – 8.5 % p.a., and their processing fee can go up to Rs 500, with most lenders offering nil processing fees.

Loan tenure

Personal loan’s tenure usually ranges between 1 and 5 years, with some lenders offering a maximum tenure of up to 7 years. In the case of COVID-19 personal loan, most lenders are offering a tenure of up to 3 years, with some lenders offering a maximum tenure of 5 years. Additionally, a moratorium of up to 3-6 months is also being offered to the borrowers where they only require servicing their interest during the moratorium period. The inclusion of the moratorium period in the COVID-19 personal loan scheme by banks is aimed at assisting borrowers in rebuilding their income flow before they begin repaying their EMIs.

Prepayment charges

In the case of personal loans offering fixed interest rates, prepayment charges can go up to 5% basis of the lender. However, personal loans offering floating interest rates do not come with any prepayment charge, as RBI has debarred banks on penalising prepayment charges on retail loans offered at a floating rate of interest. Likewise, as most lenders are offering COVID-19 personal loans at a floating interest rate, there is no prepayment charge levied on such loans.

Bottom line

As attractive interest rates and nil processing fees are the biggest draw along with the availability of 3-6 months moratorium on COVID-19 personal loan, individuals facing temporary liquidity shortfalls of up to Rs 5 lakh personal loan amount and those sharing an existing relationship with banks offering such loans can opt for it. However, with only some banks offering COVID-19 personal loans, other individuals sharing no relationship with such banks may consider opting for regular personal loans available at a lower interest rate and processing fee.

Here is a table showing the comparative difference between a regular personal loan and a COVID-19 personal loan:

Personal Loan Vs COVID 19 Personal Loan Table
Banks Category Interest Rate (%) Processing Fee(%

 of the loan amount)

Loan Amount (Rs) Maximum Tenure 

(Years)

Union Bank of India Regular Personal Loan 8.90-13.00 (floating) Up to 0.50% 

(Max:Rs 7,500)

Up to 15 lakh 5
Union Personal Loan Scheme For COVID treatment – UPLCT

(Available to customers drawing salary/pension through the bank for last 12 months, existing loan borrowers or non-salaried individuals maintaining SB/CD account and filing ITR regularly)

8.50 (fixed) NA Up to 5 lakh personal loan 5(includes 6

months moratorium)

Bank of India Regular Personal Loan 9.35-12.35 (floating) Up to 2% 

(up to Rs 10,000)

Up to 10 lakh 5
COVID 19 Personal Loan (CPL)

(Available to customers drawing a salary 

through the bank, all existing personal or housing loan customers)

6.85

(RBLR floating with monthly rests)

NIL Up to 5 lakh personal loan 3(includes 

moratorium of 6 

months)

Punjab National Bank Regular Personal Loan 8.70-14.25^(floating) Up to 1%  Up to 10 lakh 5
PNB Sahyog RIN COVID 19

(Available to all govt or private salaried individuals having salary account with the bank and drawing a regular salary for last 12 months)

8.25 (floating) NIL Up to 3 lakh 5
State Bank of India Regular Personal Loan 9.60-13.85 (fixed) Up to 1.50% (Max: Rs 15,000) Up to 20 lakh 6

(For defence 

pensioners: up to 

7 years)

SBI KAVACH Personal loan

(Available to customers of bank – salaried, non-salaried and pensioners)

8.5 (fixed) NIL 25,000-5 lakh personal loan 5(includes 3 

months moratorium)

^0.10% additional concession in applicable interest rate to customers who opt for the coverage under the Credit Life Insurance
Rates & charges as of 1st October 2021

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