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Home >Money >Personal Finance >Govt banks offering loans for covid-19 treatment. Should you opt for them?

Public sector banks are offering personal loans of up to 5 lakh for the covid-19 treatment. Individuals can use the loan for the treatment of self or family members.

According to Dinesh Khara, chairman, State Bank of India, the interest rate for the bank will be 8.5%. The minimum loan amount is 25,000, and the maximum tenure will be five years for the bank.

A few banks have come up with details of the eligibility criteria for this loan. According to the Union Bank of India's website, the interest rate will be 8.5%, and the maximum tenure will be five years. Typically, personal loans from PSBs charge 14-18% a year.

The bank has three eligibility criteria for the loan. One, customers who are drawing salaries or pension through the bank for the past 12 months. Two, those who have taken a retail loan (home, vehicle, mortgage, personal and cash loan) from the bank. Three, non-salaried individuals who maintain a savings or current account with the bank and have been regularly filing income tax returns.

Canara Bank offers a similar Suraksha personal loan with the minimum and maximum amount of 25,000 and 5 lakh, respectively. The Canara Suraksha scheme will also provide a six-month moratorium.

Even last year, public sector banks had launched covid-19 personal loans. But those were to meet the cash crunch due to the pandemic. Those loans were also available for existing customers and were priced aggressively – some as low as 7.2%.

While the personal loan for treatment of the covid-19 is available at cheaper rates, opt for them only if you are facing a temporary cash-flow problem. You can avoid them if there's uncertainty about cash-flows. It's best to avoid liabilities in the current environment.

Instead of taking a new liability, it's better to liquidate an asset.

(Do you have personal finance queries? Send them to mintmoney@livemint.com and get them answered by industry experts)

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