Should coronavirus affected persons take interest-free loan from CareCover?

The company provides pre-approved medical loan via loan card to all Indian residents of age 21 to 60 years at an annual fee of Rs 999 (inclusive of taxes). The annual fee for the loan card is paid upfront.

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To take a loan, you need to enroll and obtain the loan card with a validity of 1 year.
CareCover, a healthcare financing company, is offering instant loans for medical treatment to people affected by coronavirus disease.

COVID 19 affected persons can take interest-free loan up to Rs 5 lakh to pay their medical bills instantly from CareCover via loan cards. They are not required to pledge any collateral for the medical loan. However, someone taking such a loan should also know the caveats and the conditions attached, before availing it.

CareCover is a loan facilitator, not a Non-Banking Financial Company (NBFC). The company has partnered with NBFCs who lend money to the borrower. CareCover refused to provide the names of partner-NBFCs stating that CareCover has Non-Disclosure Agreement (NDA) with partner-NBFCs.


Nivesh Khandelwal, CEO, CareCover said, "The company generally provides loans for all diseases. However, in case if someone is affected by coronavirus disease, the company is providing instant medical loans to the covid -19 affected persons."

Who can take this loan and what is covered?
The company provides pre-approved medical loan via loan card to all Indian residents of age 21 to 60 years at an annual fee of Rs 999 (inclusive of taxes). The annual fee for the loan card is paid upfront. Once the card is activated you need to pay the fee every year. Besides, you get an interest free loan only via loan card after paying the annual membership fees every year. The company does not transfer the loan amount directly to your bank account. Also, the loan is given only after medical bills are submitted.

Khandelwal said, "You can take a minimum loan of Rs 15,000 which can go up to a maximum limit of Rs 5 lakh. No interest is levied on loan taken for up to 12 months if seeking treatment at CareCover's network of 1800 plus hospitals. Apart from this, there are no hidden charges, processing fees or interest fees."

However, CareCover has listed only 19 network hospitals on their official website.

According to Khandelwal, in comparison to a health insurance policy, a loan for health care from CareCover can be used to treat even pre-existing diseases and any type of treatment from any hospital can be taken. Further, unlike an insurance policy, there are no co-pay or deductible or exclusions and the loan amount is given against medical bills payment, he adds. However, you need to remember that because this is a loan it needs to be paid back unlike an insurance policy where the reimbursement of medical costs incurred does not have to be paid back.

Advantages of loan from CareCover
One can think of taking a loan from CareCover because of the following reasons:
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Khandelwal said, "Currently, personal loans incur interest at an interest rate of 10.75 percent from the very beginning whereas; CareCover medical loan incurs 0 percent interest for the initial period of 12 months (if treatment is taken from network hospitals). Also remember that currently, only those hospitals permitted by the government to offer treatment for coronavirus can do so.

This means if you take a loan of Rs 5 lakh at 10.75 percent for a year from any financial institution, you will have to pay an interest of Rs 29,591. However, by paying Rs 999 a year, you get an interest free loan of Rs 5 lakh a year from CareCover. However, you will get an interest-free loan only if you take treatment at CareCover's network hospital.
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Khandelwal further explains:
Getting a personal loan is a time consuming and tedious process while CareCover loan is granted instantly and can be processed within an hour.

You need to submit various documents like proof of identity, proof of residence, latest 3 months bank statement, salary slips of last 3 months and 2 passport size photographs to apply for a personal loan whereas, CareCover requires minimal documents like Aadhar Card, Pan Card and KYC documents only.

Also, CareCover requires a bank statement at the time of card buying NOT when the candidates need the loan.

Disadvantages
Although the loan is offered at zero percent interest equated monthly installments (EMIs), taking a loan of Rs 5 lakh and paying Rs 41,666 installment per month for next twelve months can have a huge impact on one's pocket. The loan is interest-free for one year only if the user seeks treatment at CareCover's partner network hospitals.

Apart from this, interest will be charged if you are taking treatment at the non-network hospital. Also, if you increase the tenure of loan repayment up to 2 years, you need to then pay 12-15 percent interest on the loan along with the loan card annual fees.

Have a look at the EMI break- up (figs shared in the table are based on average interest rate*)
Loan of Rs 5 lakh
Duration EMI in Rs (per month) Rate of interest
12 months 41,666 0%**
18 months 30,491 12- 15%
24 months 23,537 12-15%

Loan of Rs 2.5 lakh
Duration EMI in Rs (per month) Rate of interest
12 months 20,833 0%**
18 months 15,246 12-15%
24 months 11,768 12-15%
Source: CareCover
* Kindly note- Interest rate depends on the profile of the borrower.
** Only if you are taking treatment at CareCover's network hospital. (Also remember, only those hospitals permitted by the government to offer treatment for coronavirus can do so.)

How the loan card works
A CareCover loan card, which cost Rs 999 (inclusive of taxes), allows an individual to take a medical loan only for a short period, say 1- 2 years. The loan card cost is non-refundable.

Once the loan is sanctioned, you need to pay the bills via loan card. After that, the repayment of loan happens through direct debit from a valid bank account. In such a case, the EMI amount directly gets debited from the bank account. Khandelwal said, "the EMI collection is done as per the National Automated Clearing House (NACH) rules wherein the company follows government-mandated laws."

Non-network hospitals don't accept payment via loan card. And the loan sanctioned in such case are not interest-free.

As per Khandelwal, CareCover works on two sources of revenue:
  • The sale of the loan card
  • Subvention paid by a hospital where the card is used of usage of the card. Hospital pay this to CareCover to make healthcare accessible.

Documents required to avail loan via loan card
To take a loan via a loan card, you need to enroll and obtain the loan card with a validity of one year, and submit KYC documents like PAN card, Aadhaar card and a bank statement if a customer wants to get the maximum loan amount sanctioned.

The enrolled members having valid CareCover activated loan cards can call at CareCover's toll-free helpline number (9298889888) giving them basic details like name of the affected person seeking treatment, hospital name, and the estimated amount required for treatment along with a letter from the hospital verifying the patient name and bill estimation.

Khandelwal said, "At the time of loan requirement you need to submit the illness/disease confirmation letter of a doctor from the CareCover's network hospital."
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