In times of emergency, reality changes quickly: jobs may be suspended, expenses rise, and income shrinks. The financial pressure can push many families toward what seems like the easy solution – taking a loan. But before you sign anything, it’s crucial to pause, assess, and make sure this is truly the right path.
First Things First – Do You Really Need a Loan?
Taking a loan under pressure can become a long-term financial burden. Before committing, ask yourself:
- Is this expense urgent, or can it be postponed?
- Is there a cheaper or temporary alternative?
- Do I have another source of funds – savings, an education fund, family assistance, or a community lending initiative?
If there’s another option – use it first. An overdraft is the most expensive loan, and in an emergency, it can worsen your situation.
Should You Use Savings Before Taking a Loan?
Before turning to the bank, check if you have accessible and liquid funds:
- An education fund (Keren Hishtalmut)
- Savings in your checking account or fixed deposits
- Funds you can access from family or a community loan fund
Using these funds can save you interest payments and help you avoid new debt.
What Should You Avoid?
Withdrawing severance pay or other pension savings – this could harm your long-term financial future and may result in tax penalties.
Paamonim’s professional recommendation: Always seek personal financial advice before withdrawing pension-related funds.
If You Must Take a Loan – Do It Right
If there’s no other option and a loan is necessary, follow these guidelines:
- Only borrow what you truly need – Make a detailed list of expected expenses and add a small buffer for the unexpected (no more than 20%).
- Calculate your monthly repayment capacity – Factor in potential income reductions or increased expenses.
- Compare different loan offers – Review interest rates, repayment period, total loan cost, and check for prepayment penalties or late fees.
- Explore options to defer payments with your bank before taking out a loan. Ask about:
- A temporary increase in your credit limit
- Postponement of mortgage or existing loan payments
- A temporary grace period on payments
What About the Bank of Israel’s Assistance Plan?
Following Operation “Am Kelavi,” the Bank of Israel introduced a targeted support plan for households and small businesses affected by the security situation. This plan aims to provide immediate cash flow relief – but note, it is not an automatic benefit and has clear eligibility criteria.
Key benefits of the plan:
For households evacuated or injured due to the operation:
- 3-month deferment of mortgage payments – no interest or fees
- 3-month deferment of consumer loans (up to NIS 100,000) – no interest or fees
For small and micro businesses (annual turnover up to NIS 25 million):
- Deferment of loans up to NIS 2 million for 2 months – no interest or fees
- For businesses owned by IDF reservists – exemption from overdraft interest (up to NIS 30,000) for 2 months
For other affected businesses not meeting these criteria:
They may still request deferments under agreed interest terms.
Eligibility Criteria – What’s Required?
For households:
- Proof of evacuation from a local authority or authorized body
- OR: Hospitalization certificate due to injury from the operation
For small businesses:
- Proof of business premises evacuation
- OR: Verification of halted operations during the conflict period (certified by an accountant/tax advisor/lawyer)
For reservist-owned businesses:
Present proof of active reserve duty within two months prior to the application (or as confirmed by military payments to your bank account)
Important Notes:
- The plan is not automatic – a formal application to the bank is required
- Customers already in legal proceedings or with long-term defaults may not be eligible
- Some benefits are subject to the bank’s discretion and may be structured differently (e.g., extended mortgage terms, separate interest-free loans, etc.)
- The plan is valid until July 31, 2025, and applications must be submitted by this date
Summary – A Loan Is Not a Magic Solution
A loan during an emergency can serve as a lifeline – but it can also lead to a cycle of debt that’s hard to escape. Therefore:
- Don’t act under pressure
- Think through all implications in advance
- Explore every alternative before committing to new debt
- If you do decide to take a loan – proceed cautiously and build a long-term financial recovery plan.
