(Updated March 22, 2017)
By the end of 2014, the studies of World Bank showed that 69% of Filipinos do not have bank accounts of their own or even if some does, they share it with another person. In other figures, only three out of 10 Filipinos possess a bank account.
If you look at the numbers carefully, you can see that Filipinos do not have much interest in dealing with banks. It could be also possible that some Filipinos only opened a bank account as part of employment policy.
However, those with bank accounts may know that there are benefits with having a bank account such as the privilege of having access with bank loans. Getting a loan from a bank is usually thought as a tedious work.
Here are the steps to applying for bank loans.
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Check your credit report
A lot of Filipinos may not know about credit report as we are used to informal lenders such as 5-6 or Bombays. When you get a loan from a bank, the bank will look for your credit history or your past debts to have an idea about your character as a borrower. We all know that lending is a risky business and to lessen the risk of losing money, banks have set up a filtering system that greatly depends on the credit report.
Of course, if you put yourself in a lender’s shoes you won’t lend to a person who had ran away from previous debts. There is a high chance that the person will do the same to you. Lending is about trust, and a tarnished debt history could greatly affect your impression on the borrower.
Your credit report is your borrowing history and your credit score is the grade banks give you according to the report they review. Banks have various guidelines when giving scores, what could be a passing score for one bank can be failing to another.
If you are going to apply for a bank loan, better check your credit report first to know if you have a fair chance of loan approval. If you think it is a bit shaky, you must first nurse it in good shape to ensure a better chance for approval.
Have a stable job for at least 6 months
Having a stable job proves that you have money to pay your loan. Most Filipinos get regular job positions after being in probationary for six months. You need to prove that you are employed and you are earning the required minimum net income. You may be asked to submit your latest payslips and Certificate of Employment.
While some authorized money lenders require at least 6 months of employment, most banks will require an employment of a year or two consecutive years in your current company.
Banks also lend to self-employed individuals, however you need to prove that you are generating regular income for a year or two by submitting your bank statements. If you are an allottee who gets financial support from OFW relatives, you have to show proof of regular remittances. Not all banks have allottee or OFW loans.
Keep your documents
Banks require a long list of documents you have to provide, and more requirements will be added if you are applying for a secured loan with your house or other asset as collateral. Keep the documents at hand and pass it all once you are asked to do so.
Loan applications will only be processed if you have at least 2 valid IDs and complete documents. Most banks require a billing statement, proof of income, ITR, and other paper works depending on the kind of loan you are applying for.
Use an online loan calculator
Making a well informed decision can be your ticket to a better future, this is why you must use a loan calculator. When you use an online loan calculator, you can easily see the loan terms, loanable amount, interest rate and total repayment needed.
When you see the repayment amount, you will have an idea on how much you have to pay every month and if it will affect your financial status. Reflect if you can pay the monthly repayment with ease and without sacrificing your daily needs. Banks have various calculators especially created for certain loans, make sure that you use the appropriate calculator.
Research the kinds of bank loans
Banks offer various loan products depending on your needs. You can choose from:
Banks can offer more variation of loans other than the aforementioned. Choose the one that best fits your need, eligibility and payment capacity. If you need a high amount of loan and you have assets you can use as collateral, then get a secured loan. Personal loans on the other hand are usually unsecured loans.
Finding your Lender
With eligibility, you will know if you are qualified to apply for a bank loan. Eligibility usually indicates the age, residency status, and monthly income. Some banks are particular with the area where the applicant lives and with the availability of a landline. Find a bank where your status fits. Also, since banks have a couple of loans, the eligibility could vary from one loan to another.
Most banks require two valid government IDs and prefer a driver’s license. You also have to provide a proof of billing such as Meralco or Maynilad bills and payslips. If you are a self-employed, you may produce your bank statements. Do you think you can provide all the requirements? The list goes longer if you apply for a secured loan.
Most Filipinos know that we have to pay an interest when we get loans. As for bank loans, the interest depends on various factors such as the purpose of the loan you are applying to, the kind of loan (secured or unsecured), loan tenure, and the appraised value of the collateral. Find a lender who offers an affordable interest rate for you. When you compare loans, use the Effective Interest Rate per annum as this is the most accurate. Make sure to ask your bank if the interest rate is fixed or variable.
Since we are discussing about bank loans, you have to expect that some banks have high loanable amount. Some offer a minimum of P10, 000, while others loan at least 50,000. If you do not need such high amount, then you have to look for other alternative lenders. For secured loans, the loanable amount will depend on the appraised value of the collateral.
There are various types of loans and most of them depend on the purpose. Are you borrowing for your children’s tuition fee, for a once in a lifetime grand vacation, for purchasing a house and lot, for buying a brand new car, or for expanding your business? Do you plan to use your property as a collateral to apply for bigger loans? When applying for a loan, your lender might ask for your purpose to guide you on which loan can be appropriate for you.
Choose a bank which offers a loan tenure that fits your needs and financial status. Choosing the longest tenure may mean low monthly dues but more expensive in the long run as it usually have higher interest rate than the shorter terms. While it would seem to be more affordable to pay smaller amortization each month, be realistic and compute how much you have to pay for the whole loan term.
Early Settlement Charges
There are some banks which charges a penalty if you settle your loan at an earlier day than your due date. Make sure that you are choosing the right loan tenure for you. On the other hand, some lenders even encourage early settlements.
Banks charge processing fees which are usually deducted from the capital loan. Make sure that you clarify with your bank on how you will be charged. Let’s say you are borrowing P5, 000 and your processing fee is 10%. Then you will only receive P4, 500 in your bank account.
Banks usually have these three payment options:
- Automatic Debit Arrangement
- Over the Counter
- Post Dated Checks
You have to make sure that your bank account have sufficient funds to pay off your dues to avoid incurring late payment charges. In case you can’t make it, do not hesitate to give your bank a call as they might give you some repayment adjustments. Do not avoid your bank as this may only lead you to worst scenario.
It is important to monitor your loan to be reminded of your current balance and how long do you still have to pay for it, this way you can plan your finances better. You can monitor your loan repayments online. Some banks will remind you automatically about your payment dues while others will require you to submit a request for such service.
Since banks require a long list of requirements, it will take a few days to verify your financial status and creditworthiness. Usually banks take five to 14 days or more to approve your loan and then it will take a few more days to disburse your cash. This does not fit your quick cash needs, especially if you need money for emergency situations.
Banks usually offer loans with repayment at monthly installments, and the amount will depend on the terms and interest rate.
Benefits and Downsides
Carefully weigh on the loan’s positive and negative aspects. Choose the one that fits your needs and payment capabilities.
Top Lending Banks
- Bank of the Philippine Islands
- BDO Unibank, Inc.
- Security Bank
- Eastwest Bank
- China Bank
- China Bank Savings
Applying for a Loan
- Fill up the application form with accurate information to avoid confusion during verification.
- Pass the complete requirements to start the loan process. Banks will not process your loan unless you have given your required IDs and documents.
- Wait for a call from the bank to know the next step of your loan process.
- Sign the contract after reading it carefully. If you don’t understand, ask the bank representative to explain it to you. There might be fine prints that can cause you to pay more than you should.
- Pay on time to avoid incurring late charges.
- If you have a hard time, get in touch with your lender. Lenders are willing to give options to their borrowers having a hard time repaying. There can also be a chance that your lender will consider your valid reason.
- In case you can’t repay, you may have an option to refinance your loan.
Other Lenders with More Flexible Quick Cash Loans
Pawnshops require collaterals and this puts your assets at risk if you can’t repay. Pawnshops do not offer installment method for repayments, so you have to pay the whole amount of capital loan plus interest at the same time.
- Informal Lenders
There are also private lenders who give flexible loans. They require fewer documents and ask for higher interest rates such as Bombays and their 5-6 which has 20% interest charge. Also most loan sharks will pretend to be good lenders but will make sure that you will be buried deep in debts.
Make sure the lender is legal by checking it registration with Securities and Exchange Commission.
- Online Money Lenders
There are online moneylenders who process loans in just a day, making it fir for your emergency or fast cash needs. These lenders also require fewer documents for fast verification. This way, you can receive your cash through your bank account or remittance service providers within 24 hours upon loan application. Online moneylenders also have various loans with flexible terms you can choose from. Take time to get to know your online money lender by checking its SEC registration number, reading reviews of its previous clients on social media, and browsing its website. A long history of reputable lending experience also does count since this means that it has a long list of satisfied clientele.
If you need a quick cash loan now, you can get it from Cash Mart. Cash Mart is reliable online money lending company with more than 45 years of experience which rooted its lending in Singapore. Now it offers flexible loans to Filipinos. Visit CASHMART.ph and get to know more about its products and services.