How to Distinguish a Responsible Lender in the Philippines
loan sharks. Get a loan only from responsible moneylenders. Besides making sure that the lender follows the government’s lending regulation to protect you from possible loan sharks, a responsible lender also helps you with your credit report. Before borrowing from a lender, take the time to know which ones are the responsible lenders among thousands of lenders in the Philippines.
Qualities of a Responsible Moneylender
Educates the borrowerAll lenders want to earn money from a borrower. It is their business, after all. However, responsible lenders must also play as a financial partner who educates the borrowers regarding loans and finances. It is no secret that Pinoys still have a lot to understand about loans and good decision-making when saving up. We must be well-informed on how to maximize our finances. After all, we still believe the late weatherman Ernie Baron’s famous words, “Kung Walang knowledge, Walang power.”
Upholds transparency as adherence to REPUBLIC ACT No. 3765The responsible lender guides the borrowers about their loans, including:
The principal amount of the loanThe amount you actually borrowed without the interest rate and other charges yet.
Rate of interest of the loanThe interest rate is the portion of the loan charged on top of the principal or current balance.
Service or processing fee (if any)The processing fee, also called an administration fee, may either be deducted from the principal loan during disbursement or may be charged to be settled during loan repayments. Responsible lenders discuss the processing fee before you sign the loan contract. Loan sharks ask for advance processing fees and tell the unsuspecting borrowers that they will not process the loan unless they are paid. After the victims pay, they will never receive a loan. Do not trust lenders who ask for advance payments. Legitimate lenders never ask for any payments before loan processing.
Amortization scheduleMoneylenders are responsible for clarifying your amortization. You must clearly understand how much you have to pay in full, how much you have to settle each repayment date, when you are supposed to pay, how you will pay, and the cut-off time. This way, you will be well informed, and you will know when the lender will start charging the late payment fees.
Any penalty charge for late amortization paymentAside from the interest rate and the processing fee, the lenders can also charge the borrowers with late payment penalties. You have signed a loan contract that includes the dates when you have to settle your loan. It is legally binding, so you have to pay as agreed. If you do not hold your side of the agreement, expect that you will be fined.
Collection fee (if any)If the lender sends a collection officer to your house to personally get your repayments, you might be charged with a collection. Make sure that you understand how the payments are being collected. A lot of lenders do not want to charge a collection fee. That’s why they have created a convenient way for the borrowers to pay. Borrowers may pay through various payment channels. All other fees in connection with the loan transaction (if any) There are also other fees that lenders might charge, such as appraisal fees for secured loans and early settlement fees. Before you sign your loan contract, ask your lenders for itemized fees.
Description of the collectionLenders must properly discuss collection or repayment instructions. If you applied for a secured loan, make sure that you understand the consequences of failure to settle the loan and how the collateral will be handled.
The obligation in case of defaultThough all responsible lenders want all of their borrowers to settle their loans, there are times that loan borrowers are unable to pay their dues. Lenders make sure that their borrowers understand the consequences of failing to settle their loans before signing their loan contracts.
- Requires a list of documents, especially: Government ID, payslips, and proof of billing
- Has an official social media account
- Responds to inquiries
- Advises and approves the amount of loan you can repay at ease
- It has a loan contract and gives you your own copy.
- Registered with Securities and Exchange Commission
- Personal information is treated as private and confidential
Responsible Moneylenders Usually Consider:
- The type and amount of loan the borrower wants. This is because many borrowers apply for an amount that may not fit their current financial status. Your lender wants you to be able to repay your loan with ease.
- How the customer handled their finances in the past. Your lender needs to know your character as a borrower to know how you handle your loan in the future.
- Any known future financial commitments of the borrowers may affect how they handle their finances, such as getting a car loan or insurance. These will get a chunk off from the family budget.
- Any future changes in circumstances with a significant financial impact on the borrower, such as pregnancy or a kid going to college soon. For example, a baby might be on its way. As much as you want to provide for the needs, including your new family member, this will greatly impact your budget. If you are getting a loan, be honest and ask for options that may help you out.
- The customer’s declared income and the family net income will give the lender assurance that they can settle their obligation.
- Any owned asset gives the lender assurance.
Rights of the Lenders
- Decline a loan application if they believe that it is not your best option, you can’t meet the repayments, and you are a high risk after a strict evaluation.
- Know the borrower’s credit history to evaluate your creditworthiness properly.
- Know the borrower’s current contact information as long as the loan is not yet settled. It is effortless to change your cell phone number in the Philippines, but do not use this to run away from your lender. Your lender is bound to find you and has the right to take legal actions.