(Updated March 22, 2017)
Most Filipinos have experienced borrowing money to survive a financial gap.
While many are lucky to get help from family and friends, the second most popular source of loans is lending companies. Lending companies, may it be formal or informal, have utilized various ways to promote their lending services.
Don’t fall prey to loan sharks, get a loan only from responsible moneylenders. Aside from 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.
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Qualities of a Responsible Moneylender
- Educates the borrower
All 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 handling finances.
It is no secret that Pinoys still have a lot to understand about loans and good decision-making when it comes to saving up. We must be well informed on how to maximize our finances. After all, we still believe the famous words of the late weatherman Ernie Baron, “Kung walang knowledge, walang power.”
- Upholds transparency as adherence to REPUBLIC ACT No. 3765
The responsible lender guides the borrowers about their loans including:
The principal amount of loan
The amount you actually borrowed without the interest rate and other charges yet.
Rate of interest of the loan
The 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 as 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.
Moneylenders 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 dates, when you are supposed to pay, how you are going to pay and the cut off time. This way you will be well informed and you will know when will they lender start charging the late payment fees.
Any penalty charge for late amortization payment
Aside 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 which 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 collection
Lenders must properly discuss collection or repayments 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.
Obligation in case of default
Though 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 they sign their loan contracts.
- Requires a list if documents especially: Government ID, payslips, and proof of billing
A responsible lender will ask for your documents to verify your identity, address and ability to pay. Only loan sharks don’t care if you can settle on time because they can milk more money from delinquent borrowers.
- Has an official social media account
Lenders in the Philippines use Facebook, Twitter or Instagram to reach out to their clients. It is very easy to make social media accounts and no responsible lender will pass up this great chance to make their business known.
- Responds to inquiries
Responsible lenders value their customers and they always uphold the ‘quality experience’ assurance because they want borrowers to be their constant clients. Though it may take some time due to the increasing number of clients, a responsible lender will send a reply at least within a week.
- Advises and approves the amount of loan you can repay at ease
The responsible lenders will never give you a loan that you can’t repay. Let’s say you are applying for a loan worth P30, 000, but as the lender evaluates your payment capacity, you only qualified for P25, 000. Then the lender will discuss this option with you to make sure that you can pay your loans at ease.
- Has a loan contract and gives you your own copy
Lenders must give you a loan contract and discuss everything in it. You must read and understand the contract before signing it. If you have any questions, do not hesitate to ask.
- Registered with Securities and Exchange Commission
Legitimate lenders must be registered with SEC. This means their business is legal, they are paying due taxes, they are following the government’s regulations and the Republic Act No. 9474, also known as Lending Company Regulation Act of 2007.
- Personal information is treated as private and confidential
Lenders will respect the borrower’s privacy. The personal information will not be disclosed to a third party unless you apply to a bank or another lender.
Let’s say you have a loan with Lender A, Lender A will send your loan details and basic information to the Credit Information Corporation as mandated by Republic Act. No. 9510 (Credit Information System Act). Even how you handled your payments will be recorded. If you apply for a loan from Lender B, Lender B will pull your credit report from CIC to know how you handled your previous loans.
Responsible Moneylenders Usually Consider:
- The type and amount of loan the borrower wants. This is because a lot of borrowers apply for an amount that may not fit for 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. It is important for your lender to know your character as a borrower to have an idea on 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 an 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 the needs of the new addition to your family, 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 an assurance that the loan can be settled.
- Any owned asset gives the lender an 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 properly evaluate your creditworthiness.
- Know the borrower’s current contact information as long as the loan is not yet settled. It is very easy to change your cellphone number in the Philippines, but do not use this to run away from your lender. Your lender is bound to find you and have the right to take legal actions.
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