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Know Where to Use Personal Loans in the Philippines

Filled under: Borrow Lifestyle 

(Updated March 22, 2017)

Among the various types of loans, the most popular is the personal loan as it is readily available to most Pinoys. According to Banko Sentral ng Pilipinas, the most common source of formal loans in our country are the private lenders.

Personal loans are becoming one of the most sought after financial solutions. If you are planning to get a personal loan for the first time, know where you can use it.


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Benefits of Personal Loans

  • Use the money in any way you want

Banks and other lending companies usually approve personal loans regardless of how the borrowers are going to use it unless there are specified personal loans you want to apply for such as wedding loans, vacation loans or debt consolidation loan.

  • No collateral needed

Personal loans are usually unsecured loans. Since there is no need for any collateral, lenders usually conduct a thorough verification process to make sure that you are a responsible borrower. Some lenders, on the other hand, requires a co-maker or a co-borrower before approving loans.

  • Flexible repayment

Lenders offer personal loans with various terms. Filipinos are used to monthly loans when it comes to banks and other formal lenders, however, there are registered lenders who can see the problem with monthly payment.

Monthly payments are usually bigger in amount and the borrower might experience “separation anxiety” with their money. By paying through weekly or bi-weekly terms, the amount will be divided into smaller repayment dues. Also, most Filipinos get their salary every two weeks.

If you are a responsible borrower, you would want to pay the loans right after you get you salary to avoid late payment charges or to settle it as soon as possible. Ask your borrower for such terms to help you make repayments at ease.

  • Fewer documents needed

Lenders require fewer documents since borrowers do not have to prepare papers for their properties. If you want to get secured loans such as a housing loan or a car loan, you have to provide documents to prove your ownership and its appraised value. For personal loans, you just have to prepare your government or company ID, payslips (for employed), bank statement (for self- employed), and proof of billing.

  • Privacy

There are people who do not want their relatives and friends to know their existing financial problems, however banks and lenders will require character references to know the borrower’s creditworthiness. It is at your own discretion to choose your character reference well.

Remember that you are not required to have any collateral. To compensate, lenders will have to conduct interviews to know if you can handle the repayments well. Between you, the lender and your character reference, your loan application will be kept private.

  • Builds up the credit report

Credit history are made up of your past debts and loans. Whether you have been delinquent or diligent with your payments, it will all be included in your credit report. Then the banks and registered lenders will ask for this report every time you apply for them to give them an idea on how you will handle your future loans.

In return, your current lender will also report your repayments. If you want to build up your credit report, get small personal loans and repay on time. This way you will have a higher chance to have your housing loan and car loan approve.

Downsides of Personal Loans

  • Risky for the lenders

Since personal loans are usually unsecured, the lenders won’t have anything to repossess in case the borrower don’t settle the debt. This is why they pull out credit reports and do verification process.

  • Strict verification process

Lenders, especially banks, do strict verification process to evaluate the borrower’s creditworthiness. Lenders, especially online lenders, may not ask as much documents as the banks, but expect them to ask more question during calls. Since you are applying for a loan from a registered lender, be assured that the call is recorded and your answers are kept private.

  • High late payment fees

Just like any loans, if you miss your repayments, you will be charged by late payment fees. On the positive note, you can avoid this penalty if you settle your due on time.

Where to Use the Personal Loans

Around 47.1% of adult Filipinos have experienced borrowing money and most than 33% have tried borrowing but do not plan to do so again in the near future. This proves that a lot of us have been though financial difficulties. Where do Pinoys use their personal loans?

  1. Buy food

As surveyed by the BSP, the main purpose of getting a loan is to buy food. Food is a necessity we can’t ignore. Parents will even give their own meals to their kids to make sure that they are well fed. If you are getting a loan to put food on the table, then you know your financial status is heart breakingly low.

  1. Education

Most Filipinos value education. This is why despite the expected expenses with private schools, parents still send their kids there to give them better education and high hopes for their future as adults. There are also parents who are willing to brake their backs for years to get their children through college. Private schools usually don’t release grades and don’t give major exams to those who are unable to pay their tuitions. Personal loans are a perfect fit for this situation.

  1. Medical expenses

Accidents and medical emergencies happen without any warning. Most Filipinos may not have enough money to pay off medical expenses, so they resort to personal loans.

  1. To start or expand a business

One of the best ways to be financially stable is to build a business though it may be small at first. Business, no matter how big or small requires capital and working capital.

  1. Utility bills

Bills are also considered as a necessity. Imagine life without electricity, water or WiFi. Life must be miserable if you get your water and electricity disconnected. Aside from the discomfort, your neighbors will know that you are having huge money problems. It gets worst if you have a baby at home.

  1. Debt consolidation

You can use your personal loan to pay off your other debts. This way you can just have one loan to repay with lower interest rate.

  1. Vacation and recreation

Some OFWs get a loan to give their family a grand vacation in hopes to make up for their lost times together. It may mean that they will have a debt, but no amount of money will pay off the happiness of a family spending time together in a once in a lifetime vacation.

  1. Wedding

You may have already planned for your grand wedding, but there are times when there are unforeseen things that must be bought or paid off.

  1. Vehicle upgrade

Remember that your vehicle needs to be well maintained, and if you are into cars, you will most likely make some upgrades such as on mag wheels.

  1. Special celebrations

Filipinos are known to love parties. Many even borrow money just to make celebrations memorable such as a baby’s first birthday party, 50th wedding anniversary, and debuts.

Getting a personal loan is now easier than it used to as it has lesser requirements, however you have to make sure that you are borrowing from a responsible lender to avoid getting caught in the hands of loan sharks. You may use the money in any way you want, but never forget that you also have the responsibility to pay it according to your contract.





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