Know Where to Use Personal Loans in the Philippines
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, our country’s most common formal loan source are private lenders.
Personal loans in the Philippines are becoming one of the most sought after financial solutions. If you plan to get a personal loan for the first time, know where you can use it.
Benefits of Personal Loans in the Philippines
Sometimes, it’s quite a wonder how Pinoys started taking out personal loans. But if you analyze the perks that come with it, you’ll understand why.
Use the money in any way you want
Banks and other lending companies usually approve personal loans regardless of how the borrowers will use them unless there are specified personal loans you want to apply for, such as wedding loans, vacation loans, or debt consolidation loans.
No collateral needed
Personal loans are usually unsecured loans. Since there is no need for collateral, lenders usually conduct a thorough verification process to ensure you are a responsible borrower. On the other hand, some lenders require a co-maker or a co-borrower before approving loans.
Lenders offer personal loans with various terms. Filipinos are used to monthly loans from banks and other formal lenders. However, registered lenders can see the problem with monthly payments.
Monthly payments are usually bigger in amount, and the borrower might experience “separation anxiety” with their money. The amount will be divided into smaller repayment dues by paying weekly or bi-weekly terms. Also, most Filipinos get their salary every two weeks.
If you are a responsible borrower, you would want to pay the loans right after getting your salary to avoid late payment charges or settle them 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 secured loans such as a housing or car loan, you must provide documents to prove your ownership and appraised value. For personal loans, you have to prepare your government or company ID, payslips (for employed), bank statement (for self-employed), and proof of billing.
Some people do not want their relatives and friends to know about 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. Your loan application will be kept private between you, the lender, and your character reference.
Builds up the credit report
Credit history is 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. The banks and registered lenders will then ask for this report every time you apply to give them an idea of 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 of getting approved housing and car loans.
Downsides of Personal Loans in the Philippines
Despite the numerous advantages of a personal loan, it is inevitable to have some disadvantages. Here is a list of what to expect when you apply for one.
Risky for the lenders
Since personal loans are usually unsecured, the lenders won’t have anything to repossess if the borrower doesn’t settle the debt. This is why they pull out credit reports and do the verification process.
Strict verification process
Lenders, especially banks, do a strict verification process to evaluate the borrower’s creditworthiness. Lenders, especially online lenders, may not ask for as many documents as the banks but expect them to ask more questions 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
Like any loan, you will be charged late payment fees if you miss your repayments. On a positive note, you can avoid this penalty if you settle your due time.
Where to Use the Personal Loans in the Philippines
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 soon. This proves that a lot of us have been through financial difficulties. Where do Pinoys use their personal loans?
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 ensure that they are well-fed. If you are getting a loan to put food on the table, you know your financial status is heartbreakingly low.
Most Filipinos value education. This is why despite the expected expenses of private schools, parents still send their kids there to give them better education and high hopes for their future as adults. Some parents are willing to break 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 cannot pay their tuition. Personal loans in the Philippines are a perfect fit for this situation.
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.
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 initially. No matter how big or small, business requires capital and working capital.
Bills are also considered a necessity. Imagine life without electricity, water, or WiFi. Life must be miserable if you get your water and electricity disconnected. Besides the discomfort, your neighbors will know that you are having huge money problems. It gets worst if you have a baby at home.
You can use your personal loan to pay off your other debts. This way, you can have one loan to repay with a lower interest rate.
Vacation and recreation
Some OFWs get a loan to give their family a grand vacation to make up for their lost time together. It may mean that they will have a debt, but no amount of money will pay off a family’s happiness by spending time together in a once in a lifetime vacation.
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.
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.
Filipinos are known to love parties. Many even borrow money 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 are responsible for paying it according to your contract.