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Ano ang Utang at Instant Pautang?
Here’s a Simple Guide to Lending in Philippines

Utang and Instant Pautang Updated on March 2024

Narining mo na ba ang salitang utang?

Nasubukan mo na bang umutang?

Most Filipinos have experienced borrowing money from family members, a friend, a moneylender, a “Bombay,” or a bank.

Even business owners borrow money, let alone those who work at a minimum wage each day. Utang has been a part of Filipino culture, prominent enough to have caught the attention of Pres. Rodrigo Duterte.

You might have heard of instant pautang with the recent worldwide economic situation. Filipinos now use it widely in the Philippines to cope with urgent money needs. Its 24/7 online availability makes everything more manageable. 

Pero ano nga ba ang utang at instant pautang?

Find out the answers here as we discuss them thoroughly.

the-lending-culture-of-the-philippines | Ano ang utang at instant pautang?

Utang vs Instant Pautang

Nowadays, the word utang and instant pautang are used simultaneously. However, these two have some common denominators and differences. Let us lighten up the confusion as we differentiate the two from each other. 


“Utang” is a Filipino term for debt or loan. It generally implies a more formal and traditional borrowing arrangement. For example, you borrowed money from someone or a formal lending institution. The terms and conditions of repayment are typically agreed upon in advance. This way, you have a more structured repayment plan.

Borrowing is a regular activity for Filipinos, especially when they have immediate needs that require quick responses. However, borrowing from banks takes work. Financial institutions often require various documents before you can borrow from them. You must establish your credibility in borrowing, even for small amounts, before they grant you a loan. 

utang vs instant pautang

Instant Pautang

“Instant pautang” translates to instant loan in English. The term suggests a more immediate and likely informal way of borrowing money. It is often associated with quick loans from various sources, including online lending platforms, mobile apps, or informal arrangements with friends and family. The emphasis is on the fast and accessible nature of the loan. In addition, the process may be less formal than that of traditional lending institutions.

An online loan is a type of borrowing using a website. Typically, the loan amounts start small and gradually increase over time. The growth of the quick cash you can borrow depends on your repayment history. If you consistently pay on time, the cash loan you can borrow in the future will increase. 

The beauty of online loans in the Philippines lies in their convenience—fast and easy. You don’t need to submit various requirements to get your loan approval; there’s no need to wait for verification. Often, you only need one or two valid IDs. You’ll only need a short period to know whether you’re approved. 

In addition, you can receive your quick loan cash within 24 hours. This is excellent for Filipino citizens who opt for instant borrowing. Borrowing money online will be hassle-free for Filipinos. Since the Philippines is progressing in technology usage, internet access is almost everywhere. Applying for an instant online loan is just a click away. 

Utang is a broader term for debt or loan, while instant pautang highlights the urgency and may involve quicker, possibly less formal loan methods. The choice between the two depends on the nature of your borrowing situation.

Different Ways to Utang in the Philippines

You can take out a loan in the Philippines using various methods. However, you must be vigilant in talking to only legit and trusted lenders. Here are the most common ways for you to utang. 

5-6 Loan 

During the 2016 elections, presidential candidate Mayor Duterte stated his plans to irradicate the country’s ‘5-6’ lending scheme. The ‘5-6’ lending system is the famous business of Indians, locally known as Bombays, in the Philippines. Indeed, it was done during President Rodrigo Duterte’s 2016-2022 term. 

The Bombays are usually depicted wearing turbans, riding motorbikes, sometimes walking with a long umbrella, and offering loans with daily repayments. It does not matter if the repayments are as small as 20 pesos daily. They diligently come to the borrower’s doorsteps every day. Sometimes, they even offer furniture, small appliances, and other household items. The payments are the same daily.

5-6 Loan Computation

Indian nationals introduced the 5-6 lending system in the ’70s, and it has spread like wildfire. The Indians’ lending business didn’t need any advertisements; gossip in the neighborhood popularized it. Since borrowing money is part of Filipino culture, the money lending system was greatly accepted despite the staggering interest rate of 20%.

If you borrow Php 500, you must pay an additional 20% interest. In this case, 500 x 0.20 = 100. Therefore, you must pay a total of Php 600 in daily installments.

Why did 5-6 become so popular? Since the repayment is daily, the cash to be paid seems smaller than it is.

Parting with a 20 peso bill each day is more manageable than paying Php 600 in a one-time payment. Also, unlike in banks, there is no need to hassle yourself with any requirement.

Aside from the 5-6, there are other types of moneylending in the Philippines.

Fix Rate Loan Definition

A fixed-rate loan has an interest rate that is constant for the entire loan duration. The borrower pays the same interest rate on the principal amount borrowed throughout the loan’s tenure. Fixed-rate loans provide consistent monthly payments, and you can predict your expenses. Therefore, they make budgeting and financial planning easier.

The fixed interest rate starts when your loan gets approved and does not change, regardless of interest rate fluctuations in the market. 

A fixed-rate loan is usually a verbal agreement between the lender and the borrower.

Neighbors usually practice this system, as many Filipinos try their luck first with their neighbors regarding utang. There is no standard interest rate. They just talk about the fixed amount of money to top up regarding repayment. The interest remains the same throughout the loan repayment. You might have a kind neighbor who won’t ask for interest if you are lucky enough.

different ways to utang in the Philippines

Incremental Borrowing Rate

The interest rate increases after a certain period of time. With this system, the borrowers are forced to pay as soon as possible or will have to pay more.

While this ensures the lenders will profit from the primary principal loan, it is too risky for the borrower. The interest rate may start at 3%, making the loan seem reasonable and accessible initially. If you fail to pay within a month, the interest rate will increase to 4% the next month.

Incremental Borrowing Rate introduces a time-sensitive element, pressuring borrowers to repay promptly. 

Borrowing quick cash at this rate is dangerous for borrowers as it could lead to an increase in interest rates. If you cannot repay within the due, the interest will increase, snowballing the overall amount you owe. As a result, it creates more financial strain for borrowers who cannot settle their debt promptly.

Diminishing Interest

It is also known as diminishing balance or reducing balance interest. It means the interest charged on a loan is calculated on the remaining outstanding balance. As the borrower makes payments and reduces the principal amount borrowed, the interest charged on the remaining balance decreases.

Many Filipinos prefer this system. The borrower pays monthly installments, and the interest decreases based on the current outstanding balance of the capital.

How to compute diminishing balance on loan?

For example, if you borrowed Php 1,000, your outstanding balance will be Php 1,200 if the interest rate is 20%.

Php 1,000 x .20 = Php200
Php 1,000 + Php 200 = Php 1,200

  • If the first payment is Php 300, the Php 200 (20% of Php 1,000) will be for interest, and the Php 100 will be for capital.
  • Then, the new outstanding balance of the capital will be Php 900.

Php 900 x .20 = Php 180
Php 900 + Php 180= Php 1,080

  • Then, on the second month, you’ll pay Php 300 (Php 120 for the capital and Php 180 for the interest).
  • The current outstanding balance of the capital will be Php780.

Diminishing interest is beneficial over time. Your payments will be spent on reducing the principal rather than paying interest. It potentially lowers overall interest costs more than a fixed or increasing interest rate loan.

Recurring interest

It systematically calculates interest repeatedly in regular intervals such as daily, monthly, or annually. The interest is applied to the remaining credit balance, and the cycle repeats according to the agreed-upon schedule.

The lender will keep collecting the interest if the debt has not been paid in full, not by installment. This is the lending system used by pawnshops in the Philippines. 

In addition, it is a standard feature in credit cards and many types of loans. In credit cards, interest is typically charged on the unpaid balance if the total amount is not paid by the due date. Similarly, in loans, interest is often applied at regular intervals, which impacts the overall borrowing cost.

If you fail to pay off the entire balance, interest accrues during each interest cycle, compounding the total amount owed.

Timely payments are essential to minimize the overall interest charges. If you understand the terms of the financial agreement, you can manage the cost of borrowing effectively.

paluwagan with no interest


It is a Filipino term that refers to a cooperative savings and lending system. It is a form of informal financial arrangement among individuals who agree to contribute a fixed amount of money at regular intervals. Then, the total pool of funds is allocated to one member on a rotating basis. The process continues until each member has received their share.

Paluwagan, known as Pool funding, is as popular as 5-6. This is commonly done within a neighborhood or close circle of friends or workmates. Each member agrees to pay a fixed amount regularly. The contributions could be weekly, bi-weekly, or monthly, depending on the agreed-upon schedule.

A group of people will collect a certain amount from each other, then do a ‘casting lots’ or “bunutan” to determine who will be the first to use the pooled fund.

Then, on the next due, they will once again create a pooled fund of the same amount, and the next person (as decided by the casting lots at the beginning of the system) will take home the money.  The system will continue until the last person can take home the same month of the collected pooled fund.

However, the paluwagan system usually does not involve the payment of interest. Members contribute and receive an equal share without any interest charges. Also, it relies on trust among its members. There is a mutual understanding that each member will fulfill their contribution commitments, and the funds are managed within the group.

Filipinos have many ways to find extra cash when in urgent need. But you have to be mindful of the possible fees, especially the interest that will incur in the long run. This way, you will manage your utang wisely and timely. 

Where to Utang in the Philippines?

Borrowing money might sound intimidating, especially if you need to know where to get it. But now, Pinoys has many options available. Here are the top choices you can make. 

Private Money Lenders 

Money lenders can be individuals or small lending entities that use their funds or funds acquired through other means to lend to borrowers.

Private lending companies in the Philippines can offer short-term loans with the fewest required documents—sometimes none, in the case of Bombay.

Private money lenders are not heavily regulated, especially individual or small lending entities. The degree of regulation depends on the jurisdiction and the type of lending activity.

These licensed lenders, especially in informal settings, may require less collateral. They have more flexible terms, which can result in higher risks for both parties.


On the other hand, not so many Filipinos are keen to take loans from banks. This is due to the hassle of obtaining the required documents and a long processing time. 

Banks are financial institutions with a wide range of financial services, including accepting deposits, offering loans, and facilitating various banking transactions. They operate with funds from depositors and may borrow from other financial institutions.

Banks are strict due to regulatory authorities being highly regulated financial institutions. They must adhere to legal and regulatory frameworks, ensuring consumer protection and financial stability.

Banks may require collateral and perform stringent assessments of a borrower’s creditworthiness to minimize risk. In addition, banks don’t usually give out short-term loans.

instant online utang

Online Private Lenders

As the name suggests, these lenders operate online, meaning you can access their services through digital platforms. They are quite similar to private lenders, which offer loan products and services without collateral. 

Online lenders are private lenders willing to give short-term loans at the shortest process borrowers can ever experience. You can bring home the instant loan cash within a day without leaving your spot. Lenders such as Cash Mart can disburse quick cash within the day of application.

Many Filipinos opt for online private lenders. However, not all are willing to apply for it—they are still hesitant to borrow money online. However, with recent clients’ positive reviews and feedback, many  Pinoys have changed their minds. 

You can utang anytime, anywhere, with online lenders. But you still cannot deny the benefits that Filipinos can enjoy from having various options available. Choose a money lending facility that suits your financial situation. 

Is it Safe to Utang in the Philippines?

Yes, the safety of utang in the country depends on various factors, such as the lender’s legitimacy and security, interest rates, and more. There is a law that supports such financial activity. 

Furthermore, the law implies that no borrowers can be imprisoned for unpaid loans alone. It is your safety net, as stated in the Philippine Constitution. However, civil cases can be filed against you to pay the money loan if you fail to do your obligations.



The Truth in Lending Act mandates that all lenders, including banks and private lenders, be transparent with their terms and disclose all costs in the agreement contract. All costs and amounts must be itemized to ensure borrowers are aware.

Republic Act No. 3765 was enacted on November 18, 1963, and governs the disclosure of terms and conditions in credit transactions. Here are the key provisions of the law. 

Uniform Terminology. R. A. No. 3765 establishes similar names used for disclosing credit terms. This ensures that you can easily understand and compare the terms of different credit offers.

Written Disclosure Statement. Lenders must provide a written disclosure statement outlining the loan’s key terms. It must include the total amount financed, the finance charge, the annual percentage rate (APR), and the payment schedule.

Effective Annual Interest Rate. Lenders must indicate the effective annual interest rate to borrowers. The rate reflects the true borrowing cost, including the interest rate and other applicable fees.

Prepayment of Loans. The law addresses loan prepayment, ensuring borrowers can settle their obligations before the agreed-upon maturity date. In such cases, lenders must rebate or adjust the finance charges accordingly.

Penalties for Violations. Republic Act No. 3765 penalizes lenders who violate its provisions. Violations may result in fines, imprisonment, or both.

Regulatory Oversight. The law authorizes regulatory agencies  such as Bangko Sentral ng Pilipinas (BSP) and the Securities and Exchange Commission (SEC). They enforce provisions and regulate credit transactions. 

The Truth in Lending Act protects borrowers from unfair lending practices. It ensures that you have complete and accurate information about the terms of their loans. That’s why you must carefully review lenders’ disclosure statements to make informed decisions about their credit transactions.

7 Practical Tips for a Secure Instant Pautang

Are you considering securing an instant pautang through online platforms or mobile apps? 

It is crucial to prioritize safety and make informed decisions. Here are some practical tips to ensure a secure online utang experience. 

Research and Choose Reputable Platforms

Before applying for any loan, research and choose reputable online lending platforms. Look for reviews, ratings, and feedback from other users. This will help you check the legitimacy and reliability of your chosen platform.

Verify Lender Credentials

Check if the lender is legitimate and authorized to provide loans. Look for proper licensing and registration with relevant regulatory authorities. Legitimate lenders are transparent about their credentials.

Read the Terms and Conditions

Carefully read and understand the terms and conditions of the online instant utang. Focus on interest rates, fees, repayment terms, and any penalties for late payments. Clarify any uncertainties with the lender before proceeding.

Secure and Trusted Websites/Apps

Use secure and trusted websites or mobile apps for loan applications. In the website URL, look for “https://” to indicate a secure connection. Also, download a lender’s mobile apps from official app stores. It is a vital step to avoid potential security risks.

Check for Data Encryption for instant pautang

Check for Data Encryption

Ensure that the online platform or app uses encryption to protect your data. Look for security indicators, such as a padlock icon in the address bar. Its presence is vital in indicating that your information is transmitted securely.

Understand the Repayment Process

Clearly understand the repayment process, including the schedule and methods of payment. Be aware of any automatic deductions from your bank account and ensure you have sufficient funds.

Review Customer Support

Assess customer support and verify the availability and responsiveness. Legitimate lenders provide reliable customer support to address queries and concerns. Test their responsiveness before committing to a loan.

Remember that responsible borrowing involves careful consideration of the guide stated above. Your proactive efforts ensure your secure utang experience. If in doubt, seek advice from financial professionals before proceeding with a loan application.

Cash Mart: Swaktong Instant Pautang

Kung kailangan mo ng instant pautang pero ayaw mo ma-experience ang hassle ng mahabang pila o pumunta pa sa lending companies’ offices or bangko para mag-submit ng application, you can try Cash Mart’s fast cash loan.

Start filling in our online application form.

Expect the process to be smooth and short. For more inquiries, call Cash Mart now at (02) 829-0000.

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