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5 Awesome Rewards of Responsible Borrowers and How to be One

Rewards of Responsible Borrowers Updated on March 2024

Borrowing money is part of our culture. 

Before, Filipinos often sought financial aid from their loved ones abroad or more affluent friends. Today, Pinoys opt out of taking money from lenders, regardless of whether it is legitimate or not. 

However, avoiding repayments is also rampant

Lending money to your closest and trusted family members and friends creates a rift, especially if you delay, or worse, daily your payments. 

Worse, late repayments can tarnish your reputation. Your tiyo and tiya will always bring it up as a hot topic during family reunions. Sometimes, your friend will spread malicious rumors about your borrowing habit, even though it is your first time. 

The borrower, the one at fault, frequently gets mad when their beloved reminds them of their payment. It is pretty disappointing and heartbreaking, especially if you, as a lender, face the same financial emergency. 

But that is not always the case. If you borrow money and pay it off responsibly, you can gain benefits you never knew existed. 

Fortunately, taking out quick cash from licensed moneylenders has perks, especially in your future financial plan. 

Unlocking financial success begins with responsible borrowing. 

Know the rewards for responsible borrowers. Explore the five remarkable rewards that await you when you delve into actionable insights on how to become a responsible borrower. Also, discover the benefits of prudent financial practices and the key steps to ensure your journey toward becoming a responsible borrower.

rewards-for-being-a-responsible-borrower-and-how-to-be-one

 

7 Awesome Benefits of a Responsible Borrower

Responsible borrowing safeguards your financial health and brings you rewarding outcomes. Responsible borrowers benefit a lot from their following financial plans. Here is why. 

1. Higher re-loanable amount and easy re-loan process

Some lenders reward their loyal clients with a higher re-loanable amount when repaying their loans before or on their due dates. It is a manifestation of the trust that lenders place in their clients. It is suitable if you have demonstrated financial responsibility to meet your repayment obligations promptly. 

Paying diligently increases the level of trust given by lenders. 

In addition, the re-loan process is more accessible for trusted borrowers. If you make a re-loan, you do not have to resubmit all the required documents. In many cases, the lender only requests an update to the borrower’s latest payslip to verify your current financial status. You must specify changes such as an increased salary. This way, your loan process is faster. The quick documentation process saves you time and reduces the hassle of applying for a loan.

2. Strong credit score for responsible borrowers. 

Suppose you are a responsible borrower and have been getting a loan from a registered lender or bank. In that case, the lenders will report your credit information and payment behavior to Credit Information Corporation (CIC) and Credit Management Association of the Philippines, Inc. (CMAP).

For responsible borrowers, the credit reporting mechanism is a valuable asset. 

Your future registered lenders can see your positive record, letting them know you are creditworthy. Your healthy credit score is a testament to your reliability and financial prudence. Therefore, it facilitates smoother and more favorable borrowing terms for you in the future.

However, if you have yet to settle your loan on time or, worse, if you default, your credit report will be negative. Your future lender can access your credit history and will see how you dealt with your previous loan repayments. This transparency influences a legitimate money lending facility’s decision-making process. Therefore, maintaining a strong credit score opens doors to better borrowing opportunities and safeguards your financial reputation for future transactions.

3. Easy access to housing and car loans

A favorable credit report results from responsible borrowing practices. In addition, a good credit report increases your chances of getting housing or a car loan. These loans have high loanable amounts, and banks will not approve those with a negative credit report

responsible borrowers access housing and car loans

But what if you have a low credit score or zero credit history? How can you proceed with your auto loan? 

Housing and car loans typically involve significantly high loanable amounts. A positive credit report signals to lenders that you are a reliable and low-risk borrower, increasing your chances of loan approval. Often, lenders provide more favorable terms, such as lower interest rates and more flexible repayment options.

Banks and reputable lenders prioritize creditworthiness in their approval process. 

There could be lenders who claim not to check the credit history. However, they charge higher interest rates. That’s why it is vital always to have a good credit report. It does not only expand your options for housing and car loans. Also, it positions you to secure these loans on more favorable terms. As a result, you ultimately contribute to a more cost-effective and financially sensible borrowing experience.

4. Zero Penalty Fees

One of the rewarding aspects of being a responsible borrower is the potential to enjoy zero penalty fees. If you settle your loan on time, you can avoid paying the late payment fee. 

There are no laws that standardize late payment fees. 

Unlike interest rates, late payment fees are not standardized by-laws. They are always subject to the policies of individual lenders. If you get a loan from a loan shark, you will be shocked by their skyrocketing late payment penalties. These charges contribute to Pinoy’s financial hardship cycle, which causes the debt burden to become overwhelming. That is why a lot of us are baon sa utang.” 

Nevertheless, prioritizing timely loan repayments and choosing responsible lenders can avoid these excessive penalty fees and foster a healthier financial relationship with creditors. 

5. Avoid legal actions from your lender.

Responsible borrowers significantly reduce the risk of facing legal actions initiated by lenders. Yes, it is a fact. Unless a lender files an estafa case, no borrower will go to jail. 

While imprisonment is generally not a consequence for most loan defaults, lenders can still take legal action. For example, the lender can go to court and file a Small Claims Case. It is a legal process allowing lenders to seek repayment for outstanding debts within a cost-effective framework. Although it may not lead to imprisonment, it can result in a court-ordered judgment. It means you, as a borrower, must settle the outstanding debt.

Your credit report will record any financial disputes under your name. 

Moreover, even if imprisonment is not a direct consequence, unresolved financial disputes can impact your credit report. Instances of non-payment or legal actions initiated by lenders may be recorded in your credit history. As a result, it can adversely affect your credit score. Also, securing favorable terms for future loans or financial transactions is more challenging.

Responsible borrowers practice and proactively address any financial difficulties. Timely communication with lenders for mutually agreeable solutions mitigates the risk of legal actions and maintains a positive credit history.

6. Lower interest rates in future loan applications.

Creditors see you as less likely to default on future loans if you consistently meet your financial obligations, maintain a positive credit history, and manage your debts prudently. The minimum risk prompts moneylenders to offer lower interest rates on loans extended to responsible borrowers only.

low-Interest-Rates-for-responsible-borrowers

Securing lower interest rates is advantageous over the life of the loan. Lower interest rates reduce the overall borrowing costs, saving considerable money that would otherwise be spent on interest payments. Also, you experience more manageable monthly payments.

Responsible borrowers can enjoy tangible financial benefits. 

In addition, the cost savings achieved through lower interest rates are notable during long-term loans such as mortgages or auto loans. It eases the financial burden on borrowers. Also, it enhances your ability to allocate funds toward other essential needs like savings. As a result, it contributes to a more secure and comfortable financial future. 

7. Financial stability for responsible borrowers. 

Responsible borrowing fosters and maintains financial stability. You can proactively avoid pitfalls like accumulating excessive debt by engaging in sensible borrowing practices. 

Responsible borrowers align their lifestyle and spending habits with their income. This ensures their financial obligations, including loan repayments, are within manageable limits. Also, it prevents them from building up unsustainable debt levels and reduces the likelihood of falling into a cycle of financial stress.

A responsible borrower always makes informed financial decisions. 

Can you thoroughly understand the terms and conditions of loans, assess the impact of borrowing on your overall financial picture, and plan for the long term? If yes, it means you have this level of financial literacy. You are empowered to navigate various financial challenges and opportunities wisely, contributing to your overall stability.

Moreover, financial stability acts as a buffer against unforeseen financial challenges. For example, you experienced job loss, medical emergencies, or economic downturns. You are better equipped to weather these storms. Also, you are less likely to panic. Instead, think of feasible solutions. If you have a resilient foundation, it contributes to a secure and prosperous financial future.

The principles of responsible borrowing are rich in benefits that extend beyond mere financial transactions. It ranges from the invaluable advantage of a strong credit score to the tangible rewards of lower interest rates and enhanced financial stability. Being responsible borrowers unlocks a pathway to long-term financial well-being. 

How to Be a Responsible Borrower

Becoming a responsible borrower is vital to financial empowerment and long-term stability. You must adopt certain practices to confidently navigate the borrowing landscape and build a foundation for a sound and sustainable financial future.

Do you want to know what it takes to become a responsible borrower? Consider these 10 tips.

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Get the right loan.

If you search for the type of loan in Google or go to banks and inquire, you will discover various loans from which to choose. These loans vary in terms, loanable amounts, and interest rates, which can be really overwhelming. 

However, before delving into the loan specifics, it is crucial to identify the purpose of your loan. Aligning the loan type with your financial needs ensures a more tailored and suitable borrowing experience. 

Narrowing your loan options is a strategic approach. It helps you secure the necessary funds and contributes to a more effective and responsible management of your financial resources. This way, you can get a loan that fits your financial needs best.

Borrow only the amount you need and can pay with ease.

Borrowing only the loan amount that fits your needs and financial capacity is a foundation of responsible borrowing. It is best to use a loan calculator. They have one on their website if you borrow from a reputable lender.

If you get a loan from an old-school company, you must visit its physical office personally since it has no website. These are traditional lenders without an online platform. Then, inquire how they calculate the loan with the interest rate and how much you have to repay each term.

With a loan calculator, you will be able to know the total amount you have to repay and how much you need to repay each term. Also, you will know how much repayment you can handle without sacrificing your basic needs. Isn’t it pitiful not to eat three times a day just to repay a loan and avoid penalties?

Choose the best repayment term.

Selecting the most suitable repayment term is vital for responsible borrowers. Lenders offer various repayment terms. Most have monthly terms, but others offer loans on weekly and bi-weekly terms. Choose the one that best meets your status. 

Align the repayment schedule with your income frequency. If you receive your salary weekly, you can choose the weekly term. You can choose the bi-weekly term if you receive your income twice a month.

You can fulfill your financial obligations without undue strain by choosing the repayment term corresponding to your income schedule. As a thoughtful approach, you ease the repayment process and contribute to a more harmonious financial management strategy. In addition, it ensures that your loan commitments complement your income structure effectively. 

Do not lie. Lenders are good at finding the truth.

Lending is an industry centered on trust and money. Lenders are adept at assessing financial information and prioritizing transparency and accuracy during loan applications. Any deviation from the truth could lead to heartbreaking bad news.

Honesty is indeed the best policy in the lending business. 

Licensed lenders will only give loans to those they deem creditworthy. If the lender discovers you lied, you will be automatically declined. Creditors will write your name on an automatic default list. It means you will not be able to get a loan, which severely limits your future borrowing opportunities. 

If you provide accurate information, you adhere to ethical standards and position yourself for a more positive and sustainable financial relationship with legit lenders. As a result, you gain and contribute to a trustworthy and mutually beneficial financial partnership.

Never hide existing loans.

Disclosing existing loans is a fundamental task of responsible borrowers. Keep in mind that the omission of truth is similar to lying. 

Your loans leave a record despite settling them long ago. They leave a financial footprint that can impact you anytime. In addition, your existing loans have a record with CIC and CMAP. Suppose they asked whether you have an existing loan. It is better to tell the truth. You still have the chance to get approved rather than lie and get automatically declined.

Lenders rely on this information to assess your holistic financial situation and creditworthiness. Remember that lenders have mechanisms to verify financial histories if you attempt to conceal existing loans. But if you provide accurate information about your existing financial commitments, you demonstrate transparency and responsibility. 

Furthermore, lying about existing loans jeopardizes your chances of approval and damages your credit reputation. As a result, future borrowing becomes more challenging.

Read and Understand the loan contract.

Many borrowers overlook reading and understanding the loan contract. Although quick access to cash might be enticing, the loan terms and conditions outlined are vital. They can safeguard your finances and credit report.

fine prints of loan contract

Most borrowers get too excited and do not bother reading the fine print. What matters is that their affixed signature means they are getting cash. However, the loan contract is legal as it bears the rights and responsibilities of your agreement with the lender and borrower. It holds crucial information about the interest rates, repayment terms, fees, and potential penalties. If you ignore these details, it might lead to unforeseen financial burdens and repercussions.

But if you take time to read and comprehend the Notes of the Contract thoroughly, you can make informed decisions. It helps you avoid unnecessary expenses, penalties, or adverse impacts on credit reports. It is not merely a formality but a means to protect the financial well-being of responsible borrowers. 

Meet the repayments

Settling your loan repayments on time is fundamental to showing your commitment as a responsible borrower. 

A consistent and punctual repayment record builds and preserves an excellent credit score. Reputable lenders use this score to assess your creditworthiness. You can strengthen your financial credibility with a positive history of on-time repayments.

On the other hand, late repayment fees can quickly accumulate and add unnecessary financial burden. Often, it is imposed for every day the payment is overdue. If you fail to repay, it keeps adding up until you pay it off on time. That’s why regular and timely payments not only save you from these extra costs. Also, it establishes a reliable reputation with lenders. Most importantly, it fosters positive relationships with lenders. 

Keep a copy of your contract and repayments.

Maintaining a record of your loan contract and repayments is a prudent practice for responsible borrowers. Sometimes, your repayments take time to register in the lender’s system. However, keeping a copy of your receipts is tangible evidence of fulfilling your repayment obligations.

In addition, discrepancies arise in your repayment record. If you have a detailed copy of your repayments, it becomes invaluable. These receipts act as a reference for your financial records and rectify inaccuracies on your credit report.

Always file your loan-related documents in one envelope, including the contract and repayment receipts. This is the best safeguard against potential disputes and creates a solid foundation for addressing any discrepancies in the future. 

This proactive approach ensures that your credit history accurately reflects your responsible borrowing behavior. Most importantly, it provides peace of mind and facilitates smoother interactions with trusted lenders and credit reporting agencies.

Keep track of your balance.

Knowing the remaining amount to repay clearly shows your financial commitment. Also, it enables better financial planning.

Always have a vigilant eye on your loan balance. You stay informed about the progress of your repayments, which also serves as motivation. Watching the balance decrease with each payment is a tangible representation of your financial discipline and progress toward being debt-free. It is like slowly reaching the ladder of success for loan repayment. 

In addition, by keeping this practice, you can avoid surprises regarding outstanding amounts or impending due dates. Also, staying proactive and aware of your loan keeps you balanced about your financial priorities and allows you to allocate resources effectively. Most importantly, it highlights that you belong to the group of responsible borrowers. 

Stay within your budget. 

Budgeting is creating a structured plan that outlines your income, expenses, and savings goals. It is your clear roadmap for financial success. Sticking to this budget is equally crucial. It ensures disciplined spending and cultivates healthy saving habits.

always stick to your budget

When you craft a budget, align it with your income and expenditures. Such expenses include housing, utilities, groceries, loan repayment, and discretionary spending. This proactive approach prevents overspending and allows you to prioritize savings and financial goals.

Creating a budget is one thing, but sticking to it is another. It involves mindful financial decisions and avoiding impulsive purchases that may lead to financial strain. Regularly review and adjust your budget in response to changes in income or expenses. This will ensure its continued relevance and effectiveness and guide you in becoming a responsible borrower. 

Embracing these responsible borrowing practices benefits any current financial situation and sets the stage for a more secure and prosperous financial future. Most importantly, responsible borrowers must maintain discipline when repaying loans.

What to do if you can’t repay your outstanding debt?

If you cannot repay your outstanding debt, address the financial situation and work towards a resolution. Engage in open communication with your lender and explain your current situation about repayment obligations. Always pay attention to your lender’s reminders and calls.

keep off from debts

Registered lenders with reputable images are often willing to work with borrowers facing repayment challenges. Instead of avoiding communication, contact your lender when you anticipate difficulties. Explain your situation, express your willingness to resolve the issue, and inquire about alternative options.

Many licensed lenders understand that financial hardships can arise unexpectedly and may offer the following solutions. 

Repayment plans – Negotiate a revised repayment plan that better aligns with your current financial situation.

Loan modification – Inquire about modifying the loan terms to make it more manageable.

Temporary relief – Some lenders may offer temporary relief by allowing you to defer or make partial payments for a specific period.

Interest rate reduction – Discuss the potential for a temporary reduction in interest rates to ease the financial burden.

If you initiate a conversation, you commit to resolving the issue. Lenders are often more understanding and willing to explore alternatives. However, ignoring the situation can lead to further complications. You must be ready to pay for late fees, penalties, and potential damage to your credit score. Remember, lenders are more inclined to help if you approach them honestly and genuinely willing to address the situation responsibly.

Will you end up in jail if you don’t pay your loan?

In the Philippines, failure to pay a debt is not a criminal offense that leads to imprisonment. The country’s laws recognize debt as a civil matter. Filipinos cannot be jailed solely for being unable to repay a loan. However, creditors do have legal avenues to pursue the collection of unpaid debts.

no jail for responsible borrowers

There are two possible answers to how your lender will take legal action. 

No, you will not go to jail without a loan contract. However, the lender can go to the barangay hall and demand a settlement in front of the officials. Or, you might seize a valuable property as collateral for the unpaid debts. 

Yes, depending on the agreement of the signed contract. You can get jailed if the case involves estafa or bounced checks. 

Lenders can file a case against the borrower under the A.M. No. 08-8-7-SC Revised Rules of Procedure for Small Claims Cases for loans not exceeding Php 200,000. This case will be in the borrower’s credit history and will remain on the record for years, making it impossible to get a crucial loan in banks.

Laws and regulations can change. It is advisable to seek updated information or consult a legal professional to understand the current legal landscape regarding debt and repayment in the Philippines.

Cash Mart: Best Tip for Responsible Borrowers

Getting a loan includes a lot of responsibilities but impacts your finances the most. If you handle it with diligence, you can reap the rewards for your future financial gains. But if you fail, you will suffer the consequences the most. 

Thankfully, there is Cash Mart. It is a reliable moneylending company that started in Singapore and grows here in the Philippines. Cash Mart guides you to become one of the most responsible borrowers in the country. It approves quick cash loans for eligible borrowers so you can easily manage your financial emergency.