How Does It Work in Philippines?
Personal loans are extremely popular in the Philippines, so the industry is quite developed. However, the basic approach is the same as everywhere:
- One applies for a loan in a bank, credit union, or online service;
- If approved, the payee must make monthly installments to cover the interest and the loan principal;
- There are early and late payment fees (optional), service fee, etc.;
- Good credit history is needed to apply for a loan (in a bank or a union);
- The interest is the top priority of the payment, so one’s first several installments may not be repaying the loan principal.
The Philippines also has loaning called OFW (overseas Filipino workers). The difference between OFW and regular personal loans is the larger amount of the money available and the terms more suitable for overseas workers.
How Much to Borrow?
It’s better to base the size of the loan on the needs of the applicant +10%-20% in case of an emergency change in plans. In Philippines banks, one can borrow up to ₱2,000,000. Online lenders offer less but with lower requirements. There are loans as small as ₱2,000 and they go up to ₱20,000 and more.
Best Personal Loan Service
Atome is one of the best online personal loan services in the Philippines. The maximum loan is only up to ₱15,000 (although they state it’s ₱12,000), but the terms and conditions are very beneficial. One can get a loan with a repayment period of 91 to 180 days.
The daily interest rate is only 0.25%, which is quite reasonable for the local private lenders. There’s also a service fee of 0.8%-0.14%. The service promises there are no other extra charges (given the applicant repays on time).
For the pre-application, one needs to state the amount of the desired loan and their mobile number. Then, the service will offer to register an account for which one will need an ID, a picture of the owner with the ID, and other data specified in the form. The system will calculate the general repayment amount and installments. If approved, the money will be transferred to the bank account given by the applicant.
There are a lot of special features like Pay later, reminders, and loans for businesses. The website and the app are easy to use, and the second loan is even easier to get.
Personal Loan Terms
The most common personal loan terms to look for:
- Loan tenure.
This is the amount of time in which the applicant has to repay the loan;
- Early repay fee.
There’s a penalty for repaying the loan earlier to save on the interest rate;
- Late repay fee.
There’s also a penalty for late payments that is a certain percent of the loan principal;
- Collateral agreement.
Putting the applicant’s property as the loan security, so that if the person can’t repay it, the company can take their assets.
There should be a person that guarantees to repay the loan for the applicant in case they can’t (optional).
Personal Loan Requirements
It’s much easier to get a loan these days thanks to private lenders. It used to be troublesome to get a bank credit earlier due to the number of documents the applicant had to gather and strict requirements. Nowadays, before applying for a personal loan in the Philippines, one must check if:
- They are a local resident;
- They have a local billing address;
- Their annual income fits the requirements of the company;
- They are 21+ years old;
- They have a TIN (tax identification number) and the UMID (unified multi-purpose ID);
- They have a postpaid mobile (or landline) number to back up their account.
If everything’s fine, the applicant can get the borrowed money in as soon as an hour.
Banks vs. Personal Lenders
There must have been a reason for creating online lenders, so one can assume traditional bank loans don’t meet all people’s needs. Let’s see the difference between the two most popular types of lenders, their advantages, and disadvantages.
To get a loan from a bank, one needs almost perfect credit history, financial statements, and a precise plan for the money borrowed. Besides, people often end up signing a collateral agreement, which puts their property at risk. However, traditional banks have the lowest interest rates and fewer additional fees.