What is a Personal Loan in the Philippines?
A personal loan simply explained, is an amount of money borrowed from a bank or a lender. Personal loans in the Philippines range from as low as Php 10,000 to as high as Php 2 million. Several factors are taken into consideration when approving a borrower’s loan application.
Banks and other lenders usually offer personal loans with three common features:
- Loanable Amount – This is the actual amount of a personal loan before the interest rates. This amount may range from Php 10,000 to Php 2 million.
- Interest Rates – Most interest rates for personal loans are fixed. They remain constant throughout the loan’s duration. There are still some lenders who offer variable interest rates, which change after a certain period of time.
- Loan Term – A personal loan borrower repays the lender on a monthly basis. Loan terms may range from 12 to 36 months, depending on the lender and the borrower’s preference. Interest rates are lower for shorter loan terms.
Loan terms are usually fixed. When a borrower agrees to 12 months, the monthly payment period has to be 12 months – no more and no less. Loan extensions are based on approval and will incur possibly higher interest rates and hefty penalties. Most banks charge pre-termination fees for loans that are paid off earlier than the full loan term.
You may use a personal loan calculator for you to set your expectations on the amount you would have to pay on a monthly basis after interest.
Most personal loan lenders in the Philippines offer secured and unsecured personal loans.
A secured personal loan is based on collateral such as a real estate property, automobile, deposit account, and other possessions with significant monetary value. In the event that the borrower fails to make a payment for the loan, the lender can take possession of the collateral.
Since secured personal loans are less risky for the lender, it becomes easier for a borrower to loan a larger amount at lower interest rates. If you are looking for a personal loan with a low interest rate in the Philippines, you may consider getting a secured personal loan.
An unsecured loan is a personal loan without collateral. Lenders in the Philippines usually allow loans of only up to Php 1 million when no collateral is presented.
This is riskier for personal loan lenders so a borrower can expect lower loan amounts, shorter loan terms, and higher interest rates when applying for an unsecured personal loan.
Why Are Personal Loans Popular?
It is ideal for everyone to save for extra special days and some rainy days. However, there are times when unexpected large expenses can cause you to run short or drain your savings to the last drop. Personal loans are popular because of the following reasons:
- Quick approval
- Fast loan release
- Easy payment options
- Overall convenient process
You may apply, get approved, and receive your personal loan in as fast as 24 hours depending on the lender, the loan type, and the requirements you submit. Because of this, many fail to research and learn more about the loan they’re taking. There are now plenty of bank or private lender personal loans in the Philippine market. It is very important for you to fully understand the terms and conditions of their personal loan, as well as your responsibilities as a borrower to avoid stress and hassle later on.
Who Are the Usual Applicants for Personal Loans?
There are different kinds of loans in the market today. There are housing loans, car loans, and personal loans among others. In a nutshell, you can borrow money to spend on practically anything.
There are others who would use personal loans as an investment for business while there are also borrowers who have something more specific in mind such as:
- Medical bills
- Debt consolidation
- New gadgets and furniture
- Home renovations and improvements
- Weddings and Birthdays
As its name suggests, a personal loan is indeed personal. It is up to you how you want to spend the borrowed money. In most cases, the lender would no longer require you to explain the purpose of the loan.
For personal loans, the purpose of borrowing money is almost never significant in the approval process. It usually doesn’t even matter if you need funds for a medical emergency or if you just want to buy a newly released cell phone model. The approval rating still depends on whether the loan is secured or unsecured, your income, credit history, and other factors.
Applying for a Personal Loan in the Philippines
It is highly recommended for a borrower to extensively research the different types of loans and lender options in the Philippines before submitting a personal loan application. Interest rates and terms have major differences between banks and other lenders.
Once you have signed a personal loan agreement and have already received the loan money, there’s no turning back. As mentioned above, even if you choose to pay back the entire loan earlier than the loan term, there will still be pre-termination charges.
Personal Loan Candidate Requirements
Especially for first-time personal loan applicants, the most basic question that comes to mind – what are the requirements?
For a chance to get approved for a personal loan, you must be:
- At least 21 years old
- A Filipino citizen
Most banks require Filipino citizenship, but may also consider foreigners who have lived in the Philippines for a certain period of time. The lender will also inform you about the minimum gross income requirement and may require you to submit your credibility proof. Most banks would do a credit check for them to determine your credit history. This is their way to find out whether you will actually repay them on time or at all.
You will be required to fill up a loan application form and submit several documents. It is impossible to find a lender that allowed personal loan in the Philippines with no requirements. To ensure a hassle-free application, prepare the original copy and photocopies of the following:
- A government-issued ID (usually at least 2)
- Proof of income, your most recent pay slips that covers the last 3 months
- Latest ITR (Income Tax Return)
- Proof of employment or Certificate of employment
- If you are self-employed, you may be required to submit your DTI registration and/or 1 to 2 years’ worth of audited financial statements.
How to Apply for a Personal Loan
If you’re physically going to your bank of choice, simply bring the loan requirements. Ask for the application form, fill it out completely. When in doubt about anything, ask a bank representative to help you out. Submit the application form and wait for their approval. The bank representative will inform you of the usual timeframe for approvals.
Although it is still an option for you to go to the bank and speak to a loan representative, there are easier and more convenient ways to apply for personal loans online. In fact, if all your requirements are ready, a loan application is done in as quick as 10 minutes.
The steps are similar to the ones mentioned above. Instead of going to the bank personally, just visit your preferred private lender or bank’s website and do the following.
- Application Form – Fill out a personal application form completely. Since a bank representative is not around to assist you, make sure all fields are filled out correctly. If you miss anything, you may have to wait longer for approval or worse, your application may get rejected.
- Requirements – All requirements must be scanned or photographed clearly. Attach them to your application form or email them to your bank.
- Confirmation – The usual timeframe for personal loan approvals is between 5 to 7 working days. However, many banks offer quick turnaround times that can be as fast as 24 hours.
Once your personal loan application has been approved, a check will be issued to your name. In some cases, the funds will be deposited to your bank account.
How to Get a Large Loan Amount
If you have tried applying and getting approved for a personal loan in the past, you must know by now that it’s fairly quick and easy if you’re asking for the minimum loan amount or somewhere around 5 figures. However, if you’re loaning hundreds of thousands to millions, it gets challenging to get your loan approved.
What if you need to loan a higher amount?
- Secured Loan – A secured loan means you have to present collateral for your loan to be approved. If the collateral corresponds to a significant amount, for instance, a real estate property, then the chance of getting approved for a large personal loan is higher.
- Shorter Loan Term – The longer you hold on to the borrowed money, the riskier it is for the bank. If you offer to pay back your personal loan as fast as possible, there’s less risk involved. Less risk for the bank means more chances for a large amount to get approved.
- High Depositor – Do you have a savings or time deposit account with your bank that contains a significant amount? Have you consistently deposited and transacted large amounts with them? If so, you won’t have a hard time getting a large amount approved for your personal loan.
Loan Application Processing
The moment your personal loan application form and requirements are submitted to your bank, they will begin processing your application. They will check the details you wrote on your application and find out if they are correct, complete, and truthful. In many cases especially if you’re applying for a large personal loan amount, they can do a background check and credit check on you.
Banks have a system to check on your credit rating as well. All types of loans, credit card bills, and other personal bills that you paid in the past are taken into consideration in your credit score. If you’re an on-time payer without any debts or outstanding payments, you shouldn’t have any problem getting approved. In fact, there’s a higher chance for you to get approved if there’s more than enough positive information available on your credit report compared to first-time no-record loan applicants.
Personal Data Security
It is understandable how you could worry a little about giving out all your personal information to the bank or lender especially if you’re processing your information online.
Before submitting any of your personal data and files to your bank, make sure you’re on the right website. If you’re 100% sure that this is the legitimate website of your bank, you don’t have to worry about your security. These websites are heavily “guarded” to ensure that all customer data remain private and secure.
Banks and Companies Offering Personal Loans in the Philippines
Most commercial banks offer personal loans. There are also several financial institutions and private lenders granting personal loans to applicants. Some of them are found online.
It is very important for every loan applicant to research carefully and understand every detail of the personal loan they are applying for. Sometimes, because funds are needed urgently especially for emergencies and other very important reasons, loan applicants carelessly accept anything that is offered to them. Many of them end up getting shocked by hefty interest rates, hidden fees, unfriendly payment options, and a whole lot of inconvenience.
On our website, you will find reviews about these companies that offer personal loans in the Philippines. We checked loan details, requirements, and the loan process. Let this serve as a guide for you before you hit the submit button on that application!