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December 14, 2018
Borrowing money is not always bad, as long as it is done responsibly and for the right reason. Case in point: getting a personal loan to generate long-term income, like starting or expanding a business. Personal loans are also helpful in financing life milestones like weddings and immediate needs like medical bills and tuition fees.
Are you thinking of getting a personal loan? Get to know what it is exactly and the important details to remember before you apply online.
Here is everything first-time borrowers need to know about personal loans:
When you get a personal loan, you are formally borrowing money from a lender to fund your personal expenses. You are expected to pay back the money you owe, plus interest and fees.
Personal loans are also known as unsecured loans because lenders do not require collateral from prospective borrowers. Filipinos typically use personal loans for these purposes:
Getting a personal loan is a straightforward process. In the Philippines, it generally involves these steps:
Just like any financial product, personal loans come with benefits and drawbacks, which make them either suitable or unsuitable to certain kinds of borrowers. If you are not sure yet if getting a personal loan is the right decision for you, consider its pros and cons.
Personal loan providers charge an interest on the amount borrowed that must be paid every month.
Personal loans have lower interest rates than credit cards, making them a great choice for those who need quick cash for emergencies. But because personal loans are generally unsecured (meaning they are collateral-free), their rates are higher than secured loans such as auto loans and housing loans.
Banks that provide personal loans charge two sets of interest rates: monthly add-on rates and effective annual interest rates.
The add-on rate is the interest that the lender charges every month on the amount you plan to borrow.
On the other hand, effective interest rates show the actual cost of borrowing money. It includes the administrative or service fees that the bank charges for processing your loan application. This is why the effective interest rate—the one you’ll need to pay—is typically higher than the add-on rate.
Personal loan providers charge various fees from a borrower’s loan proceeds. Thus, the amount you will actually receive will be less than the loan amount you have applied for.
When you apply for a personal loan, find out all the fees that will be taken away from your approved loan amount. Know also the consequences of paying off your loan before maturity or past the due date.
After reading all the basic information about personal loans, you should be able to determine if it fits your current financial needs. If so, you can move on to knowing the requirements and qualifications for obtaining a personal loan.
Before proceeding with your personal loan application, check first if you are eligible for a loan and then prepare the required documents.
Commercial banks in the Philippines are among the most credible lenders of personal loans. For more convenience, you can opt to apply at the bank where you have an existing deposit account.
You can apply for a personal loan in any of these banks:
Applying for personal loans online is a convenient option for busy professionals and those with a busy lifestyle, who barely have time to go to the bank to file their loan application. You can complete the entire process in just a matter of minutes.
Considering to skip the trip to the bank? Here are the steps for online personal loan applications:
Go to the website of your bank and look for the personal loan application form. Enter the required information about yourself, your job and income, the loan (e.g., purpose, amount, payment term, etc.), and other details.
Make sure you provide correct and complete information. If you miss or skip any fields on the form, the processing of your application will take longer, as the bank will need to contact you to ask for the missing details.
Scan or take clear photos of the documents required for your personal loan application. You will either email the scanned copies or photos of your documents or attach these files to the personal loan online application form.
You will also have to read the terms and conditions to complete your application.
Your online loan application is complete! You will just have to wait for confirmation through email or SMS that the bank has received your application. The bank may also contact you for further instructions.
Banks typically process applications within five to seven working days. If you get an approval on your online personal loan, the bank will either issue a manager’s check or credit the loan amount to your deposit account with the bank.