Different Types of Loans Every Borrower Must Know

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December 14, 2018



Lenders in the Philippines offer different types of personal loans to potential borrowers who need immediate cash to fund an important expense. These loans cater to different needs and financial capabilities.

Never make the mistake of applying for a personal loan online without researching and understanding the various choices available for consumers. Find out what personal loans will work for you and eliminate the ones that do not fit your needs.

If you plan to get one, make sure you familiarize yourself with the personal loan types in the market so that you know your options and can choose the right loan for you.

Common features of personal loans in the Philippines

All personal loans issued by different commercial banks in the country share three common features:

1. Fixed loan term

Most banks require monthly repayments over a period of 12, 18, 24, or 36 months. If you choose a shorter loan term, you will pay a higher monthly balance but at a lower interest rate than if you choose a longer loan term.

2. Fixed loanable amount

You can borrow from Php 10,000 up to Php 2 million, subject to the lender’s approval. The actual amount that the issuing bank may lend you will be based on your income and credit history. A high income and a good credit history can raise your chance of getting approved for a higher loan amount.

3. Fixed interest rates

Except for a few ones with variable interest rates, most personal loans come with fixed interest rates—they do not change throughout the duration of the loan.

What are the different types of personal loans?

As a prospective borrower, you need to figure out which type of personal loan and rates will suit your needs, save you on costs, and help you achieve your financial goals.

Personal loans in the Philippines vary according to what they are used for and whether or not they require a collateral from the borrower.

Types of personal loans based on purpose

Personal loans are essentially multi-purpose loans, so they can be used to meet a wide variety of financial needs.

Generally, Filipinos get personal loans for the following reasons:

  • Personal installment. Borrowing money and paying it back to the lender (loan principal plus interest) in fixed monthly installments over 12 to 48 months.
  • Debt consolidation. Managing one’s debts by consolidating all credit card debts and other loans into a single personal loan that offers better terms.
  • Home improvement. Improving your home’s value by covering the costs of renovation, repair, or remodeling projects.
  • Travel. Funding travel expenses in your dream destination.
  • Education. Financing school fees for one’s children. You can also get an educational loan to take up a postgraduate degree. Compared to student loans, you can use an educational loan to pay for fees in any school.
  • Investment. Growing money through investments in stocks, mutual funds, and real estate, among others.
  • Electronics. Purchasing gadgets and electronic equipment needed for your business such as mobile phones, tablets, and computers.
  • Business. Covering the costs of starting or expanding a business such as purchasing equipment and increasing your working capital.
  • Medical bills. Paying the costs of medical treatments or surgeries. Medical loans are helpful in managing the high costs of hospitalization and medicines.
  • Auto loan. Financing a new or used car.
  • Wedding. Covering the costs of your dream wedding. With weddings in the Philippines costing from Php 50,000 to over Php 1 million, a wedding loan can help you pay for everything before your big day.

Types of personal loans based on collateral

Secured personal loans

To get a secured personal loan, you need to put up a collateral (property, vehicle, or deposit account) as security for the bank. When the borrower fails to pay it off, the lender can take the collateral to recover the unpaid amount.

Because of the lower risk for the bank, secured loans have higher loan amounts and lower interest rates than unsecured loans.

In the Philippines, only BDO offers a secured personal loan to overseas Filipino workers, requiring BDO bank account deposits as collateral.

Unsecured personal loans

Also called an unsecured loan, a non-collateral personal loan is issued by a bank or any financial institution without requiring any type of collateral from the borrower.

Most personal loans in the Philippines are unsecured or non-collateral loans. With an unsecured loan, you can borrow from Php 10,000 to Php 1 million that is repayable in 12 to 36 months.

Some of the major banks that issue no-collateral personal loans in the country include the following:

  • BDO. Employees and self-employed individuals can avail of an unsecured loan from Php 10,000 to Php 1 million at annual interest rates ranging from 25.98% to 26.76%. Unsecured personal loans for OFW borrowers are also available through the bank’s Asenso Kabayan Program.
  • BPI. The bank offers loan amounts from Php 20,000 to Php 1 million at 25.03% to 25.74% annual
  • EastWest Bank. The bank’s personal loan amount is Php 25,000 to Php 2 million. For existing credit cardholders, the annual interest rates range from 41.62% to 41.94%. The interest rates are higher for non-credit card owners at 46.92% to 53.21%
  • Maybank. Maybank’s collateral-free personal loan from Php 50,000 to Php 1 million can be obtained at a 1.3% monthly interest rate.
  • Security Bank. The bank lends a minimum of Php 30,000 up to Php 1 million with interest rates starting from 29.48%.

Differences between secured and unsecured personal loans

With an unsecured loan, the risk is higher for the lender, so it typically comes with a lower loanable amount and a higher interest rate.

Personal loans without collateral are guaranteed by a borrower’s creditworthiness instead of a collateral. So if your credit standing is good, you will have a greater chance of approval than someone with a bad credit history.

When you apply for an unsecured loan, you will need to prove to the lender that you have a stable income and can make monthly repayments on your loan. Banks ask personal applicants to submit proof of income to determine their capacity to repay a loan. So you need to prepare supporting documents such as income tax returns, pay slips, and certificate of employment to the bank to get approved for an unsecured loan.

What personal loans are available from banks?

Aside from the government-issued multi-purpose loans, commercial banks are also legitimate providers of personal loans. Most banks in the country offer these loans to qualified Filipinos and foreign residents in the Philippines. Typically, they process personal loan applications in as fast as one week.

Here is a quick look at the personal loans issued by different banks in the Philippines:

AUB CasHelp

  • Loan amount: Php 30,000 to Php 250,000
  • Loan term: Maximum of 36 months
  • Interest rate: Subject to bank’s approval

BDO Personal Loan

  • Loan amount: Php 10,000 to Php 1 million
  • Loan term: 6, 12, 18, 24, or 36 months
  • Monthly interest rate: 1.30% (for a 6-month term) or 1.25% (for all other terms)
  • Effective interest rate: 25.98% to 26.76%

BPI Personal Loan

  • Loan amount: Php 20,000 to Php 1 million
  • Loan term: 12, 18, 24, 30, or 36 months
  • Monthly interest rate: 1.20%
  • Effective interest rate: 25.03% to 25.74%

China Bank Savings Easi-Funds Personal Loan

  • Loan amount: Php 20,000 to Php 1 million
  • Loan term: 12, 18, 24, 36, or 48 months
  • Monthly interest rate: 1.55% to 1.95%
  • Effective interest rate: 32.73% to 37.24%

EastWest Personal Loan

  • Loan amount: Php 25,000 to Php 2 million
  • Loan term: 12, 18, 24, or 36 months
  • Monthly interest rate: 1.49% to 1.89%
  • Effective interest rate: 41.67% to 53.21%

Maybank enAble Personal Loan

  • Loan amount: Php 50,000 to Php 1 million
  • Loan term: 12, 18, 24, or 36 months
  • Monthly interest rate: 1.30%

PBCOM Personal Loan

  • Loan amount: Php 40,000 to Php 1 million
  • Loan term: 12, 18, 24, 36, or 48 months
  • Monthly interest rate: 1.332% to 1.96%
  • Effective interest rate: 28.40% or 37.40%

PSBank Flexi Personal Loan with Prime Rebate

  • Loan amount: Php 20,000 to Php 250,000
  • Loan term: 24 or 36 months
  • Monthly interest rate: 1.75% (fixed term) or 2.5% (revolving credit line)

RCBC MyCash Loan

  • Loan amount: Php 50,000 to Php 1 million
  • Loan term: 6 to 36 months
  • Interest rate: Subject to bank’s approval

Robinsons Bank Personal Loan

  • Loan amount: Php 5,000 to Php 250,000
  • Loan term: 6, 9, 12, 18, 24 or 36 months
  • Interest rate: Subject to bank’s approval

Security Bank Personal Loan

  • Loan amount: Php 30,000 to Php 1 million
  • Loan term: 12, 18, 24, or 36 months
  • Monthly interest rate: 1.39% to 1.69%
  • Effective interest rate: Starts at 29.48%

Sterling Bank of Asia Personal Loan

  • Loan amount: Php 50,000 to Php 1 million
  • Loan term: Maximum of 36 months
  • Interest rate: Subject to bank’s approval

UCPB SalarEasy Loan

  • Loan amount: Php 50,000 to Php 300,000
  • Loan term: 6, 12, 18, 24, or 36 months
  • Interest rate: Subject to bank’s approval

Now that you have a better idea of the various personal loans in the Philippines, you can decide better which ones would make the cut. Weigh the benefits and drawbacks of your top choices to determine the best personal loan that can help you meet your short-term cash needs.