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First time to visit Moneymax? Our online platform allows you to check and apply for different personal loans in the Philippines based on partner, interest rates, fees, and other features.
Moneymax compares personal loans that can be paid back over terms of between 6 months and 60 months. The effective interest rate (EIR) you will be charged depends on your personal circumstances, and will be between 1.39% and 32.05%.
This is a representative sample of what it may cost: a loan of P50,000 over 24 months at 1.59% EIR would equate to monthly repayments of P3,030. The total cost of the loan that you would pay back is P72,720.
Such fees depend on the amount you want to borrow so make sure to check with the bank or loan partner you’re applying for.
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 different purposes:
- Medical emergencies
- Home improvement
- Debt consolidation
- Business opening or expansion
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 for a loan.
Getting a personal loan is a straightforward process. In the Philippines, it generally involves these steps:
- Comparing personal loans. Never skip this step because it will help you find the right personal loan for you. Compare different loans offered by banks based on the loan terms, loan amount, interest rates, fees, and repayment amount and terms.
- Personal loan application. Once you have picked the best personal loan, check if you qualify for the loan. If you do, you can start applying online or at the branch of the bank. You will submit the required documents as proof of your identity and income.
- Loan processing. Banks conduct credit history checks to determine your capacity to repay your loan. The bank will notify you if your loan is approved.
- The release of loan proceeds. In the Philippines, banks fund personal loans either by issuing a manager’s check or crediting the loan amount to the borrower’s deposit account.
- Repayment of the loan. You will pay your monthly installments until the end of the loan term through post-dated checks, automatic debit from your deposit account, or over the counter.
- Loan closure. When you make your final repayment, your loan will be closed.
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.
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.
Pros of a personal loan:
- Lower monthly interest rates than credit cards. Monthly interest rates on personal loans range from 1.20% to 1.94%, while credit card interest rates go from 2.00% to 3.54%
- Ability to choose a loan repayment period. If you choose a longer period, your monthly repayments are lower, but you will be charged a higher interest rate.
- Fixed interest rates and monthly repayment amounts. This helps you manage your finances more easily.
- The borrower’s risk is lower than a secured loan. Because no collateral is required to take out a personal loan, you will not lose any of your assets.
Cons of a personal loan:
- Higher interest rates than secured loans (that are guaranteed by collaterals)
- Banks charge a pre-termination fee when you pay off your loan early.
- There are penalty fees for late repayments. If not managed well, the unpaid amounts might snowball into a bigger debt.
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.
What is the difference between effective rate and add-on rate?
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.
The fine print that comes with your personal loan is an agreement between you and the lender that contains the guidelines on the use of your personal loan. The Terms and Conditions are also essential in helping you manage your personal loan responsibly.
Missing important information about your loan could lead to bad consequences, like paying fees and charges that you could have avoided had you read the terms and conditions carefully.
When reading the fine print, look for these crucial details:
- The date when your monthly installments will start and due date
- Repayment terms
- Any additional interest charges for missed payments and computation
- Fees and charges you will be required to pay
- Whether or not the bank will charge a prepayment fee if you fully repay your loan before it matures
- Computation of your monthly installments
- Situations when a borrower defaults on a loan