Loans for People with Bad Credit: What Borrowers Must Know

Published: November 12, 2018 | Updated: March 17, 2020 | Posted by: Venus Zoleta | Personal Loan

bad credit loans Philippines

“Can I get a personal loan with poor credit history?”

It takes time to repair a bad credit report (or to build one if you have none), so you’re wondering if you can qualify for a loan now even if yours is in a terrible shape.

Well, your choices are rather limited. Generally, banks and government agencies deny loan applications from borrowers with a poor credit score. So these lenders are already out of the question.

Other types of lenders in the Philippines, however, do accept and approve loans for people with bad credit history. So yes, you can borrow money for any financial emergency even with a less-than-ideal credit record. But once you get approved for a bad credit loan, managing it isn’t as easy as you think.

Here’s everything you need to know about bad credit loans in the Philippines.

What Lenders Give Bad Credit Loans?

Some informal moneylenders in the Philippines don’t conduct credit checks or evaluation. Others do, but the borrower’s credit score or credit history isn’t the most significant deciding factor for loan approval or rejection.

Below are the types of lenders that cater to Filipino borrowers with bad credit history.

(Note: This does not, in any way, promote any of these loans for people with bad credit. Understand the risks before applying for a bad credit loan.)

Private Lenders

Also called online lending companies, private lenders provide all sorts of loans: cash loans, instant loans, online loans, payday loans, salary loans, and emergency loans. Regardless of what they’re called, all these loans have minimal requirements and promise quick approval and disbursement.

These bad credit loan providers typically require only valid IDs and a completed application form. The internet makes the application process a lot faster and more convenient than traditional loans. Simply visit the lender’s website, fill out an online form, upload the requirements, and wait for a call from the company’s representative for data verification. Approval takes as fast as 5 to 10 minutes, and the loan proceeds are available for withdrawal on the same or next business day.

While you may easily get approved for a bad credit loan, you’ll be charged a higher interest rate because your credit risk is high. Monthly interest rates for loans from private lenders range from 4% to 7.5%, making them more expensive than loans from banks with monthly rates of only around 1%.

Read more: Borrowing from a Private Lender? Consider the Pros and Cons First


For those with a poor credit history, another way to secure a loan in the Philippines is put up an asset such as jewelry or gadgets as collateral.

Pawn loans from pawnshops are secured loans. This means you can get approved for a loan (the amount depends on the value of your collateral) without looking at your credit report. However, if you fail to repay your loan on time, the pawnshop can put up your pawned item for sale to recover its loss.

5-6 Lenders

The 5-6 lending scheme has such a bad rap because of its extremely high interest rate of 20%. Even President Rodrigo Duterte has expressed several times his intention to stop this long-time practice in the Philippines.

But 5-6 lenders have become deeply rooted in the Filipino culture that people—especially micro and small business owners—still borrow money from Bumbays.

How Risky is a Bad Credit Loan?

Borrowing from lenders that provide bad credit loans isn’t only expensive but also risky. You’re expected to pay very high interest plus the principal at a short time, usually one to 18 months. The repayments will eat up a bulk of your monthly budget.

If not managed well, your situation can snowball into a debt trap. It’s worse if you got a secured loan, as you might lose your collateral when you fail to pay off your loan. Then it hurts your credit history more. And so, the vicious cycle continues.

So before you start applying for a bad credit loan, understand its risks, consider how well you and your budget can handle them, and proceed with caution.

Tips to Get Loans for People With Bad Credit History

If you decide that getting a bad credit loan is the only way to go, here are some quick tips to help you minimize its risks:

  • Shop around for lenders. Spend time reading reviews about companies that provide bad credit loans. Compare the lending companies and their offerings.
  • Verify if a lender is SEC-registered. Check the Securities and Exchange Commission (SEC) website to ensure that you aren’t dealing with a scammer.
  • Use an online loan calculator. Online lending companies have a personal loan calculator on their website. Use it to compute how much you can realistically afford to borrow and check the interest rate.
  • Never lie in your loan application. If you have a poor credit record, don’t hesitate to tell the truth. The lender can easily detect any inconsistency in your information, and that can hurt your chances of loan approval.
  • Submit complete requirements and application form. Incomplete loan applications get rejected. So make sure everything you submit to the lender is complete.
  • Avoid applying for multiple loans. Considering to apply to different lenders at the same time to boost your chance of approval? Just don’t, no matter how desperate the situation is.

Final Thoughts

Once you’re approved for a bad credit loan, take this as an opportunity to improve your credit score. Consistently pay your monthly amortizations on time. If you’re on the verge of defaulting on your loan, negotiate with the lender for a more flexible term. When you’ve paid off your bad credit loan without setbacks, you’re making it easier for yourself to get approved for personal loans in the future.