" is so strongly embedded in the Filipino culture that only two in every 10 adults in the country don't borrow money, according to the Bangko Sentral ng Pilipinas (BSP) financial inclusion survey. Emergency loans and personal loans are just two of the many options when it comes to borrowing in the Philippines.
Here are the most common lending systems that Filipinos turn to for meeting their urgent cash needs. Understand their benefits and risks before choosing the kind of loan you'll take out.
Emergency loans provide a quick and easy way for cash-strapped Filipinos to fund any unexpected, urgent expense. They're particularly helpful when you need money to rebuild your home or repair your car after a flooding
, fire, earthquake, or any disaster.
Most emergency loans in the Philippines come from three sources: private lenders, government offices, and employers.
1. Online Emergency Loans from Private Lenders
Of the three common emergency loan providers in the country, private lenders have the simplest application process, as well as the fastest approval and fund release.
Many emergency loan applications can be filed online nowadays, after which you'll know if you're approved for the loan within 5 to 10 minutes. You can receive funds on the same day or even in a matter of minutes.
This is why emergency loans appeal to the unemployed and those with low income or poor credit history. Emergency loans for unemployed Filipinos are ideal for when you need cash ASAP but are likely to get declined by banks because you don't have proof of income. Online lenders only require valid IDs and don't usually ask for as many income documents as banks do.
Great as they may seem during dire financial situations, emergency loans are a notoriously expensive way to borrow money in the Philippines. Interest rates are between 1% and 1.5% per day, which translate into an annual percentage rate
of around 500% to as much as 3,000%.
Moreover, loan amounts are small. The highest amount you can borrow is PHP 20,000. Emergency loans also come with very short terms, usually 30 days, so you've got a very limited time to return the amount you borrowed plus the interest.
2. Emergency Loans from Government Agencies
The SSS, GSIS, and Pag-IBIG Fund assist survivors of natural disasters in the Philippines through their respective emergency loans or calamity loans.
If you live in an area officially declared under a state of calamity
and you need additional funds to get back on your feet, you can apply for an emergency loan from one of these government offices.
Compared to private lenders, the SSS, GSIS, and Pag-IBIG Fund offer longer repayment terms and significantly lower interest rates. However, you must be an active member (meaning you're paying your contributions) of one of these agencies to qualify for a loan.
Here's a table that shows the key features of emergency loans from the three Philippine government agencies.
||GSIS Emergency Loan
||Pag-IBIG Calamity Loan
||SSS Calamity Loan
| Loan Amount
||Up to 80% of the member's Total Accumulated Value
||One-month salary credit up to PHP 16,000
|Annual Interest Rate
For more details on how to apply for these emergency loans from Philippine government agencies, check out this primer
3. Emergency Loans from Employers
Some companies in the Philippines make emergency loans available to their employees affected by calamities. Others provide these loans as part of their employee benefits package, which their workers can avail of any time they need cash for an emergency or to get through Petsa de Peligro
until the next payday.
Emergency loans from employers are the cheapest compared to other lenders, as they don't typically charge an interest. Repayments are also quite convenient and flexible since they're deducted from an employee's succeeding paychecks or from the 13th-month pay.
The company you're currently working for may be offering an emergency loan program. Check with the HR department and take advantage of it.
Payday loans or salary loans in the Philippines
are quite similar to emergency loans from private lenders, as they both provide borrowers a quick and easy access to cash online. Their interest rates are also higher than personal loans from banks.
Payday loans have slightly higher loan amounts and stricter application requirements. Some lenders let Filipinos borrow up to PHP 50,000 and require a few income documents such as payslips and bank statements.
Banks have strict requirements and credit investigation processes for borrowers who need cash for an emergency. Processing of loans takes longer than other lenders, typically from three to seven days. Personal loan providers need that much time to assess a borrower's ability to repay a loan.
This may not be the best option if you need money immediately. Still, getting personal loans is a safe, legitimate, and affordable way to borrow money in the Philippines with their low interest rates and long repayment terms.
Borrowing Money from Family, Relatives, or Friends
"Pautang naman. Bayaran kita sa sweldo
." It's that easy to borrow money from your loved ones when you need it. Your ever-reliable tita, brother, BFF, or teammate in the office is just a phone call or text message away.
No documents required. No collateral to give. No interest to pay. No payment due dates to worry about. You can just pay back what you owe when you can. No wonder that majority of Filipinos (61.9% to be exact
) are indebted to their family, relatives, and friends, based on the latest BSP data.
Of course, this type of utang
comes at a cost. Break your promise to return the amount you borrowed, and you'll easily lose their trust and the chance to borrow from them again.
As much as you can, avoid being too dependent on your loved ones to save you from financial problems. It isn't worth all the conflict, drama, and stress that can ruin any relationship.
Do you really have to borrow and have no other choice? Stay true to your word and repay your debt immediately.
5-6 Lending Scheme
The 5-6 pautang
system charges a very high interest rate of 20%. Yet it's still a thriving part of the Filipino utang
culture up to this day, even when there's plenty of more affordable loans in the Philippines
This "kapit sa patalim
" lending scheme's popularity comes from the fact that it doesn't require any collateral to get cash quickly. The amount you borrow from 5-6 must be paid off daily, so the repayments seem smaller than they actually are. Indian lenders in motorbikes come knocking at your door to collect the payments, making things even more convenient for borrowers.
Pawning or Sangla
[caption id="attachment_24480" align="alignnone" width="640"]
Photo by Joelaldor via Wikimedia Commons[/caption]
Like the 5-6 lending system, pawn loans or sangla
is a popular way to get quick cash in the Philippines. This is especially in rural areas where pawnshops outnumber banks and ATMs
Filipinos run to the nearest sanglaan
to borrow cash for emergencies. All you have to do is to give collateral such as jewelry or gadgets—no need for credit checks and income documents. Pawnshops charge interest rates for as low as 1% over a one-month term.
Pawning your valuable item can be risky. You might not get it back if you fail to pay back the amount you borrowed within the loan term.
Have you tried borrowing money for an emergency? Which type of moneylending works best for you? Which is the worst? Share your experience in the comments section below.