Home Credit Loans: Weighing the Pros and Cons
Published: August 28, 2019 | Updated: August 17, 2020 | Posted by: Venus Zoleta | Personal Loan
“Is that a housing loan?” is a question you’ve probably asked after seeing the Home Credit logo. Don’t worry, it’s not something related to real estate, but it is a non-traditional type of lending in the Philippines. And chances are you’ll end up finding yourself deciding whether to apply for a loan from them or not. Read on to learn how it works and if it’s a suitable option for you.
Table of Contents
What is Home Credit?
Home Credit Philippines[1] started its operations in 2013 as a money-lending service. As part of Home Credit Group, a global consumer finance provider, Home Credit slowly became a popular payment option for big-ticket items like home appliances and gadgets. And since then, the company expanded its operations to include cash loans.
Loans are available to Filipino citizens only, 18 to 68 years old, with stable income as employees, entrepreneurs, self-employed professionals, or pensioners. As mentioned before, Home Credit Philippines offers two types of loans: a non-cash loan through in-store financing and a dedicated cash loan through its mobile app.
What is a Home Credit Standard Loan?
Home Credit gained popularity from its core financial product, the standard loan. It’s a non-cash loan that allows borrowers to purchase big-ticket items like laptops, cellphones, gadgets, musical instruments, furniture, and home appliances payable via monthly installments. Anyone can apply for a standard loan, even non-credit card owners.
This made Home Credit a popular paying method when shopping for electronics in the Philippines. Its standard loan is straightforward: shop for the item you want, purchase it with the help of a sales agent, wait for the loan decision (approval takes as fast as 10 minutes), pay the down payment, bring home your item, and pay the installments every month.
Key Features of Home Credit Standard Loan
- Loan amount: Up to PHP 50,000 for all qualified purchases
- Interest rate: Varies depending on the purchase price, chosen down payment, and chosen repayment term. Home Credit doesn’t publish its interest rates, but based on computations using its online calculator, rates range from 29.28% to 73.13%.
- Repayment terms: 9, 12, 18, or 24 monthly installments
- Down payment: At least 20% of the retail price; 10% for purchases under PHP 5,000
- Loan fees: Processing fee worth 3% of the loan amount
- Requirements: At least two valid IDs, at least one being a primary ID and one with a home address
- Store availability: Any of Home Credit’s 7,000 partner retailers in Robinsons and SM malls, including Abenson, Automatic Centre, and Western Appliances
- Brand availability: Samsung, Oppo, Acer, ASUS, Toshiba, LG, Nokia, Sony, Huawei, and more electronic brands
What is a Home Credit Cash Loan?
Home Credit also provides instant cash loans for any financial need. The cash loan is available only to existing Home Credit standard loan borrowers. Applicants can apply through the official Home Credit app or over the counter at partner stores.
Approval can take as fast as half an hour, and release of the loan can take two business days. Once approved, the loan proceeds can be claimed through the borrower’s bank account or cash pick-up at any Metrobank or Cebuana Lhuillier branch within 7 days.
Key Features of Home Credit Cash Loan
- Loan amount: Maximum of PHP 50,000
- Interest rate: Depends on the offer from Home Credit; ranges from 29.28% to 73.13%
- Repayment terms: 18, 24, 30, and 36 months
- Requirements:
a. At least two valid IDs, at least one being a primary ID and with a home address
b. Any bank document such as deposit slip, passbook, or bank statement that shows the borrower’s savings account number
What are the Payment Options for Home Credit?
Paying Home Credit installments is as easy as applying for their loan. Just like paying for other utility bills, they accept over-the-counter loan payments at different bills payment centers and remittance centers in the Philippines. You can also pay through GCash and other digital wallets that allow loan payments.
- SM Business Centers and bills payment counters in SM malls
- Bayad Centers
- ECPay outlets (7-Eleven, Shopwise, True Money, RD Pawnshop, etc.)
- Cebuana Lhuillier
- M Lhuillier
- RCBC
- GCash
Borrowers should only make cash payments at the aforementioned accredited payment channels, except for RCBC that also allows funds transfer via its ATM and online banking facilities. Check and credit card payments are not accepted.
What are the Benefits of Home Credit Loans?
1. Easy Loan Application
You only need two valid IDs to apply for a Home Credit cash loan or standard loan. You can also improve your chances of approval by presenting any available document that proves your financial capabilities.
2. Quick Approval
As an instant loan provider, Home Credit can make loan decisions in under 10 minutes for standard loans and 30 minutes for cash loans. Some customers reported getting approval within an hour which is longer than the advertised approval speed, but still quicker than most loan providers.
3. Flexibility
Home Credit loans allow you to customize your payment plan. From determining the amount of your down payment to choosing an agreeable repayment term, these features can help anyone with a limited budget to afford a big purchase through monthly installments without using a credit card.
4. Easy Loan Management
Borrowers can download the Home Credit app to help them stay on top of their loans and avoid missing due dates. They can view their loan details, payment schedule and status, and loan offers, among others. They can also chat with a customer rep for any questions and concerns.
5. Early Repayment Option
Home Credit Philippines allows customers to repay the full loan amount before the term ends. This gives the advantage of not paying any interest and fees if the full repayment is made within 15 days after contract signing.
6. Loan Insurance Option
Borrowers can also avail of loan insurance coverage from Sun Life Grepa Financial, Inc. for their Home Credit loans. At the untimely death of the borrower, Sun Life will cover 120% of the loan. The beneficiaries won’t be burdened with the outstanding balance, and they may receive an excess cash benefit.
What are the Drawbacks of Home Credit Loans?
1. High Interest Rates
Paying high interest is the biggest trade-off with Home Credit loans since you’re still borrowing from a private lender. You can refer to its standard loan calculator, but most borrowers reported getting high interests for their loans. Home Credit also doesn’t release detailed information about its loan terms unless you’re a client.
You can avoid paying a high interest by taking advantage of your credit card’s 0% installment feature. You won’t be paying an interest using a credit card, as long as you always pay your bills in full and on time. If cash or credit card payment isn’t an option, consider getting a low-interest personal loan. Of course, you can always just save up instead.
2. Easy Way to Earn Debt
The problem with buying gadgets, appliances, and similar items is that they are depreciating assets, which means they lose their value over time. Usually, the owner isn’t making money out of them, except when buying a phone for your business use or a laptop for your freelance career.
If you purchase a high-ticket item through a loan with a high interest rate, make sure you have enough income to sustain the monthly payments. Otherwise, you’ll find yourself struggling to find ways to repay your installments.
3. Rejection for Delinquent Borrowers
Just like any lender, Home Credit checks the credit history and score of borrowers with the Credit Information Corporation. This means you’re likely to be rejected if you have unpaid loans reflected on your credit report.
4. Consequences of Late Payments
It’s not enough that you pay on the due date itself. Home Credit recommends paying the monthly installments at least three days in advance. Making late payments can lead to extra fees and the possibility of getting declined when you apply for another Home Credit loan.
Final Thoughts
Home Credit loans can definitely help you get out of a tough spot, but be wary of its pitfalls. Before you apply for any type of loan, always consider how it will affect your finances, especially if the lender employs high-interest rates. Explore more affordable loans and other financing alternatives first before you decide to dive right into the sea of debt.
Photos from Home Credit website and Facebook page
Source: [1] Home Credit Philippines Official Website
