6 Tips to Get a Personal Loan for Freelancers in the Philippines
Published: May 4, 2020 | Updated: July 28, 2020 | Posted by: Venus Zoleta | Personal Loan
This article was published on July 17, 2019 and was updated on May 4, 2020.
Being a freelancer in the Philippines has its downsides, and one of them involves getting a loan for freelancers.
Formal lending institutions in the Philippines like banks and government agencies are strict when it comes to loan approvals. They require borrowers to provide their payslips, income tax return (ITR), certificate of employment, and other financial documents to prove their ability to repay a loan on time.
If you don’t have proof of a stable income, you have a slim chance of getting approved. Worse, you can get downright rejected for a loan. Even though you’re earning more than an average employee, lenders will still see you as a credit risk because of the usual unpredictability of freelance income—unless you have documents to prove otherwise.
However, don’t let your self-employment status stop you from borrowing money to cover your financial needs. It takes some effort and patience. But you can definitely improve your chance of getting approved for a freelancer loan with the following tips.
Table of Contents
Smart Tips on Getting a Loan for Freelancers
1. Be a Registered Taxpayer
To get a loan in the future, one of your must-dos as a self-employed or freelancer is to register as a professional or business with the Bureau of Internal Revenue (BIR). Once you’re a registered taxpayer, you can start filing your ITR.
Aside from being a proof of paying income taxes, the ITR shows how much you earn in a year. It’s one of the documents that lenders use to decide to have an easy approval of loan application.
Tedious as the process may be, filing your ITR will help you in getting not only a loan for freelancers but also credit cards and visas. So start doing it as soon as you can since it’s harder to get a personal loan without ITR.
Read more: How to File an Income Tax Return in the Philippines: Guide for Freelancers and Entrepreneurs
2. Secure Your Business Registration Documents
Are you a self-employed running a small business on top of your freelance gigs? You need to register with the Department of Trade and Industry (DTI) and secure business permits from different government offices.
Your business registration papers will help boost your chance of fast approval for a loan for freelancers. These documents prove you have other sources of income aside from freelancing.
Read more: DTI Business Registration Guide for Entrepreneurs in the Philippines
3. Have a Good Credit Score
Another way to make yourself creditworthy and likely to be approved for a freelance loan is taking steps to build and maintain a good credit score.
A credit score is what lenders use to evaluate loan applicants. By looking at a prospective borrower’s payment history, a lender will have an idea of that person’s capacity to pay back a loan.
As a freelancer, having an excellent credit score will work to your advantage. Pay your insurance premiums and credit card bills in full and on time. If you don’t have a credit card yet, you can easily qualify for a secured credit card and use it responsibly to build a good credit history.
4. Prepare Your Supporting Financial Documents
Lenders need assurance that their borrowers will repay what they owe, which is why they ask for several income documents. Even if you are not employed by a company and have no payslips as proof of income, you can try submitting other documents to prove your capacity to pay.
Take a look at all your sources of income and see if you can get documents as proof. Here are the documents that some lenders accept:
- Bank statements for the past six months
- Certificate of employment from clients – You can request your clients to give you a certification that states your employment, your gross income, and how long you’ve been rendering services to them.
- Certificate of Earnings from Upwork – If you get your freelance projects through Upwork, you can get a Certificate of Earnings report [1] from the online job search platform. This document shows a freelancer’s earnings for the past one to 12 months. Lenders such as the Pag-IBIG Fund accept the Certificate of Earnings for applications for a loan for freelancers, subject to certain conditions.
- Stock certificate and other certifications of investments – If you’ve been investing in stocks, UITFs, and/or mutual funds for a while, you can get a certification from your broker or bank that proves your ownership of investments.
- Proof of asset ownership under your name – Do you own a car, real estate property, or any other valuable asset? You can provide documents to the lender to prove you own certain assets.
5. Try to Borrow From a Bank Where You Have a Long-Time Account
Contact the bank where you have a long banking relationship with (at least one year) to check if you can get a personal loan for freelancers. The bank may consider lending you money if you’ve been receiving payments from your freelance gigs into your bank account and maintaining a large amount of deposit for a long time.
6. Get a Salary Loan for Freelancers From Legitimate Private Lenders
Need to borrow cash immediately but don’t have any financial documents? The easiest way to get a personal loan for freelancers in the Philippines is to borrow from informal lenders. These companies offer salary loans, payday loans, online cash loans, instant loans, and quick cash loans.
However, be sure to deal only with legitimate lending companies. They should be registered with the Securities and Exchange Commission[2], like Tala Philippines and Loan Ranger. These private lenders for personal loans allow freelancers in the Philippines who don’t qualify for bank loans to apply online for their respective personal loans. Unlike formal lenders, private lenders only require borrowers to submit valid IDs and meet the minimum age requirement (18 years old).
Personal Loan Options for Freelancers in the Philippines
Below are the top options for freelancers who are seeking a personal loan. This list is based on loans with requirements that long-time freelancers can presumably provide.
BPI Personal Loan
- Maximum loan amount: Up to 1 million pesos
- Interest rate: 14.40% p.a
Required documents:
- Valid government-issued ID
- 3 months original payslip and/or Latest Income Tax Return with BIR or Bank Stamp (BIR Form 2316)
Citibank Personal Loan
- Maximum loan amount: Up to 2 million pesos
- Interest rate: 26.9% to 37.9% per annum (Effective Interest Rate)
Required documents:
- Valid government-issued ID
- For employed: latest income tax return (BIR Form 2316) or latest 1 month payslip
- For self-employed: latest income tax return (BIR Form 1701), audited financial statements (AFS) with auditor’s report, balance sheets, and tax receipt
- Minimum annual income of P250,000
- Owns a principal credit card for at least a year
RCBC Personal Loan
- Maximum loan amount: Up to 1 million pesos
- Interest rate: 6.08% per annum, 1.40% per month add-on
Required documents:
- Accomplished RCBC application form
- Certificate of Employment and Compensation or latest 2 months Payslip or copy of latest Income Tax Return
- Copy of valid government IDs
- 1 month latest utility bill
Final Thoughts
While getting a loan for freelancers in the Philippines is challenging, it doesn’t mean its impossible. If you’re just starting out as a freelancer, you’re better off waiting for a few more years—at least a year or two—before applying for a personal loan. This enables you to do the steps discussed above to increase your chance of loan approval.
Sources:
- [1] Certificate of Earnings (Upwork)
- [2] List of Registered Firms and Individuals (Securities and Exchange Commission)
Venus is an experienced personal finance writer with a background in digital marketing, public relations, and journalism. She’s into stock, VUL, and mutual fund investing. Follow Venus on LinkedIn.
