10 things you need to know about personal loans

MANILA, Philippines - Whether you are an entrepreneur applying for a business loan or just applying for a personal loan to ease your financial situation, there are certain things you should know about bank loans in the Philippines.

A personal loan varies from a business loan because, in the case of a personal loan, the interest rate is high but the cash is readily available. Whereas, a business loan will be issued under the name of the organization and any partners of your organization will also be responsible for the repayment of the loan. Each type has its own advantage and disadvantage, the matter of which is out of the scope of this article.

Let us pay a close look at the 10 most important things you should know about a personal loan.

1. Is it a secure loan?

Certain loans require for the submission of collateral where you put up your possession or assets as a guarantee, for instance, your property. In case you are unable to pay back the credit amount, the bank has the entire right to seize that property. The majority of the personal loans are not secure loans, so make sure of the risks before you apply for one.

2. Required details to apply for the loan.

Certain loans require some financial details. Some banks ask for your credit score and your basic monthly income to judge if you are able to pay back the monthly amount. In certain cases, banks might require copies of bank statements and deeds of other assets to identify your income and your net total assets.

3. What is the payment for the loan?

Certain loans call for an initial sum of money that needs to be paid at the primary stages of the loan. This fee might vary from one bank to another, so it is wise to compare the different rates at varying banks, before you settle on the final choice.

4. What is the rate of interest?

This is the additional amount you have to pay for the loan. It is mostly listed in the annual percentage rate, also known as APR. This rate denotes the additional amount you have to pay for the money lent and the total you have to pay back. The higher the interest rate, the more costly the loan. Personal loans generally have interest rates somewhere between 4% and 30%. Again, this rate might differ from bank to bank, so go for the one that suits your bill.

5. Repayment duration of the loan.

This denotes the duration given to you by the bank to make the repayment of the loan amount along with interest charges. Certain banks offer the option to choose the duration of repayment depending on your monthly income, this aspect too differs from one another. If the repayment period is short, then the monthly payments will be quite high, whereas, if the duration is long, then the monthly payment will reduce.

6. Limitations on the use of money

Although personal loans usually don’t have limitations as compared to student loans or car loans, it is best to clarify and find out if there are any barriers of that sort.

7. Fine for quicker payments

Just in case your financial situation for the month is a bit more stable than the previous month and you have a bit of extra cash you can deposit, there is one thing you have to check before applying for the loan. Certain banks charge a fine for payments more than the payment limit. Make sure to find out if your bank charges them, and steer away from loans that don’t give you some air for breathing.

8. The application process

This is an important step that many people overlook when applying for loans. You have to know the duration it will take for your loan to get approved and how long it will take for the bank to lend you the money.

9. Figure out your credit score

This is one of the most important factors that needs to be considered when applying for loans in the Philippines. This score can affect your chances of obtaining a loan. The lower the credit score, the lesser you can lend. This can be increased by making on-time payments, quick repayment of debts and removal of inappropriate information from your credit report.

10. Prepare for the worst

None of us know what the future has in store for us. Make sure what the fines for late re-payment or non-payment are before you decide to obtain loans in the Philippines

Now that you know the 10 most important things, you can now find a loan that suits you best. Remember not to be in a hurry, the fruits of patience are always sweet! - Maricor Bunal, TheSummitExpress

Maricor Bunal has been a Project Manager and Content Writer for a long while. Her passion in writing is her main drive in crafting articles that are engaging, informative, and meaningful. Her partnership with Loan Solutions PH has given her a whole new opportunity to take writing to a whole new level.