Life's a journey often fueled by needs that are more or less dependent on our financial health. The extent of fulfillment of these needs and commitments are directly proportional to amount of money we’re willing to invest. In most cases, personal savings and investments are not sufficient enough to fulfill the obligation. In these situations, the most popular instrument that we can fall back upon is a loan. A loan is a contractual arrangement between the borrower and the lender under which the latter agrees to disburse a fixed amount of money(Principal) to the former towards fulfillment of a specific need to be paid back in installments along with applicable interest charges over a specified period.
Millions of Filipinos have been relying on various loan instruments for decades to fulfill their household, business needs and casual needs. Being a vibrant and fast growing economy, there is no dearth of banking institutions in the Philippines today. The country is home to both indigenous and multinational banking companies operating across the length and breadth of the country, disbursing banking and financial services of international standards. The Bangko Sentral Ng Pilipinas or BSP as popularly known is the central bank of Philippines that regulates and supervises the banking system in the country.
Types of Consumer Loans in Philippines
When we talk about consumer loans, nearly all major banking corporations offer the following loans on the basis of the end requirement.
- Personal Loans
- Housing Loan
- Car Loan
The availability and accessibility of these loan instruments depends on various factors that includes income, nationality, credit history etc. The terms and rates vary from bank to bank and are determined by various external and internal factors such as economic conditions, prevailing base rates to name a few. If you’re someone who is new to the world of credit, it's paramount that you understand the purpose and underlying elements of the loan product before availing one.
Benefits of Availing a Loan in the Philippines
There are situations in life where we need financial assistance for an emergency or a casual need. The best answer to such situations is a Personal Loan. As this loan comes with no commodity attached like the housing or auto loan, it can be availed for a multitude of reasons and surprisingly, no questions asked on how you would like to use the loan amount. A simple and easy to understand loan instrument, Personal Loans have been redefining the credit industry over the last couple of decades by disbursing billions to fulfill personal needs of borrowers.
As a part of the retail lending portfolio, nearly all banks in Philippines offer Personal Loans. Based on the eligibility criteria and other determinants, one can avail a loan amount of up to P3,000,000 depending on the requirement. The maximum tenor provided by loan is around 5 years, depending on the lender. The benefits of getting a personal loan are plenty. Let us look at few of them.
- This loan can be availed for a plethora of requirements. Therefore, it becomes an open ended loan that can be used for multiple purposes, from vacation needs to covering medical expenses.
- Personal loans come with simple terms and conditions, comprehensible by all. It has little frills and hidden elements when compared to other credit products available in the market today.
- No collateral/security is required to avail this loan. It is purely disbursed on the basis of eligibility and borrowing capacity.
- Repayment can be easily made in Equated Monthly Installments(EMIs) along with the interest charges, which makes it convenient for the borrower to plan his budget.
Glossary of Terms Used in Personal Loan
- Early Settlement Penalty: A monetary fee imposed by the bank if the borrower wishes to close the loan account before the end of term by settling the balance. The penalty amount is a percentage of the current outstanding balance in the account.
- Loan Tenor: A pre agreed period within which the borrower agrees to repay the loan amount with interest charges in installments to the lender.
- Late Payment Fee: A penalty imposed by the bank on the borrower for not receiving the monthly installment payment on or before the due date. This fee is generally a fixed amount, communicated upfront.
- Effective Interest Rate: This is the actual rate of interest billed on the principal amount where compounding occurs more than once in a given year.
Leading Banks That Offer Personal Loan in the Philippines
- BPI Personal Loan
- BDO Personal Loan
- Security Bank Personal Loan
- Eastwest Bank Personal Loan
- RCBC Personal Loan
This product is a multi-faceted debt instrument that can be availed for a variety of housing related requirements such as purchasing an apartment/condo, procuring a plot for purpose of constructing a house, renovation & rebuilding, etc. This is one of the most sought after loans in the country owing to its purpose as it fulfills one of the most basic requirements in life, housing.
In Philippines, depending on the bank and the product offered, the term of the loan can go up to 25 years with interest rates starting around 5.25 percent. Here are some of the benefits of funding your housing dream by means of a loan.
- Interest rates for housing loan in Philippines is one of the lowest in the Asian region which makes the costs housing a lot cheaper.
- Funding the costs of procuring a home ensures that there is no immediate burden on your personal finances, thereby letting you manage day to day expenses without much hassles.
- The margin of finance can go as high as 80 percent of the project cost depending on the project and the bank in question. With such high financing potential, the onus on you is minimal.
- A housing loan comes with flexible terms such as option to choose the loan term, making it a friendly loan option.
Glossary of Terms Used in Housing Loan
- APR(Annual Percentage Rate): A term used to denote the interest rate computed on an annual basis, applied on the principal amount disbursed.
- Principal Amount: The actual amount disbursed by the bank under the loan agreement which does not include interest or other charges. This is the amount that the lender agrees to pay the borrower under the contract terms.
- Loan Term: The stipulated time frame agreed between the bank and the borrower to pay back the loan in installments along with applicable interest charges.
- Margin of Finance: The extent of the project cost which the bank is willing to finance for the borrower.
Leading Banks That Offer Housing Loans in the Philippines
Owing a car has become a basic necessity in the 21st century. Having a car in the family helps in easing day to day conveyance from workplace to home and also acts as a vehicle to plan those holiday and weekend getaways. With so many local and international car brands in Philippines, we’re spoilt with choices. Complementing the availability of cars in the country is access to easy loans to procure our dream car. Nearly, all banking institutions in the country offer attractive finance options for buying a car.
Banks in Philippines extend loans for both new and used cars. While the EIR(Effective Interest Rate) for new cars starts at around 8.90 percent, interest rates for used cars is around 2-3 percent higher than this. Lets look at some of the benefits of buying a car on loan.
- With a loan at your disposal, you don’t have to limit dreams of owning a car of your choice since banks are willing to finance up to 80 percent for new cars and up to 70 percent for used units.
- You get ample time to repay the loan since the average cap on the tenor is around 60 months, giving you sufficient time to pay back as per your financial convenience.
- Some of the lenders also include costs of accessories and security systems under the loan ambit, making the whole experience of availing the loan, an holistic one.
- Loans for cars come at quick approvals when compared to other types of financing options in the market with easy-to-comprehend terms and conditions.
Glossary of Terms Used in Auto Loan
- Repayment Tenor: A pre agreed term between the borrower and lender where the former agrees to pay the borrowed amount along with applicable interest charges in equated installments within the stipulated time frame.
- Pre-Owned Car: A car that has been previously owned by a different person and is available for change of ownership in the market. Pre-owned cars are also known as Second hand cars.
- Mode of Payment: The channel through which the borrower will repay the loan amount in equated installments to the bank every month. Eg. Auto Debit Arrangement.
- Minimum Loan Amount: This is the base amount that the bank is willing to lend to the borrower for purchasing a car. The borrower will be not be eligible to borrow an amount lower than the minimum stipulated amount.
Leading Banks That Offer Auto Loan in the Philippines
Factors That Affect Loan Eligibility in Philippines
Loan eligibility takes into account, multiple factors that determine your ability to borrow the loan and pay it back. Before applying for any type of loan, you must make a thorough study on the nature of loan with a view to be equipped with sufficient information to deal with confidence. Some of the factors that affect the eligibility are provided below.
- Income: Whether you’re salaried or self employed, the annual earnings are taken into consideration as a primary determinant. How much you earn, the take home salary, disposable income after payment of liabilities are some of the factors the bank would take into consideration. In most cases, one can include income of spouse or immediate family members to add weightage to the loan application.
- Project/Item cost: If the loan is associated with tangible object such as car, all costs are taken into consideration. The financials should fall within the set limits.
- Credit History: Perhaps, one of the most crucial determinants in the whole process. Previous instances of late payments, defaults are taken seriously and may go against the applicant. On the flipside, good credit ensures that you not only get the loan, but also flexibility to negotiate the terms of the loan.
Tips To Get The Best Loan Deal in Philippines
|Compare Loan Products Online||Websites like BankBazaar.ph maintain exclusive and up to date information on products offered by various bank and its features. They also provide break up of rates and fees, helping in making a decision faster.|
|Use Loan Calculator to Understand the Financials||
Before applying for a loan, it's paramount to understand the financials with a view to get a better picture on how much you can actually afford. Use a loan calculator to get a detailed breakup of the costs involved.
The calculator available on this website does just that by providing a detailed amortization and breakup of various components.
|Negotiate the Terms||The rates and terms projected is not final and binding. There is always a room for negotiations. Speak to the bank representatives to see if they can offer something better based on the basis of your background.|
|Lookout for Periodic and Festive Offers||During exclusive campaigns and offers, banks offer enhanced loan term and rates which can actually help you save money and get a better deal. You can also inquire with the seller for partnership with banks for exclusive loan offers. Eg: Car dealership.|
How Can BankBazaar Assist You With Loans?
BankBazaar.ph is an online web place which provides comprehensive information on all the banking and financial products. Whether you’re contemplating on getting a credit card/loan or generally scouting for specific information in the banking or insurance sector, we have it all under one roof. The site also hosts intriguing tools such as loan calculators to help you in getting a salient breakup of the financials involved in a particular type of loan.
You can compare, review products from various categories such as credit cards, general and health insurance, personal loans, home loans, time deposits etc. to make well informed financial decisions.
News About Loans in Philippines
Loan Growth seen in June
Growth in lending to households and businesses by commercial banks was seen in June as well. As per data released by the BSP (Bangko Sentral ng Pilipinas), lending including RRPs (reverse repurchase) grew by 16.6%, outstanding loans excluding RRPs increased by 17.6% and loans given for production activities grew by 17.7%. The increase in production loans was because of the increase in real estate loans; steam, electricity and air conditioning supply, retail and wholesale trade, vehicle repairs, insurance activities, communication, etc. The data showed that loans taken for household consumption had increased by 18.8% and there was constant growth in credit card loans. BSP will ensure that the credit condition will be at par with the economic growth of the country.
29th July 2016
Securities and Exchange Commission signs an agreement with LandBank
SEC or Securities and Exchange Commission signed an agreement with LandBank in Philippines for allowing certificate payments required for the registration of companies with the agency that is done using debit cards, credit cards and automated teller machines issued by LandBank and other Bancnet recognized banks.
Under this particular agreement, POS (point of sale) terminals will be established by LandBank. These terminals will be set up at the all the satellite office is Ali Mall Cubao, Robinsons Galleria, SM Manila and SM North Edsa along with SEC Head Office. This will be facilitating payments made by using debit cards, credit cards and automated teller machines.
Point of sale is device made for payments. The credit card holder, debit card holders and the automated teller machine users can make their payments using POS instead of paying by cash.
The chairman of Securities and Exchange Commission, Teresita Herbosa stated that using point of sale terminals at the Securities and Exchange Commission will enhance agency’s ease of running its business creativities. Consumer convenience will also be enhance this way. Herbosa added that this step is considered to improve the business regulation quality in line with the administration policies of Duterte.
20th July 2016
Japanese Bank ties up with BDO
Shizouka Bank, one of the largest banks in Japan has gone into a partnership with BDO Unibank to offer service to all the needs and requirements of its customers and expand their business in Philippines.
The memorandum of understanding was signed and the partnership between Shizouka Bank and BDO was sealed. According to Shizouka Bank, the customers are interested in investing in the SMEs (small and medium enterprises) in Philippines. Since BDO has a very strong foothold in the Philippine economy, Shizouka Bank will be able to cater to the needs of its customers in a better way.
19th July 2016
Money Laundering Rules Strengthened by BSP
In order to ensure that the non-banking financial institutions follow the anti-money laundering rules, the BSP (Bangko Sentral ng Pilipinas) is planning to upgrade them. Nestor Espenilla Jr., Deputy Governor General of BSP, said that this step has been taken to prevent such activities in Philippines. He also added that the revised rules will be applicable to all existing companies. The regulator kept a close watch on all the activities of pawnshops in April, who are the top distributors of microinsurance products in the country as per Espenilla. By end of May, 2016, BSP had delisted around 250 remittance agents, pawnshops and foreign exchange dealers. It also delisted Philrem Service Corporation for violating lawsThe investment climate in Philippines currently looks very favorable as the economy in the country continues to show growth and higher growth potentials.
18th July 2016
Philippines FDI Soars to $2.2 Billion in April 2016
According to the data released by BSP (Bangko Sentral ng Pilipinas), the FDI (Foreign Direct Investments) in Philippines in April 2016 has reached a record high of $2.2 billion. The net inflows in April this year has grown by 476.1% when compared to the same time last year when the recorded FDI was $382 million. It has also surpassed FDI of $364 million that was recorded for March last year.
BSP has confirmed that all FDI that have been posted for the month of April have seen an increase. A rise of 3,199.3% was seen in equity apart from reinvested earnings and total placements rose by 2,044.1%. Last year in April, the equity apart from reinvested earnings totalled $1.32 billion and total placements stood at $1.43 billion.
Majority inflows have been from US, Japan, Germany, the Netherlands and Taiwan with investments in real estate, insurance, manufacturing, wholesale/retail trade and administrative/support service related activities.
The investment climate in Philippines currently looks very favourable as the economy in the country continues to show growth and higher growth potentials.
12th July 2016
Bank lending and money supply may rise in Philippines
BSP (Bangko Sentral ng Pilipinas) stated that loans for the production activities have expanded in Philippines. So, there is increase in bank lending and money supply. M3 or Domestic Liquidity also increased by 13.5% in the month of May. In April, te M3 growth was 12.8%. The Domestic Liquidity growth on a month to month basis was 1.4%.
The Domestic Claims in April was 18.4%. Currently, it rose up to 18.7%. The maximum bank loans went to the real estate activities, retail and wholesale trade, motor vehicle and motorcycle repairs, insurance activities, financial activities, and communication and information. On the other hand, public sector lending went up by 35%.
30th June 2016
Metrobank Plans Fundraising for Up to P20 Billion
The Metropolitan Bank and Trust Co. is planning to raise P20 billion by offering long term deposits that are high yielding. The Metrobank board has approved the LTNCDs or Long-Term Negotiable Certificates of Deposits issuance in 1 or more tranches which are at least worth P10 billion as revealed to PSE (Philippine Stock Exchange). The proposed tenure for these deposits range between 5.5 years and 10 years depending on the market conditions. The bank plans on benefiting from the comparatively low rates of interest and liquidity in the financial system.
LTNCDs are exempt from taxes for eligible individuals when held for a minimum of 5 years. These products are specifically targeted to investors seeking long tenures and higher interest rates when compared to short term deposits or savings accounts. They are insured by PDIC (Philippine Deposit Insurance Corp.) with a maximum cover of P500,000 per depositor.
Metrobank’s President Fabian Dee authorized the appointment of arrangers and third parties for the issuance. He has also received authority from the board to approve details such as the launch timing, tenure, issue size, denomination and the interest rate.
25th June 2016
BDO Unibank Declares Cash Dividends of P1.09 Billion
BDO Unibank, the largest lender in Philippines, declared that it is going to pay a staggering amount of P1.094 billion as cash dividends to its stockholders as of 15 June, 2016. The financial giant disclosed this information to the Philippine Stock Exchange (PSE) on Monday. These dividends will be paid from the surplus profits of the bank and this decision was taken in a board meeting of BDO Unibank on 28 May, 2016. The board approved declaring cash dividends of P0.30 for each common share and it is payable on 27 June, 2016 on approval of the Bangko Sentral ng Pilipinas.
Earlier, BDO posted a record net income of P25 billion in 2015, with a year-on-year increase of 10 percent. This year the bank is aiming to generate a net income of P26 billion with a minimal growth of 4 percent.
01st June 2016
Slow Loan Growth may lead to Rate Adjustments
If the loan growth continues to slow down, it may prompt BSP (Bangko Sentral ng Pilipinas) to make adjustments in the monetary policy settings following an “operational” cut that was introduced last week for the interest rate corridor as said by an economist from a foreign bank.
Last week, adjustments to the current policy rates was announced by the central bank ahead of the 3 June implementation of an interest rate corridor which will involve auctioning off term deposits to steer the rates in the money market closer to the key policy rate of BSP. BSP has said that adjustments were not made keeping in mind the changing economic conditions but to narrow the corridor.
According to BSP data, bank lending has seen a sustained expansion to log a 14.8 percent growth in March from 1 year ago which slid from 16.9 percent that was recorded the month before. This pace has been seen as the slowest since the 13.6 percent climb in December.
26th May 2016
BDO Unibank Inc and Japan’s Aozora Bank Set to Partner Up
BDO Unibank Inc. has once again forged a partnership with another Japanese bank as a way of supporting Japanese firms looking to start operations in Philippines. The two banks are set to collaborate for investment banking services, merger and acquisition advisory and assisting clients needing banking support if they decide to start operations in the country.
BDO Unibank Inc. is the country’s biggest bank and has reported an all-time high earnings of P25.055 billion amidst robust growth in its core businesses, up from P22.828 billion in 2014. BDO has said that Aozora bank occupies a unique position as it is neither a mega bank nor a regional financial institution and is active in provisions of loans, debentures, deposits, loan syndication, business and asset revitalization and securitization. Additionally, Aozora also provides advisory services to assist financialand corporate institutions, retail clients.
24th May 2016