Over the last couple of decades, Personal Loan has become a household name when we talk about a specific credit instrument that is easily accessible for a multitude of needs which require a financial impetus. Owing to its simplicity and little frills, it continues to dominate the loan market with millions being disbursed, year on year. For those of you not so well acquainted with this product, it is an open ended loan disbursed by banks and financial institutions for almost any need under the sun. It works akin to any other loan instrument where an approved amount(principal) is given by the lender to the borrower who agrees to repay the loan over a fixed term(loan tenor) along with applicable charges in equated installments.
Let us understand the Types of Loans available in Philippines today. Primarily, a PL is categorized on the basis of collateral requirement. The first category detailed below is on the basis of this specification.
Secured Personal Loan
- This loan is available for resident Filipinos as well as foreigners with residency in the Philippines.
- This type of loan is provided on the basis on a collateral such as Time Deposits held with the bank.
- The eligibility amount is generally a large percentage of the amount held in the account, which is taken as a security by the bank.
- The interest rate is slightly lower when compared to an unsecured loan, owing to the security provided.
- Secured loans are provided against deposit accounts held in both Peso and US Dollar depending on the bank’s offer.
- Documentation and application is much simpler here since the banks can rely upon existing relations such as Time Deposits/Savings Account.
- Eligibility is slightly relaxed compared to an unsecured loan, the loan is extended to both salaried and self employed applicants.
- A secured personal loan mostly comes pre approved and is largely suitable for aspirants with no/low credit history.
- The most popular of the two, unsecured loans are extended to Filipinos and Foreigners with a minimum age of 21 and above.
- No collateral is required since the basis of providing this loan is the personal background of the applicant such as income, credit history etc.
- The loan amount is substantially higher since there is no primary cap like its secured counterpart.
- The interest rates are slightly higher in this type of loan and the method of compounding the interest can vary based on scheme and the bank.
- Documentation and paperwork can be elaborate as it all depends on the applicant’s background, eligibility and income group.
- The terms and rates vary from person to person on the basis of multiple inputs such as income.
- Here, the loan does not come on a pre approved basis since the application has to go through the process of scrutiny, on the basis of bank’s internal benchmarks.
Personal Loan for Overseas Filipino Workers
Most of the indigenous and multinational banks in the country offer personal loans for OFW’s as well. These products comes with tailor made features and benefits to suit the needs of Filipinos working abroad.
- Loans for OFWs are provided on both secured and unsecured basis.
- A secured loan is provided on the basis of Time Deposit/Savings account held in both Peso and US Dollar.
- Loan amount starting at P10,000 with an upper cap of up to P3,000,000 is extended to people falling in this category.
- Depending on the bank, a flexible loan repayment tenor of up to 48 months is provided to Filipinos working abroad.
Top Up Loan
Existing loan customers can be eligible for an additional loan on the basis of good credit standing. Under this option, the existing personal loan account is topped up with the approved loan amount. If you’re looking for additional funds during the repayment period, the top up option is a lot more feasible when compared to signing up for the new loan. The rates and terms will largely remain the same, unless specified the bank. The Top Up option is generally given to unsecured loan accounts. Since additional funds are disbursed on the basis of existing relationship, paperwork and documentation is minimal.
Leading banks in the Philippines offer the top up option. Do inquire with the bank if you’re looking for funds on an urgent basis.
Just in case you’re new to the world of personal loans, here are some the common reasons a Personal Loan can be availed for.
Consolidation of Debt: One can look at this loan instrument to pay off existing debts such as credit card balances and save money. Loans with high interest rates can be paid off in full by availing a personal loan. Instead of paying multiple EMIs and bills every month, this loan can be used to consolidate all the loans which are drilling a hole into the pocket.
Travel/Vacation: That dream vacation needn't wait until you’ve accumulated sufficient savings in the bank. One of the most common reasons for availing this loan is to meet the expenses of vacation. Why should you really wait when you have immediate access to money? Go ahead and live it up and payback in affordable installments.
Medical Needs: Health issues can be tricky, especially when it comes at expensive costs of hospitalization and treatment. When there is a medical emergency which requires considerable money, you can rely on this loan to cover the costs of treatment. The health of our loved ones is more important than anything else.
Special Occasions: Those exclusive events in life such as anniversary celebrations of parents, kid’s birthday party require considerable amount of financial resources. You don’t want to leave no stones unturned to ensure it goes as planned. In such circumstances, borrowing through a personal loan helps.
Renovating Home/Contents: This act requires good amount of financial resources along with sound planning. Personal loan helps in such cases where you can borrow a large sum and pay back in equated installments.
Emergency Need: For all those uncalled for times in life, this loan is the best answer as it can be disbursed in little time. If you’ve an urgent requirement for money, you can trust this open ended loan to fund the emergency need.
Before availing a personal loan, it's paramount that you compare the best loan offers from various banks before getting one. Bankbazaar.ph provides detailed information on loans from various banks and also gives you access to the latest rates and terms from banks in Philippines.