Installment Loans: The Full Guide

Most people nowadays prefer installment loans when applying for financing due to several advantages such as flexibility of payments, higher loanable amounts, scheduled repayments, etc. The appeal certainly is already there and what highlights this type of loan product more is the efficiency of the application process.
This article will explore more what an installment loan is and how it works, the different types of installment loans, and other installment loan products in the Philippines today.

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Written by: Piggyy


Citibank Philippines

Citibank offers various financial products. Check and apply for exciting loan offers now.



UnionBank offers Quick Loans up to ₱1 million. Apply for this loan product now.



MayBank helps businesses and individuals with competitive financing offers. Apply for a loan now.


Security Bank

Security Bank offers attractive loan terms. Get this offer now.



What is an Installment Loan?


The main characteristic of an installment loan is the option for you to pay the total loan amount in fixed, scheduled payments – typically monthly. The scheduled payment is towards the principal amount and the interest charged.


Installment loans typically include the principal loan amount, interest rate, and loan term. Because the repayment is fixed and scheduled, borrowers can adequately budget their finances and pay the monthly amortization.




Types of Installment Loans


Installment loans can be secured or unsecured and can be of different product types: Mortgage, Auto, or Personal Loans.  


Secured Loan

A secured type of loan requires you to present collateral for approval for the installment loan. Usually, mortgage loans will hold the property used as the collateral, and the vehicle for which the auto loan is applied will also be the collateral. 


Unsecured Loan

Installment loans that don’t require collateral are considered unsecured loans. Usually, the basis of the approval for this type of loan is your creditworthiness, as evidenced by your credit score and ability to make repayments based on the income or assets owned. 


Mortgage Loan

A mortgage loan is a specific loan product for home financing. Usually, the repayment term for a home loan can be up to 20 to 30 years, with a fixed interest payment and regular monthly payment schedule. 


Auto Loan

An auto loan is an installment loan if you intend to purchase a car but cannot afford to pay cash outright. Depending on the lender, the repayment term for an auto loan can be up to 36 months for used vehicles or 48 months for brand new cars with a fixed interest rate and monthly payment schedule.


Personal Loan

Personal loans, also known as multi-purpose loans, are ideal for different financial needs. The purpose could be starting a business, consolidating debts from various lenders, family vacations, important events, school tuition, etc. It is often unsecured and may require higher interest rates than other installment loans. 


Buy Now Pay Later

One of the popular products of installment loans now is the Buy Now Pay Later option, which falls under consumer financing or retail installment loans and is famous for online purchases. This method allows you to purchase goods – usually appliances, gadgets, electronics, or other fixtures – and pay a downpayment. The balance amount (often interest-free) can be paid in installments, spread across an agreed period of time. In the Philippines, the BNPL works well when you purchase items from merchants and settle the payments to the respective third-party loan providers. 


Brands that Offer BNPL


BDO Buy Now, Pay Later

BDO and BDO-issued Amex cards qualify for this promo in all of the partner stores of BDO. When you purchase the items, the monthly installment payments can spread out for up to 24 months at 0% interest, while up to 36 months of repayment will require a 1% add-on rate per month. 


Home Credit Consumer Loan

You are not required to have a credit card to avail of this loan, and you can visit any partner stores and inquire about the product. The loan application is immediately processed, and you will pay the downpayment. The interest rate depends on the downpayment and the repayment term chosen, and Home Credit will charge a processing fee based on the financed amount. 


Shopee SPay Later

This product is only available for qualified Shopee users wherein the account owner has a credit limit and can freely purchase items with an installment plan for up to 12 months. To cover the loan process, Shopee charges a processing fee of 0-2% in addition to the interest rate, ranging from 1 to 5% of the total order. 


Who Can Use the Different Types of Installment Loans?


Anyone can avail of installments loans, especially if they need them for urgent needs but lack the funding to pay the loan back in full within a short period. Some people prefer to pay in installments to manage their finances, especially when purchasing a home or a vehicle. 


Those with stable income will use the loan proceeds to address their personal needs, such as additional business capital, medical expenses, or debt consolidation.


Requirements for Installment Loans


Here are the typical requirements for the different types of installment loans:


Mortgage Loan

  • Duly filled application form
  • Valid government-issued ID
  • Income Documents 
    • Employed Individuals: Certificate of Employment and Compensation, Income Tax Return, Payslips or Bank Statements
    • Self-Employed Individuals: Audited Financial Statement, Bank Statements, or Lease Contract
    • Corporate Borrowers: Business Registration Documents, Suppliers/Customers Contact Information, etc. 
  • Collateral Documents
  • Contract to Sell / Reservation Agreement from the Developer
  • Floor or Building Plan, Bill of Materials, etc. 


Auto Loan

  • Completed loan application form. 
  • 1-2 valid government-issued ID
  • Proof of Income (either of the following):
    • For locally employed: Certificate of Employment, Income Tax Return
    • Self-Employed: Income Tax Return, Bank Statement, Business Registration
    • OFWs: 3 months proof of remittance, Latest Crew Contract or Consularized Certificate of Employment


Personal Loan

  • Valid government-issued IDs
  • Income Document
    • Employed (1-month payslip, certificate of employment and compensation, or latest Income Tax Return)
    • Self-Employed (latest business ITR or audited financial statement)
  • Completely filled-out loan application form


Buy Now, Pay Later

  • 1 or 2 valid government-issued IDs
  • Proof of Income


In What Situations Should One Apply for an Installment Loan?


Before applying for an installment loan, you must be confident that you are financially prepared to commit to paying the monthly installment.


Here are a few situations one must be experiencing before taking out a loan:


Genuine Need But Lacking Cash

Some people might have an urgent need for cash but cannot afford to repay the total amount in one payment. Installment loans help people adjust their budgets to accommodate meeting the needed money to make a purchase.


Tight Budget 

Many low-income earners barely get by daily. Between paying for food, shelter, transportation, school tuition, and other expenses, some people can scarcely set aside money for savings or make additional purchases. Installment loans could come in handy to get by. 


Unexpected Expenses

It’s inevitable to pay for sudden purchases and emergencies, whether it’s sickness or the death of a family member. It’s unfortunate for people who lack emergency funds. When this occurs, one may struggle to make a one-time payment and might not have other sources to get the money. 


Big-Ticket Items and Large Purchases for Business

Big-ticket items such as furniture and appliances are generally expensive, and you may prefer to avail of installment plans to pay off the things while managing your monthly budget. Meanwhile, large consumer purchases can include a vehicle, house and lot, or it could also be for acquiring machinery or equipment for the business. 

Pros and Cons

There are many reasons why more and more people prefer installment loans. While installment loans may offer attractive benefits, there are pitfalls when applying for installment loans without thinking it through.



  • Higher Loan Amount With the flexibility and length of repayment that installment loans provide, lenders will offer a higher loanable limit to you, which is an advantage on their side because it prevents you from applying for a loan from different lenders to get a high loan amount.   
  • Affordable Repayment TermsInstallment loans have affordable repayment terms that let you pay in smaller payments but with a fixed interest rate and for a fixed duration. This option helps you manage your finances, especially if you need to pay for big-ticket items for your household.  
  • Fast and Easy ApplicationApplication for an installment loan can be made in person or online, depending on the most convenient method. Online applications save time by not traveling and waiting in line at the branch. With complete documents, most loan processes take only a few days.  


  • May Result in Impulsive SpendingWhen you have access to higher loan limits but only need a small portion of the loan amount, it could tempt you to make unnecessary purchases. Without proper planning and wise spending, you might fail to pay on the due date, and the lender will charge interest plus penalty fees. 
  • Higher Borrowing Cost in the Long RunYou should recognize that borrowing in installments comes with borrowing costs that might be more expensive in the long run when they pile up. Borrowing costs such as interest, processing fees, and other payments and charges can pile on top of the principal amount borrowed. 
  • Repayment Schedules are FixedFixed Repayment Schedules mean that scheduled payments remain constant and active on the due date, regardless of your financial situation. On the one hand, it may be ideal for you to budget appropriately, but on the downside, you can’t choose the due dates for the payments, which may result in late payment fees and cost you more. 
  • Expensive Late Payment FeesInstallment loans offer convenience, but missing payments on time can be very costly. On top of late payment fees, interest will also be charged each day after the scheduled payment has passed. Unpaid for a long time, the interest could pile up, making it difficult for you to recover. 

Financial Institutions that Offer Installment Loans


Here are some of the financial institutions that offer different types of installment loans in the Philippines:


Mortgage Loan

UnionBank Home Loan

Loan Amount: will depend on the contract price

Down Payment: at least 10%

Interest Rate: 

  • 7.00% fixed for 1 year
  • 7.50% fixed for 3 years
  • 8.25% fixed for 5 years
  • 10.00% fixed for 10 years
  • 11.0% fixed for 11-20 years


Loan Repayment Period: 1 to 20 years



UnionBank offers Quick Loans up to ₱1 million. Apply for this loan product now.


Security Bank Home Loan

Loan Amount: minimum of ₱1,000,000 up to 80% of the appraised value

Interest Rate: from 6.25% to 10.00% per annum

Minimum Monthly Income Required (Joint Gross): ₱50,000

Approval Period: within 10 banking days

Loan Repayment Period: up to 20 years


  • Between 21 to 65 years old. 
  • Must be continuously employed for 2 years. 
  • If self-employed, must be running a profitable business for 3 years. 


Security Bank

Security Bank offers attractive loan terms. Get this offer now.


Auto Loan

BDO Auto Loans

Loan Amount: will depend on the vehicle value

Down Payment: 20% to 40% of the vehicle value

Interest Rate: 

  • Brand New: starts at 17.33% per annum (36 months)
  • Pre-Owned: starts at 14.11% per annum (24 months)

Repayment Period: 

  • Brand New
    • Personal Use: up to 5 years
    • Business Use: up to 3 years
  • Pre-owned
    • Personal Use: up to 4 years
    • Business Use: up to 2 years


  • Must be a Filipino citizen or a foreign nation (subject to visa qualifications).
  • Between 21 to 70 years old.
  • Employed or self-employed with a stable source of income. 



Apply for BDO’s low interest-rate loan products now.


BPI Auto Loans

Down Payment: as low as 15%

Interest Rates:

  • Brand New: starts at 9.36% per annum (12 months)
  • Pre-Owned: starts at 14.26% per annum (24 months)

Minimum Monthly Income Required (Joint Gross): starts at ₱30,000

Repayment Period: up to 5 years


  • Must be a Filipino resident or a foreign nation with a stable Filipino co-maker.
  • Between 21-65 years old. 
  • Employed full-time or owns a business. 


Bank of the Philippine Islands

Avail of low interest rates with BPI. Do not miss this offer.


Personal Loan

Citibank Personal Loan

Loan Amount: ₱100,000 to ₱2,000,000

Interest Rate: 26.9% per annum 

Minimum Gross Salary Requirement: ₱250,000 per annum

Repayment Period: 5 years


  • Must be a Filipino resident with a Philippine billing address. 
  • Borrower must be at least 21 years old but not over 65 years old. 
  • Must have a Tax Identification Number (TIN). 
  • A principal cardholder with Citibank. 


Citibank Philippines

Citibank offers various financial products. Check and apply for exciting loan offers now.


Maybank Personal Loan

Loan Amount: up to ₱1,000,000

Interest Rate: 1.3% per month 

Minimum Gross Salary Requirement: ₱25,000 per month

Repayment Period: up to 3 years


  • Filipino citizens should at least be 23 years old upon loan application but should not be more than 65 years old upon loan maturity. 
  • Must have an active landline, work, or mobile phone number. 
  • Must be in the same profession or business for the past 3 years.



MayBank helps businesses and individuals with competitive financing offers. Apply for a loan now.


Buy Now, Pay Later


Atome is a mobile app that lets shoppers purchase items and split them into three equal payments without zero interest. You can browse local stores such as Rustan’s, Zalora, and The SM Store and select the items you want to buy. 


You will see the total amount upon checkout, and since it’s divided into three installments, the initial payment is paid upon purchase. The other two are spread 30 days apart with no interest or additional charges. 


Loan Amount: Will depend on the price of the item. 

Interest: None

Repayment Term: 3 Installments (first one after purchase, with second and third installments 30 days apart)


Comparison to Other Types of Loans


An installment loan’s main characteristic is the flexible repayment option which requires borrowers to pay equal monthly installments over a set period of time. Other types of loans require different payment agreements such as the below:


Payday Loan

A payday loan is an excellent option if you need immediate funds before your payday. You can extend your credit based on your salary, but the lender or financial institution will charge you a higher interest rate, and you must pay the amount in your next paycheck. Other terms used for Payday Loans are Cash Advance or Check Advance Loans. 


Revolving Credit

A revolving credit functions just like a credit card, and you are pre-approved of a credit limit that you can use, depending on the need up to the credit limit allowed. Unlike installment loans, a revolving credit line is replenished when the borrower has made a payment. 


The interest a borrower will pay will only be towards the used portion of the credit limit, but usually a higher interest rate than installment loans. 

Frequently asked questions

Can I get an installment loan with bad credit?

It’s still possible for many borrowers to be approved for an installment loan even if they do not have a high credit score, although the interest will be on the higher end and the loanable amount is lower. Some lenders might also require collateral. 

What interest rates should I expect on installment loans?

The interest rate will depend on the type of loan availed whether mortgage, personal, or auto loans. To know more about interest rates, the borrower can check out the different loan products directly from financial institutions or check their websites directly. 

What is the difference between a payday loan and an installment loan?

A payday loan requires repayment of the full amount immediately when the next paycheck is received, while an installment loan can be paid back for months or years. 

What is Buy Now, Pay Later (BNPL)?

Buy Now, Pay Later is a retail installment loan wherein consumers can make purchases and pay back the purchase price over equal monthly installments within an agreed period. 

How does Buy Now, Pay Later Work?

Consumers can purchase from the physical store and choose BNPL upon checking out. Online shopping websites will also provide an installment payment option upon checkout. The BNPL option is activated through credit card purchases or other financial institutions.  

How to sign up with the buy now pay later product of Shopee?

A user should have a Shopee account and activate the SPay Later option. Once approved, an initial credit limit will be available on the user’s Shopee account. Upon checkout of items, the Shopee user can choose SPay Later as the payment option and the installment period. 

How to avail of buy now pay later through BDO?

First, the consumer must be a BDO or BDO-Amex cardholder. Upon purchases, the cardholder can convert the payment into installments for up to 36 months. If the payment period chosen is 24 months, the purchase is interest-free, and if it is up to 36 months, there is a 1% add-on rate. 



Many advantages accompany installment loans, including payment flexibility, higher loan limits, and a more straightforward application process. 


Through installment loans, many borrowers can afford what they need as long as they qualify for the specific installment loan type they are applying for. Although packed with many benefits, any borrower must still consider the drawbacks of borrowing money and the costs involved. 


״The secret of happiness, is not found in seeking more, but in developing the capacity to enjoy less״ - Socrates

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