Why and How to Secure a Personal Loan in the Philippines

What is a Personal Loan?

Personal loans can be used for anything you need, making them different from other loans available in the market. Most loans are designed for a specific purpose—for instance, housing loans can only be used for housing-related matters, and car loans can only be used for car-related affairs. However, you can apply for a personal loan for any expense, so long as it actually warrants a loan.

Some personal loans offer as high as Php 2 million; commercial banks usually do these. Meanwhile, legit online loans offer a smaller maximum loan amount – sometimes as low as Php 10,000 to 20,000. In addition, personal loans may either be secured or unsecured, meaning they may come with collateral depending on what you will be purchasing.

In availing of a personal loan, you will be entering into a contract with a financing institution (government, bank, or online lender) in order to receive a certain amount, which you will be paying off monthly, over the period you will agree upon. Since this is a loan, expect to pay extra to taking into account the interest rate that you and the financing institution will agree upon. This interest rate varies depending on where you’re applying for a personal loan and how much you can loan based on your credit rating.

Should You Get a Personal Loan? 

Just because a personal loan is readily available doesn’t mean you should get one. After all, it still boils down to your need of availing one, as well as your ability and commitment to paying off the loan. That said, how do you know if you should get a personal loan, or perhaps something else? Here’s what to do.

When to get a personal loan 

Given the many loans available in the market, it’s best to apply for a personal loan only if other loans cannot meet your financial needs. For instance, if you’re looking to buy a house, you’re better off applying for a housing loan than a personal loan. Consequently, if you’re planning to start a business, then your best bet would be a business loan instead.

It’s also important to evaluate how much you need and when you need it. Banks offer personal loans at high amounts—this is perfect if you need funds for traveling or other leisure activities that may take a lot of money. However, personal loans often done with banks usually take time. Likewise, these loans would require that you submit different documents for them to evaluate your application. If your need is urgent, such as when you need to pay off medical bills ASAP, this may not be your best option.

Additionally, personal loans vary quite a lot in the amount they offer. When you loan online, you can expect the loan amount to be quite meager, and the interest rates to be quite high. If this fits your needs, you can check out quick cash loans online. It might be worth evaluating if there’s any way another way you can acquire the money you need, too, rather than turn to legit online loan providers.

Choosing the Right Personal Loan

Before you go off applying for a personal loan, it’s important to know what to look for in selecting a lending institution. With so many kinds of personal loans to choose from—personal loans from banks or government institutions, or even online loans with low-interest rates—you should know just what to look for when choosing the perfect personal loan for your needs. Here are some things you need to consider:

Interest

Depending on how much you’re borrowing and how long you plan to pay off the loan, you can find yourself faced with different interest rates for different personal loan options. Government institutions usually disclose their interest rate as an Effective Interest Rate or Annual Percentage Rate (APR). This shows the actual interest you have to pay off—so, as your loan amount gets smaller, so does the interest you have to pay.

Meanwhile, banks and online lenders typically disclose their interest via monthly add-on interest rates. This is a fixed interest rate that you have to pay off each month—this might mean a higher loan amortization each month, as your interest rate does not get recomputed regardless of how much you’ve paid off from the principal.

Loan Tenure

This refers to how long you can pay off a loan. Usually, borrowing a considerable sum of money means that you can pay it off for a longer period as well. Loan amounts in the millions can be paid off over 5 years; on the other hand, some quick cash loans have a maximum loan tenure of only 1 month. This is an important consideration, as you have to make sure you can pay off your loan amount in the given time. The amount you have to pay monthly, after all, will depend on how long you will be paying the loan.

Repayment Option

This refers to possible payment channels you can use to pay off the loan. For government institutions, for instance, you can simply have it deducted from your salary. Alternatively, you can pay for this through bayad centers or online merchants. Banks and online lenders accept payments through different means, too. Some can be through e-wallets, some through a direct deduction from your bank account, and others through other payment channels. A lot of financing institutions offer multiple loan repayment options. Make sure to check which one can be most accessible to you, so you won’t have to worry about missing your payment for the month!

Where to Get Personal Loans with Low-Interest Rates in the Philippines

Ready to apply for your first personal loan, but not sure where to get one? Here’s where you can apply for a personal loan or a quick cash loan in the Philippines:

Government agencies

Two government agencies are known for the low-interest loans they provide in the Philippines. These are typically available for employed individuals in the country, who have a membership with either the Social Security System (SSS), or the Pagtutulungan sa Kinabukasan: Ikaw, Bangko, Industriya, at Gobyerno (Pag-IBIG).

SSS Salary Loan

A government loan with only an annual percentage rate of 10%, the SSS Salary Loan is available for qualified members looking to borrow a personal loan. Payments are made monthly.

Members can borrow up to one or two months’ worth of their salary, payable over 24 months via monthly installments. Monthly payments are pretty convenient for this loan, as they can automatically be deducted from an employee’s salary since they require an SSS contribution monthly.

In addition, SSS gives a second chance for members who could not settle their dues in time. Through their Loan Restructuring Program (LRP), borrowers can quickly settle their overdue SSS loans at a lower annual interest rate of 3%. This is on top of not paying a penalty fee and being given the freedom to extend their repayment term up to five years. Because of these reasons, it’s no wonder that most Filipino workers rely on SSS loans if they want some quick and emergency cash. 

In sum, here are some quick notes to remember regarding the loan:

• Annual Percentage Rate: 10%
• Loan amount: Up to 2x the member’s monthly salary
• Loan tenure: Up to 24 months
• Processing period: 2-3 weeks
• Service fee: 1% of the total loan amount
• Late payment penalty: 1% of the loan amount

Pag-IBIG Multi Purpose Loan

Another low-interest personal loan, the Pag-IBIG Multi-Purpose Loan, allows for a higher loan amount if you’ve been paying your contributions with them for a long time. Pag-IBIG members are allowed to borrow up to 80% of their total Pag-IBIG contributions—that includes their personal monthly contributions, along with their employers’. If their account also earned dividends in the past, that’s included in the total as well.

The Pag-IBIG loan is perfect for those who have been working and paying their dues for a long time. The loan also features a low effective interest rate of 10.75% (around 0.896% monthly), payable over 24 months. Another key benefit of this loan is its convenience—loan payments can simply be deducted from your salary, so you won’t have to worry about forgetting to pay them monthly.

In summary, here’s how the Pag-IBIG Multi Purpose Loan works:

• Annual Percentage Rate: 10.75%
• Loan amount: Up to 80% of the total accumulated value at Pag-IBIG
• Loan tenure: Up to 24 months
• Processing period: 2-3 weeks

Banks

In the Philippines, commercial banks are another key option for securing personal loans. This is also your best bet if you’re looking to borrow a huge amount of money, which can sometimes reach millions. Because there are many banks in the Philippines, the personal loans market can be quite competitive, with different banks boasting varying benefits and unique selling propositions.

In general, though, most banks in the Philippines offer personal loans with a minimum loan amount of Php 10,000 to Php 50,000. In terms of the maximum amount, a few banks offer up to Php 2,000,000, while others offer around Php 1,000,000. Bigger loans usually allow up to 5 years of the monthly payment, with an average monthly interest rate of 1 to 2 percent.

Sometimes, banks offer promos to their loyal customers and allow personal loans of as low as 0.5% monthly. This isn’t a usual occurrence, though, so it’s best to assume an interest rate of only 1 to 2 percent.

Personal loans usually have to be processed at the bank itself, especially when it requires a lot of money. The contract terms will typically be explained at the bank itself, too. Be prepared with the required documents—a government-issued ID, a copy of your company ID, and your payslip or income tax return. Other banks may require additional documents, so make sure to inquire about this with them.

Usually, some banks can process loans as quickly as a day. However, most banks take around a week to finalize the review and approval of your application.

Online Lenders 

It is perfectly possible to avail of a loan online, and it’s quite easy, too! Quick cash loans exist in the Philippines, and you can rely on them if you’re in a pinch and in urgent need. These personal loans have no requirements except for a government issued ID, and have quick turnaround periods, too!

Some legit online loans give you their response in as fast as 30 minutes. The application process is quite straightforward, too—you only need to fill in an application form online and provide proof of your identity via a picture of your government ID. 

If you loan online, you can expect the loan amount to be smaller than personal loans from banks and government institutions. Online personal loans usually offer up to Php 20,000, with some offering up to Php 50,000 for loyal users of the platform. A chosen few offer loans of up to Php 100,000, but these are incredibly rare.

These loans also tend to have higher interest rates, which can reach up to 20% of the loan amount per month. Loan tenure is also relatively short, with most small-amount loans only offering a loan tenure of 1 to 3 months. For higher-amount loans, tenure can reach up to 12 months maximum.