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Personal Loan

We all have that friend who, after all these years, will suddenly show up and say “hi” only to end up asking, “pwedeng pautang?” What if you’ll be in their shoes needing money? Good thing, there are personal loans for that! But is it a good thing? Sure, if you’re smart knowing the pros and cons before actually applying for a loan.

After all, loans were created to “help” you out of financial woes like paying debt, tuitions fees, medical emergencies, and even expenses for renovating your house. But there are nasty sides to them that you, as a future consumer, should be aware of and should know how to handle.


1. The interest rate is high

Let’s say you want to borrow ₱100,000 and pay it in 24 months.

Using the GoBear personal loans comparison tool, you will pay a total of ₱128,400 using a Maybank enAble plan on a 13.2% interest rate per annum with a ₱2,000 processing fee. A BPI regular loan will amount to ₱130,300 in total on a 14.4% interest rate with a ₱1,500 processing fee. Meanwhile, you will pay slightly higher with BDO at ₱131,300 on a 15% interest rate per year and a ₱1,300 processing fee.


Solution: Choose banks that offer lower interest rates and pay it in the shortest possible time. Also play with a loan calculator so you can compare rates and payments for different terms and loan amounts. 


2. It’s difficult to get approved

Requirements to get approved for personal loans are basically proofs that you can pay it. Some banks require that you earn ₱30,000 to ₱50,000 per month and prove it by showing your latest payslip, bank statement, credit card statement, or latest ITR. After submitting your requirements, the bank will closely investigate your credit history and excavate anything wrong you’ve done in the past. You’re in big trouble if you’ve been a constant borrower who have history of not paying back on time or at all.


Solution: It’s easier to get approved by preparing all the needed requirements down to the last bit. Also, don’t be so exaggerated with the amount. If you earn only ₱30,000, how on earth can you pay ₱1 million in 24 months? Also, keep your financial history clean and impressive.


3. Agents may be bad for you

Agents run on commission and are not paid by the hour. They may not spend time on someone who is not 100% guaranteed to get approved for personal loans. So if you happen to submit you loan application to an agent and he/she said you’re not approved, do not lose hope. It hasn't reached the bank yet.


Solution: Go directly to the bank and talk with the bank teller.  Better yet, compare personal loans with GoBear first and have instant access to the information you need without spending a sent.


4. Processing time can be long

A loan application or processing time usually runs for 5 to 10 banking days. It can be longer if you have incomplete documents.


Solution: Get fast loans by compiling complete documents.


5. It’s not for everyone

So you’re earning double the minimum required monthly earnings for the loan. But you are an online freelancer and cannot produce an ITR or pay slip. You can’t even identify yourself between employed or self-employed. Also, BPO workers are not always happily welcomed even after being eligible because they in BPO.


Solution
: Deal with banks who live in the present and can recognize that BPO and freelance workers are regularly earning Filipino citizens who can pay back cash loans.


6. There are penalties for early repayment

The lender should be happy if the borrower can pay all his dues earlier than expected, right? Wrong. The bank will lose money if everyone pays off the debt early. So in some banks, they have this early repayment penalty of about 5% of the remaining principal balance. It’s like being punished for doing something good. Ouch!


Solution: Check your bank if they have early repayment penalty. Better yet, do not pay early.


7. Personal loans have hidden fees

Well not really “hidden,” but they’re not visibly emphasized (similar to slimming drinks with disclaimer saying “works with proper diet and exercise”).


Solution: Read the black and white. Yes, we know it’s boring, and it is boring for a reason. Just read it and save yourself from costly mistakes. Know what are the processing fees, late payments, amendment fees, documentary stamp tax, and so on. Also, play with the loan calculator. They got little notes how they come up with the fees.


8. The sharks will get you

So you got approved for a loan and it seems everything is fine and dandy. Your job is looking great, the economy is looking great. But all of a sudden, life happens, and you lose your job, ran out of money, and in deep debt. The next thing you know, there are guys in black suits harassing you to pay for your ₱100,000 loan that now amassed to nearly half a million pesos because of interest. Got the scenario? Yes, it can happen to you, and yes, it did happen and for sure, this is still happening.


Solution: Have a plan when the worst happens. It’s best to talk with the bank if you are not sure you can pay the debt on time. Anyway, they cannot send you to jail for that so they most likely cooperate. But don’t be the bad guy breaking the deal you made. This is your second chance. Just remember the scary guys in suit knocking on your door. They’re trained to make you pay.

 

Personal loans are helpful if you know what you’re doing and getting. Be an informed borrower and make sure you compare personal loans with GoBear Philippines before application.