Personal Loans Online – A Detailed Guide for Filipinos 2024

Even when you do your best to spend money wisely, sometimes you might not have enough to meet all your needs. Personal loans are practical solutions for most people who have to get extra cash. A personal loan can solve your money problems in due time because you can apply for one online in the Philippines. The fixed interest rate that comes with most personal loans is why they are popular. This guide explains the essentials of a personal loan, like requirements, loan application, and choosing the best one.

What is a Personal Loan?

A personal loan is an amount of money a bank, credit union, or another financial institution lends to a borrower with interest. You get a specific duration to pay off the loan amount and interest accumulated. In the Philippines, loan amounts range between PHP 1,000 and PHP 1 million. The interest rates range from 10% to 39%, depending on the loan amount. Small online personal loans are usually unsecured, but secured ones are also available.

Does a Personal Loan Suit Your Needs?

Just because you are short on spending money doesn’t mean you should get an online loan. As with any other financial product, you must be confident a personal loan is suitable. The appeal of personal loans is that they don’t have a lot of limitations when it comes to usage. Here are a few ways to use a personal loan:

Debt Consolidation

You can take out a debt consolidation loan to help you clear liabilities. Debt can accumulate fast, especially when you don’t have a solid plan to pay them off. When you have many liabilities, your credit approval chances decrease. Lenders don’t trust a borrower with a poor repayment history. A practical solution is to consolidate debt into a lump sum, so it’s easier to clear. You can use the entire loan to pay off the debt or only clear part of it, depending on the need.

Pay Off Your Credit Card(s)

Clearing your credit card balance is one of the easiest ways to improve your credit score. If you intend to apply for a loan or line of credit, your credit history determines your suitability as a borrower. Credit card debt is a common obstacle for many loan applicants. With a personal loan, you can pay off your cards to prevent the balance from growing. If you have several cards, you can transfer the balance and pay it off as one debt, making it less challenging to meet the monthly payments.

Home Improvement

Financing a home renovation can be daunting, particularly if it’s urgent work. Even the smallest improvement projects can have many costs. So, you must be certain you have the cash to pay for them. Whether you are planning to redo the whole kitchen, add an extension, or do a few repairs, a personal loan gets the job done. The size of the project determines the right loan amount to ask for. Personal loans for home improvements are viable alternatives for homeowners who don’t want to or can’t use their properties for home equity loans.

A Major Purchase

If you need to invest in a big purchase that your income or savings can’t cover, a personal loan is a good option. Imagine if your air conditioner or cooker is damaged beyond repair and you lack the funds at hand to buy one outright. A personal loan can solve your problem. It enables you to pay off a large purchase at once. Therefore, you don’t have to pay in installments, which can be costly. Additionally, it lets you buy the item you need when you need it.

Things to Consider Before You Borrow Money

You have seen the different ways a personal loan can solve your problems, and you believe it’s suitable for you. However, applying for a loan is a big decision you should be sure you are ready for. Don’t rush a loan application simply because you qualify for one. Know what you are getting yourself into first. The following are key aspects of online personal loans.

Interest Rates

An interest rate is the money a lender charges to advance you a particular loan amount. This figure is usually presented as a nominal annual percentage rate. When paying off your loan, you have to return the principal plus the accumulated interest. Thus, ensure you get the best rates on the market. Lenders calculate interests as:

Variable Interest Rate

This type of interest changes for the duration of the loan. The lender adjusts the interest rate according to the market conditions. Therefore, you could pay more or less interest in a month than when you applied for a personal loan.

Fixed Interest Rate

A fixed-rate doesn’t change throughout the loan tenure. Fixed rates are common for personal loans. Besides being easy to calculate, you know what you will be paying from start to finish.

Loan Repayment

When you take out a personal loan, you must pay back the base principal and interest within the agreed timeline. You have to work out the monthly payment with the lender. Your loan repayment terms depend on the loan amount, your credit history, and minimum gross monthly income.

Affordable Payments

Never get a loan you cannot afford to pay. Defaulting on even a single monthly payment ruins your credit score, making it harder to get approved for another loan in the future. Hence, work out favorable payment terms with the lender to avoid defaulting.

Payment Frequency

Expect a regular monthly payment schedule for a personal loan. However, some products come with weekly and bi-monthly schedules. Therefore, find out from your lender the options available.

Length of Repayment

Loan terms range from lender to lender. So, the repayment timeless depends on the institution from which you are borrowing. Filipinos can get between six months and 5 years to repay loans.

Lenders Not Just Banks

Although they are the most popular, banks are not the only places where you can apply for a personal loan. Varied lenders in the Philippines offer personal loans to different customers. Online lenders are the biggest alternative to banks. These companies are easily accessible to Filipinos, not to mention the convenient online application process.

Internet lenders are especially suitable for borrowers with poor credit. Pawnshops are other options. If you require fast cash without a credit report check, a pawnshop is the most sensible option. The downside is that these lenders have high interest rates. Also, you need security for the loan. Filipino borrowers can also secure loans from private lenders, which have fewer requirements than banks.

What do Lenders Consider?

Lenders have different requirements for personal loans. However, a few elements are consistent in the loan application process. Before shopping for a loan, know what a lender focuses on, so you can be ready. The basics are;

Outstanding Debt

The liabilities in your name affect your status as a borrower. A lender evaluates your ability to repay a loan. Consequently, a large debt indicates you might not have the means to cover the monthly payments. In the Philippines, you must have a debt to equity ratio of not more than 3.44:1.

Financial Commitments

What do you spend your income on? Your monthly commitments influence a lender’s decision. A borrower who has to pay for a mortgage, car, school, and utilities might not have much left to service a loan every month. The fewer commitments you have, the higher the chances of getting a decent loan amount and interest rate.

Credit Score

Your credit score is the most critical consideration for a lender. A poor credit history means a low score, which reduces the loan amount you can borrow and subjects you to astronomical interest rates. Try to maintain a credit score of at least 600.

Regular Income

Lenders look at your minimum gross monthly income to determine your ability to repay a loan. Income requirements vary across institutions, although some don’t disclose them. You have to show proof of income in your loan application.

Employment Status

If you are applying for a big loan amount that could take a few years to pay back, the lender has to assess your risk thoroughly. Solid employment works in your favor. It shows lenders you have a stable income that can cover the repayment.

Your Assets

Proof of assets increases your chances of credit approval. When you have assets that can be used as collateral, your risk as a borrower reduces. If you default on the loan, the lender can take possession of your assets to cover the repayment.

Tips for Getting The Best Personal Loan

Personal loans are tailored for different borrowers. So, getting the best one for you might take some work. Besides finding a reputable lender, you have to factor in a few other elements. Here’s what to do to ensure you apply for the most suitable loan.

Build Your Credit Score

Your credit score impacts to creditworthiness. A poor score can disqualify you for a loan or only allow a small loan amount. If you have bad credit, the best solution is to work on it before applying for a new loan. Get your credit report from CIC (Credit Information Corporation) to see what needs improving. You can improve your credit history by paying off debt. Try to pay down credit card balances and other loans through debt consolidation. Don’t use your credit limit too much, and avoid getting too many cards. Also, avoid making a hard credit inquiry because it hurts your score.

Shop Around

Avoid applying for the first loan that looks attractive. Take your time to compare different products. This comparison makes that task uncomplicated. Find products with the best interest rates and loan terms in the Philippines using our site.

Is A Personal Loan The Solution?

A personal loan is a practical alternative when you need a sizeable sum and prefer not to max out your credit cards. Personal loans are incredibly flexible, allowing you to use the money for everything, from debt consolidation to emergencies. However, evaluate your needs carefully to see if another product like a home equity loan won’t serve you better. If you decide to get a personal loan, use our comparison site to land the best deals in the Philippines.

How to Apply For A Personal Loan

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