A salary loan, also known as a payday loan in some parts of the world, is designed to allow you to meet the cost of any expenses you can’t quite manage to cover from your existing salary. Generally speaking, they are designed to be used on a short-term basis as a way of helping people to get the funds they need without taking a second job or selling any of their possessions. Most people use this style of borrowing as a last resort and the majority of customers are responsible when it comes to budgeting for repayments, however, this is not always the case. Here are 10 questions you need to ask yourself before you seriously consider taking out a salary loan in the Philippines?
1. What Led to My Current Money Shortage?
Be honest with yourself. Is this a result of your lifestyle? Or perhaps a serious, unforeseen event such as a health problem or family emergency? Whatever has led you into a situation where you need to borrow money to meet every day expenses, you will need to take steps to try and address this in order to avoid getting in to unmanageable debt. Take a look at your spending habits and identify problem areas. It also makes sense to check you are receiving any and all benefits and salary payments you are entitled to.
2. How much do I realistically need to borrow?
Need is the operative word in this sentence. Salary loans in the Philippines are designed to help people meet the cost of every day living, not to pay for unnecessary expenditure or luxury items. Before completing an application, be realistic with yourself about how much you need to borrow. Make a list of everything the loan is going to be used for and ensure that you only take out what you need. Its tempting to treat yourself but if that is your intention, a longer-term personal loan would be a far more appropriate option for you.
3. Are the lenders I am dealing with legitimate?
When you need funds fast, you can be forgiven for acting on impulse due to the stress and anxiety that comes with being in debt. However, you must never fall victim to illegal lenders. Doing so can have severe consequences for you and your family. Always check that any lenders you are considering are fully accredited and recognised by the financial authorities. If you have any doubt in your mind, check online and ask around. The beauty of digital communication means that shoddy business practices and poor-quality service can be called out publicly for all to see.
4. How will I make the repayments each month?
This is probably the most important question of all. Missing payments on short term payday loans can result in additional default charges, penalty payments and even legal action in the worst-case scenarios. Have a solid and realistic plan that takes in to account your daily expenses as well as the loan payment itself. You may need to do extra hours at work, start a side business or sell some unwanted items, but lenders need to receive your payment on time each month in order to continue working with you. If you do manage to pay on time without a problem, your credit rating is likely to increase, and you will be eligible for much cheaper interest rates in the future.
5. Do I have any alternatives?
Can you go without any non-essential items for a couple of months? Take a second job on an evening? Or perhaps borrow money from a family member or friend? If you do have an alternative means of finding the funds you need, rather than using a salary loan, you may want to consider this first. Though they are a great way of making sure you don’t miss essential bill and house payments in the short term, salary loans are not designed as a replacement for a regular income. If you can find an alternative way of generating cash, it makes sense to do this, rather than putting yourself at unnecessary risk.
6. How Can I Increase My Income?
Even if you do decide to take out a salary loan, the Philippines is a part of the world with many potential job opportunities for ex pats and residents alike. Teaching English online, working behind a bar or helping in a kitchen are 3 tried and tested methods many people have used to generate a little extra cash when they are financial trouble. If you are earning more than you need, you can start to pay make larger repayments to your loan provider and you could even start a savings account. Doing this means that if you do end up in a situation where you don’t have an income in a particular month, you can still potentially make your loan repayment and avoid any unwanted charges.
7. Which Loan Provider Should I Use?
Not all loan providers are equal and you should always take the time to investigate terms and conditions, interest rates and most importantly, customer reviews. If there are numerous complaints of shady practices or hidden fees, avoid that lender at all costs. If the feedback is largely positive, they can be added to your list of potentials. Some lenders offer gimmicks and special offers to try and lure customers in to unmanageable debt, so always read the small print before you decide to make a final decision. Ultimately, you need to be looking for the lowest interest rate, penalty payments that won’t break the bank and customer service that makes you feel respected and valued. If your provider can’t offer these things, they definitely aren’t for you.
Summary
Salary loans should only be used as a last resort and you should never rush into any financial agreement without first considering the implications and if necessary, any potential alternatives.