Using loans, credit cards and finance is something most people in the developed world will do at some stage in their lives and for most of us, it isn’t a problem. This style of lending allows people in the in the Philippines and beyond to enjoy their lives to the fullest, even on a relatively modest income. Problems only usually arise when customers are unable to differentiate between manageable borrowing that won’t impact on their lives and irresponsible decisions that leave them without enough money for life’s essentials. This is Asteria’s guide to identifying irresponsible borrowing habits.
Check Your Statements Regularly
Not checking statements is the number one reason so many people get into financial trouble with money lenders in the Philippines. If you have automated payments set up, it’s easy to ignore your statements, which means that it’s also easy to forget when introductory interest rates expire. Similarly, you may not notice any penalty charges for things like unintentional late payments. These can add up very quickly and if you aren’t checking your statements regularly, there’s a good chance you could be accruing a lot more debt than you realise. There’s also the potential for scammers and fraudsters to take control of your account without your knowledge. Though this is thankfully quite rare, it does happen, so remaining vigilant is a must.
If the amount you owe is constantly increasing. Stop borrowing.
It might seem obvious, but many people seem to forget that everything they borrow must be repaid eventually. In the Philippines, loans come with interest rates that can vary quite dramatically. Short term or payday loans, for example, will generally have a much higher rate than longer term personal loans. If they aren’t used correctly, high interest loans can end up costing consumers far more than they can afford. If the amount you own is increasing faster than you can cope with, the first thing you need to do is stop taking out loans and try to generate an income elsewhere.
Never approach an unofficial lender
They’re illegal, unregulated and can be involved in other areas of organised crime. Even if you feel desperate, never consider borrowing from lenders who operate on the black market. The chances are that you will be able to secure yourself a substantial amount of money very quickly by approaching unofficial lenders, but this will always come with an unmanageable interest rate and can also leave you at risk of exposure to violent criminals. In worst case scenarios, options such as bankruptcy or debt management plans are always a better option than trying to deal with your financial issues by using unofficial or unregulated lenders.
Always have an income
Whether you work full time or generate money from a small home business, it is essential to have a regular income so that you can make loan repayments comfortably. Providing you have enough left over for all of life’s essentials, you don’t necessarily need to have a great deal of money coming in, but you should never consider taking out a personal loan if you are unemployed or without any means to pay it back. There are many ways to earn a living in the Philippines and even a few hours per week can make a significant to difference to your financial wellbeing over time.
Avoid high interest rates unless you’re borrowing for a short time
This is another common mistake that causes some people severe, long term financial problems. High interest rates aren’t a problem until the amount you are paying begins to significantly increase. Once this happens, it can become very difficult to get out of debt. Never use short term or payday loans unless you are certain you can afford to pay the money back. A few months of high interest can be manageable but after a year or so, you will inevitably find that the overall amount you owe is now considerably more than you borrowed in the first place. Always spend time comparing interest rates and opt for the lowest one you can possibly find.
Never Try to Borrow Your Way Out of Debt
This is basically impossible, though some people do attempt it. Borrowing money to try and pay debts will only make the situation worse over time. If you need to, consider contacting your creditors to explain the situation you are in. Some may be willing to give you a little more time or even write some of the debt off. Using money from one lender to pay off another will eventually lead to serious problems unless you can find another source of income.
Identify what you need and what you can live without.
Its never much fun making decisions like this, but it is necessary. One of the main causes of long-term debt is living an extravagant lifestyle that is way beyond a person’s means. Though you think you may need this season brand new fashion accessory, the chances are, you can probably live without it. There’s nothing wrong with treating yourself from time to time, but try to eradicate reckless or impulsive spending, especially if you are already in debt.
Start Borrowing Slowly
When you are offered a loan or a credit card, don’t be tempted to take the maximum amount that is available to you in one go. It takes time to learn how to manage money and by limiting yourself to a smaller amount, you are minimizing the risk of running in to financial trouble later down the line. If you can prove that you can make regular payments without a problem, the chances are that lenders will increase the amount that is potentially available to you based on your previous behaviour. Many people get in to trouble because they borrow way too much, way too quickly. Try to take things slowly until you’ve established a good reputation with lenders. It can take time, but by doing this, you will be increasing your chances of being offered lower interest rates and higher maximum amounts.