Lenders in the Philippines can advise you on the best product for you, the most appropriate type of payment plan and also whether or not you are likely to be approved for credit, however, they can’t make decisions on your behalf. Many people fall into unmanageable debt by making poor decisions when it comes to personal finance. This why we’ve created this article on how to manage some of the stress and confusion that can arise when you’re considering taking out any form of loan. As always, this isn’t an exhaustive guide, but it may help you to think clearly if you need to make a decision under pressure.
3 Questions to ask yourself before submitting an application.
Before you decide to go ahead with a loan or credit card application, always ask yourself these three simple questions.
1. Do I really need this money?
If the answer is a quick, simple and unambiguous “yes” then you don’t really need to think about this any further. If you find yourself thinking “maybe I could live without this” you need to brutally honest about how urgent the situation really is.
2. Do I have any alternatives?
Would it be possible to save the money over a short space of time? Could you sell some unwanted goods or go without certain things in the short term? If you have a potential alternative to short term borrowing, it usually makes sense to explore this before you submit an application.
3. Can I afford the repayments comfortably?
This means not going without essentials such as food, heating and clothing. If you have decided that borrowing is a sensible option and that you do in fact need the money, always ensure that you can meet the cost of any repayments you are due to make before you sign up to an agreement.
Choosing the right type of credit
In the Philippines, personal loans are as common as credit cards and both styles of borrowing come with their own unique positives and negatives. Before you decide to apply for credit of any kind, its important to make sure you are getting the most appropriate type for your needs.
Credit Cards
Usually appropriate for small to medium sized purchases that you can afford to pay back over a period of 9 to 36 months. Interest rates vary dramatically, depending on your credit rating, age and income, so be mindful of this when you are looking around. Low APR and even 0% interest can be available to some customers and in some cases, this is a much better deal than using fixed rate personal loans. Be mindful that missed payments can mean the end of any promotional rates, though.
Personal Loans
Personal loans are designed to pay for medium to large purchases over a period of six months to five years, though there are occasional exceptions to this. This kind of credit is usually reserved for those who can prove they are in receipt of a steady income and those with a poor credit rating or an unstable income may find it difficult to secure loans with a decent rate of interest. Using personal loans to pay for cars, holidays, or large luxury purchases is not uncommon in the Philippines.
Salary Loans
This type of loan is specifically for those who need a helping hand to cover the costs of daily living and emergencies. Interest rates are very high, but approval rates are usually very good. The Philippines has a number of reputable loan providers who can offer salary loans of varying amounts, though we must stress that this type of borrowing is for short term use only.
Choosing the best option for your personal circumstances
You will need to ask yourself a few questions on the way to making your final decision. Here are some you might like to consider.
How Much Do I Need?
Between $10 and $500 dollars
Credit Card Or Savings: Purchases of this level can be made with credit cards or savings as they are relatively small. It isn’t usually worth applying for a loan for this amount, though in extreme circumstances, you may be able to secure a payday loan of around $500 if you have no other options available to you.
Between $1000 and $10000
This level of spending will require a personal loan, rather than a credit card and lenders will be more likely to approve sums of over 1000 dollars. Anything less than this isn’t usually worth their while.
Can I wait for the money?
Yes
If you can wait a few weeks for the money, you may want to consider credit cards and personal loans. The approval process is generally much faster than it used to be now and generally speaking, this style of credit is much better value for the consumer than something like a payday or salary loan.
No
Salary Loan: If you have exhausted all of your other options in terms of sources of funding, a salary loan could be your last option. Providing you can afford to make the repayments, using this type of borrowing can be an effective way of covering emergency costs and expenses that can’t wait. Approval usually happens within minutes and money can be in your account within the hour in some cases. Just remember to only borrow what you need and never be tempted to use this type of credit to treat yourself to unnecessary purchases.
Summary
Before you decide to take out any form of credit, its important to think through your actions before you submit anything officially. Always consider the purpose of the money you are borrowing, the amount you need, how long you intend to take paying it back and also the impact not doing so may have on your personal finances and situation. Essentially, not rushing into hasty decisions and taking the time to weigh up the advantages and disadvantages of each type of borrowing is the best approach to take.