When you’re thinking about taking out any form of credit, you need to consider a few things before making your final decision. Personal loans and salary loans in the Philippines are available from a variety of different lenders, but they are designed for very different purposes. Not everybody understands the difference so we thought it would be a good idea to put together a few example scenarios that will help you to identify which type of borrowing is the most appropriate for your needs. Here’s Asteria’s guide to choosing between personal loans and salary loans.
Potential Uses for Personal Loans
Personal Loans in the Philippines are available to those with a regular income or the means to pay back a fixed amount of money each month for a set period of time. Loan terms vary between around six months to around five years. They are generally designed to help people spread the cost of larger purchases or to pay for things that their salary can’t quite cover. The list below is not exhaustive, but it will give you an idea of some of the most common uses for this type of loan.
Cars and other vehicles
Few people can afford to pay for large purchases like this without saving and many people use substantial personal loans to allow them to pay for the cost of a car.
Home Improvements
From new kitchens to fitted bathrooms or bedroom furniture, a popular use of personal loans in the Philippines is home improvements.
Luxury Holidays
Sometimes holidays can be priceless and the memories you make can last a lifetime. Many young families and couples in the Philippines use personal loans to cover the cost of their dream holiday.
Electronic Items
Laptops, TVs, Washing Machines and Games Consoles can all be expensive items to pay for from your regular salary, which is why many people choose to use personal loans to meet the cost of these items instead.
Clothing
Whether it’s a new work uniform, a suit for a friend’s wedding or a good quality pair of shoes to see you through the next year’s business meetings, personal loans for clothes are commonplace in the Philippines and around the world.
Antiques and Collectables
From rare records to one off figurines, the world of antiques and collectables can be an expensive business. Many people who are interested in this area use personal loans as a way of making sure they can get any items they want, even if they are a little short on their salary that month.
Small Business Ideas
The side hustle, or the second income, is now a part of life for people all around the world. Personal loans are one of the quickest and simplest ways to finance small business ideas without having to spend a long time saving.
Personal Development
This could be a degree level course at university or something vocational but using a personal loan to invest in your own development is often a very sensible thing to do. Many people use the increased earnings to help pay pack what they have borrowed.
Potential Uses for Salary Loans
Salary loans are very different to personal loans. They are usually approved very quickly and are available to people with less than perfect credit ratings. However, they are not designed to be paid back over a long period of time as they generally have very high rates of interest. As their name suggests, they were created to help those who are struggling to meet the costs of every day living and emergencies when their salaries won’t stretch quite far enough. Here are a few potential scenarios where salary loans may be appropriate.
Emergencies
Sometimes life throws things at you that you aren’t expecting. This could be medical bills, the need for long distance travel, breakdown and repair charges for vehicles or unexpected costs incurred by damage or theft. In these situations, the last thing you need to be worrying about is how you are going to pay for things, which is why many people opt to use salary loans. Providing you can make arrangements to pay back what you have borrowed as quickly as possible, this option gives you access to fast cash, so you won’t have to delay that flight or potentially go without transportation.
Day to Day Living Costs
Things like heating, electricity, gas, food, water and utilities can’t be ignored. If you find yourself short on funds, a salary loan can allow you to cover the basics until your next paycheque comes in. Though they should be viewed as a last resort and paid back as soon as possible, this style of short-term lending in the Philippines is frequently used by individuals and families in their time of need.
Bills and other non-negotiable payments
Certain bills need to be paid on time to avoid incurring additional charges or losing your service. Some families use salary loans to cover the cost of essentials like the internet, rent and credit card payments to avoid getting into arrears or further debt. Though this should never be seen as a long-term solution, if you are certain you are going to receive a salary payment from regular work, it can be a good option to avoid getting caught short.
Summary
As you can see, the difference between each type of loan is quite clear. Salary loans are basically an emergency measure that can be used as and when they are needed. Personal loans are designed differently and can be taken out for less pressing, but no less important purchases. The key differences are in the level of interest you can expect to pay overtime and the criteria you will need to satisfy before being approved. In simple terms, a salary loan should really be a short-term solution to a cash flow problem whereas a personal loan can be used for higher priced items that you are prepared to pay for over a period of time.