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Smart Ways to Use Your Loan Money in the Philippines

The reality is, only a few Filipinos have the cash they need on hand to pay for big-ticket items upfront. This is why it’s common for Pinoys to take out mortgages, car loans, and personal loans, so they can pay for these costly expenses over months or even years.

There are a lot of financial institutions that offer financial services or assistance. With the convenience of these companies offering us fast cash, one may forget on how to deal with their loan money wisely. This may lead to mismanagement of your resources which may also have you fall into a never ending debt cycle.

So the question is “How do you use your loan money wisely?” Read up to learn more about our smart tips on handling your loan money in the Philippines.


Loan Industry in the Philippines


The good news is, our country is home to many alternative microfinance companies and loan institutions. Most of the loans being offered undergo a fast approval process with no collateral requirements needed. As long as you promptly submit the requirements (e.g. filled out application form, valid IDs, valid phone number), you can get the money you need in no time. You will also need a decent amount of income in order to qualify.

In addition, borrowers can still get a loan even with a bad credit history although do take note that these loans have a higher interest rate than traditional bank loans. Nonetheless, they are still beneficial as they offer flexible limits between PHP 1,000 and PHP 25,000. These loans can be credited directly to your bank account after approval. For new clients, the loan period can range anywhere from seven to 90 days. Of course, the interest rates vary from company to company, but they can never go beyond 20% per year.

Read also: Different Types of Loans in the Philippines


Smart Ways to Use Your Loan Money in the Philippines


Now you know how easy it is to obtain a loan in the Philippines, here are some tips you ought to know once you receive your loan money:


1.    Home Renovations

Whether you’re planning to do a full kitchen makeover or just anupgrade your appliances, a loan allows you to pay for home repairs with an installment plan. Think about it, spending a few hundred pesos per month is less painful and more realistic for many Filipinos than dropping P15,000 at once on a new room.


2.    Paying off Debt

Debt consolidation or in other words, taking out a new loan to pay off another loan, is the most common reason that people apply for personal loans. The rationale behind this is that you apply for a new loan with favorable payoff terms – a lower monthly payment, lower interest rate, or both. Debt consolidation can also be used as a tool to deal with credit card debt, student loan debt, and the like.


3.    Education

In the Philippines, college is a significant investment and is usually taken very seriously. Fortunately, loans can help you cover the cost of tuition fees so you can earn a degree and start your career! Again, it’s important to have a clear payoff plan and understand how the monthly loan payments will impact your overall budget.in

4.    Wedding Costs

The average wedding costs in the Philippines is around PHP 300,000 to PHP 400,000 which is a big chunk of change. If you and your soon-to-be are comfortable with the idea of taking out a loan, you might want to consider a personal loan to shoulder your wedding expenses. Of course, your special day doesn’t have to cost nearly as much as the average, but if celebrating in style is a top priority, it’s best to crunch the numbers as early as now so you may know if a loan is the best way to cover the costs. Loans can also pay for the engagement and/or wedding ring, if you deem it necessary.


5.    Emergency

We’ve always been reminded to stash at least 3 to 6 months of your expenses as an emergency fund. But sadly, many Filipinos can’t afford to save for one especially for emergencies such as a car repair, medical bill, or daily expenses if you suddenly lose your job. In case you go down this route, research all your options first. See if you can negotiate the costs. If you’ve suddenly lost your job, find out what unemployment benefits you are qualified for so that you can decrease the total amount you need to borrow.


6.    Vacations

Are you thinking of escaping the holiday blues? Or maybe you’ve been offered a huge opportunity overseas? You can definitely fund your vacation with a loan.


7.    Major Life Change

Moving on, legal separation, or career changes, unfortunately, come with emotional and financial costs as well. As much as possible, even if we like to hope for the best, these uncertainties happen. So we advise to plan for these transitions. A loan may help ease the financial burden which, thankfully, you can get in a matter of days.

Read also: Why Do SMEs Need Business Loans Philippines


What to Consider Before Taking Out a Personal Loan in the Philippines

As mentioned earlier, taking out a loan can be quite easy but it doesn’t mean that you should apply for one right off the bat! While the notion of fast cash sounds splendid, remember that you’ll have to start paying off your loan usually within 30 days. Make sure you have a clear purpose for it first and a solid plan to pay it back.

Always keep the following things in mind before you make a decision:

      Interest rates: Most personal loans come with fixed-rate. In case you opt for variable rates (one that changes) make sure you’re fine with your monthly payments changing if rates go up or down.

      Size of your loan:  Lenders offer a wide range of loan sizes so consider first how much you can afford to pay each month.

      Loan terms: this pertains to the length of time you have to pay off the loan which is usually between 1 to 10 years. The longer the chosen term is, the smaller your monthly payments and the higher your interest rates are.

      Fees: Some lenders charge sign-up fees, but it’s possible to have these waived.

Now that you know the smart ways to use your loan money wisely in the Philippines, now’s the time to do some research and compare all your options. Most Filipinos opt for RFC, one of the pioneers of the lending industry.

If you’re ready to apply for a loan, you may fill out a short application form by RFC through this link.

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