• Short on Cash? Need Extra Funds for a Big Purchase? A Personal Loan May Help

    A personal loan can help you ride out any crisis, or simply achieve your goals faster and sooner.
    by Nicole Sindiong .
  • Short on Cash? Need Extra Funds for a Big Purchase? A Personal Loan May Help
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  • When it comes to personal finance, the general rule is to budget and set aside as much and as often as you can for your immediate needs and long-term goals. Whether it’s a month’s groceries, your dream family vacation, or that much-awaited home renovation, there’s nothing you won’t be able to handle financially once you learn how to plan your expenses and save. Add in a few investments — to help your savings grow rather than just let them sit and lose their value to inflation — and you’re pretty much on your way to financial security. 

    You can only prepare so much, however, and sometimes, life may leave you in need of a little support. There are financial products and services that you can look into to help you ride out any crisis, or simply achieve your goals faster and sooner. Among them is personal loans. 

    Personal loans = “fixed” debt
    A personal loan is money you borrow from a bank or other lending institution for whatever purpose it may serve you. Unlike other types of loans that fulfill a specific objective, like a housing loan or a car loan, a personal loan can be spent entirely up to your (the borrower’s) discretion. Use it to augment your current cashflow, top up your child’s tuition fund, or pay unexpected expenses such as urgent home repairs or car maintenance. In short, it's all up to you.

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    Personal loans are considered “fixed” debt. They’re given out in lump sum and paid back in fixed monthly installments over a specified period of time — usually between two to five years. It’s a one-time loan, which means you won’t be able to take out a new one until you’ve paid the last in full, unlike “revolving” credit card debt, which, if you’re not careful, can compound month after month. 

    Personal loans are also typically unsecured. It means you won’t be required to pledge a property or asset as collateral when you apply for one. Your eligibility will instead rely solely on your credit score — the higher it is, the higher your chances of getting approved for a personal loan, and the better the rates. 

    “The amount you can borrow is determined by the lending institution, depending on your credit score. They just need to see that you have the capacity and are responsible enough to pay it back,” says Trisha Gamboa, a registered financial planner. “In this light, it’s advisable to apply at an institution where you have a consistent and positive transaction record.”

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    Personal loan is a one-time loan, which means you won’t be able to take out a new one until you’ve paid the last in full.

    Interest rates matter
    Not all personal loans are created equal, though. Experts recommend looking around before deciding on a lender, to make sure you get the deal that’s best for you. 

    “Always look for the lowest interest rates,” suggests Jeremy Jessley Tan, a registered financial planner and columnist for various Philippine publications. “For those working in a corporate institution, check to see if your company offers personal loans before you decide to go to a bank. Often, corporations do offer low-interest loans, or they’re partners with banks that give their employees lower rates than those published. Of course, it also helps to shop around and look for institutions that offer even better rates.”

    In the past, this literally meant visiting different financial companies and inquiring one by one about their products and rates. These days, however, you can easily get all this information and more without even having to step out of the house. Yes, you can search for it on each of these companies’ websites, but service providers have taken it a step further and created a single tool that does it all.

    It helps to shop around and look for institutions that offer even better rates.

    A financial comparison website is a digital platform that collates the rates and terms of all types of financial products, including personal loans, from a variety of banks and institutions. It offers potential customers the advantage of being able to search for the specific product/s they need and get side-by-side comparisons of rates from every possible provider within seconds. It allows you to conveniently narrow down your options and identify the ones that meet your requirements and suits you best.  

    At present, there are several of these websites available in the Philippines. These include iMoney.ph, eCompareMo.com, MoneyMax.ph, and GoBear.com. All of them essentially work the same way: On a user-friendly interface, you select the product you wish to avail. For personal loans, you’ll be required to indicate how much you plan to take out and how long you intend to pay it back. After that, you input a few personal details including your occupation, monthly salary range, and whether or not you own a credit card.

    Once the information is plotted, the website runs a quick search through its product and provider database and then presents all the options that fit your qualifications. Search results usually include each provider’s interest rates, monthly payment plan, total amount payable, and loan application requirements.

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    Although these websites work with different financial institutions, they operate independently. They also give you the option to apply for a financial product through them, and only if you decide to do so will they charge a small fee or commission from the concerned third party provider. This is typically disclosed in their About Us or Terms and Conditions page. 

    Where these online portals differ is the range or variety of providers. While they all boast a comprehensive database of partners, some include institutions that the others don’t have in their roster. So if you want to make sure you get the best rates, it might be a good idea to run a quick search through all of them. 

    “Although many price comparison websites will provide you with a wide range of options, they will rarely include every supplier on the market,” write the experts over at The Money Advice Service in the United Kingdom. “Some suppliers might have exclusive deals in place with a particular comparison website, or they might have chosen not to appear on comparison sites at all. Sometimes a supplier might be new to the market and won’t have been added to the website’s database yet. For these reasons, it’s always best to run a comparison on a few websites to see what other options are available before you make a decision.”

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