Borrowing money on the go has become a popular method of acquiring cash in the Philippines. Even though cash loans can be a bit risky, this is the fastest way to finance your soft-term or long-term needs.
However, becoming eligible for a loan in the Philippines can be either pretty fast or quite long, and depends on the amount you are requesting. There are a lot of factors that determine the outcome, such as financial capability, paperwork you have on hand, the type of loan, and others.
Now, let’s see how cash loans work in the Philippines.
What is a cash loan?
This the amount of money you borrow for household, utilities, education, health, and other. Cash loans are either secured with collateral or unsecured, and you repay the loan in monthly installments. Usually, these types of loans don’t require a collateral, since the amount you can borrow doesn’t top $1,000.
However, if the collateral is involved, then it’s a certain asset such as land, house, car, and others. The payments are usually secured through a salary, but if the collateral is required, then the borrower should document it legally so that the lender can seize the asset, if you fail to pay installments regularly.
Type of loans
Five-Six Loans – the Philippines inherited this type of lending from Indians, who were often called Bumbay. This is the most popular way of borrowing money in the Philippines because there is no collateral involved. A verbal agreement between two parties is enough get instant cash, while the interest rate goes up to 20%.
That’s why it is called a five-six loan. When you borrow five, then you will have to return six. Additionally, the borrower repays the loan in daily installments, unit the entire debt is settled, with interest.
Private lenders – similar to Bumbays, private lenders will grant you the cash with interest, but they have different terms and conditions. In some cases, the collaterals might be required, especially if you’re borrowing a lot of money.
But, this type of financing isn’t quite popular in the Philippines because it takes too long for the money to reach your account. It usually takes seven days to get a loan, and paperwork requirements are quite substantial.
Online private lenders – this method is still new in the Philippines, but it’s becoming more accepted due to increased security measurements. Online lenders can be almost anyone, a company, or an individual willing to provide short-term loans. They usually have fewer requirements than a bank, and the majority of online loans are processed within 24 hours.
Understand terms and conditions
While cash loans are an easy way to get money, they come with specific terms and conditions. Usually, the interest rates are pretty high, compared to regular loans. You can’t borrow a lot of money, and the maximum tenure is 12 months; in some cases, only one.
Therefore, before applying for a loan, get familiar with how the lender operates and what are the terms and conditions you will have to meet.