Financial Education Series: Credits and Loans for Beginners - Your Guide to Borrowing Wisely in the Philippines

(Heads Up: Some texts here are colored to stress their importance. Also, we provided lists of lending institutions below, but we encourage you to do due diligence about the information provided. Please read the disclaimer before taking critical actions based on the information we provide.)

Hey there, kababayans!

Let’s talk loans and credits, shall we? In our hustling and bustling lives, loans and credits often serve as our financial lifelines. They help us weather emergencies, invest in our futures, and reach for our dreams. But with so many options out there, navigating the loan and credit maze can feel overwhelming, right?

Don’t worry, we're here to guide you through the twists and turns! Before diving headfirst, let’s consider a few key things:

What are loans and credits?

Loans and credits are both ways of borrowing money from a lender, such as a bank, a cooperative, or an online platform.

However, they have some differences:

• A loan is a lump sum of money you borrow for a specific purpose and repay over a fixed period, usually with interest and fees. Examples of loans are personal loans, business loans, car loans, and student loans.

• A credit is a revolving line of money that you can access up to a certain limit and repay as you use it, usually with interest and fees. Examples of credits are credit cards, overdrafts, and cash advances.

Which one is better?

There is no definitive answer to this question, as it depends on your needs, preferences, and financial situation. However, here are some general factors to consider:

• Interest rate

Loans usually have lower interest rates than credits, as they are less risky for the lender. However, some credits, such as credit cards, may offer interest-free periods or rewards if you pay your balance in full monthly.

• Flexibility

Credits usually offer more flexibility than loans, as you can borrow and repay as you need, without having to apply for a new loan every time. However, some loans, such as personal loans, may allow you to make extra payments or prepay without penalty.

• Budgeting

Loans usually make budgeting easier than credits, as you have a fixed repayment schedule and amount. However, some credits, such as credit cards, may help you track your spending and manage your cash flow better.

Ultimately, the best option for you is the one that suits your goals, capacity, and discipline. To help you decide, you can use online tools like loan calculators and credit card comparison sites to compare the features, costs, and benefits of different loans and credits.

Now that you have a basic understanding of loans and credits, let’s look at some tips on how to use them wisely and responsibly:

1. Know Your Needs and Limits

• Be clear about your goals

What are you borrowing for? Is it to fix that leaky roof, finally get your dream phone, or pursue your education? Knowing your purpose helps you choose the right loan type and amount.

• Do the math

Be honest about your financial situation. Calculate how much you can comfortably repay every month. Remember, borrowing more than you can handle can lead to debt traps and hurt your credit score.

 

2. Explore Your Options

• Know your choices

Personal loans, business loans, credit cards, online loans – the list goes on! Each type offers unique features, benefits, and drawbacks.

 

• Comparison is key

Tools like Moneymax, Grit PH, AllTheBestLoans, and eCompareMo are your best friends here. These online platforms let you compare interest rates, fees, terms, and requirements of different lenders, helping you find the best fit for your needs.

 

3. Read the Fine Print

• Don't sign blindly

Before you put pen to paper, scrutinize the fine print. Pay close attention to fees, penalties, interest rates, and other terms that impact your loan or credit.

 

• Ask away

Don't be shy! If anything is unclear, ask for clarification. Make sure you understand everything before committing to any loan or credit facility.

4. Pay Smart and Stay on Track

• Make timely payments

This is crucial! Timely and complete payments avoid late fees, penalties, and interest charges. They also build a strong credit score, which opens doors to better financial opportunities in the future.

 

• Life happens

If you hit a rough patch and struggle to make payments, don't hide! Talk to your lender openly. Explore options like loan restructuring or refinancing to get back on track and avoid defaulting.

 

5. Use Your Loan Wisely

• No impulsive spending

Stick to your borrowing purpose. Avoid unnecessary expenses that could strain your finances.

 

• Save and prepay

Look for ways to save money and make extra loan payments. This reduces your interest cost and helps you pay off your debt faster, freeing up your finances for other goals.

 

Remember, loans and credits are powerful tools, but they also come with responsibility. By following these tips and staying informed, you can navigate the loan and credit maze confidently and achieve your financial goals.

Here are some additional resources to help you along your journey:

• The Philippine Department of Trade and Industry (DTI) provides a Consumer Loan Guide for Filipinos to make informed loan decisions.

• The Bangko Sentral ng Pilipinas (BSP) offers information on different types of loans and financial institutions in the Philippines.

• Online Resources: Websites like Moneymax, Grit PH, and AllTheBestLoans provide financial education and tools to help Filipinos manage their finances effectively.

Here are some credit and loan providers in the Philippines:

Government Owned or Controlled Credit and Loan Providers

Several government-owned or controlled banks in the Philippines offer loans and credits to various sectors and individuals. 

Here are some of them and their products:

Land Bank of the Philippines

This is a universal bank that provides financial services to farmers, fisherfolk, cooperatives, local government units, and small and medium enterprises. Some of the loans and credits that it offers are:

• Agricultural and Fisheries Financing Program

This is a program that provides loans to eligible borrowers for the production, processing, and marketing of agricultural and fishery products. The interest rate is 5% per annum for short-term loans and 6.5% per annum for medium and long-term loans. The loan amount and term depend on the project and repayment capacity of the borrower.

• Socialized Credit Program under the Sugarcane Industry Development Act

This is a program that provides loans to small sugarcane farmers for farm development, farm inputs, and farm equipment. The interest rate is 5% per annum for short-term loans and 6.5% per annum for medium and long-term loans. The loan amount is up to ₱100,000 per hectare, with a maximum of ₱2,000,000 per borrower. The loan term is up to 10 years, with a grace period of up to 3 years.

• LANDBANK Mobile Loan Saver

This is a program that provides salary loans to government employees through their mobile phones. The interest rate is 10.5% per annum, with a loan amount of up to ₱1,000,000. The loan term is up to 36 months, with a monthly amortization deducted from the borrower’s payroll account.

 

Development Bank of the Philippines 

This is a universal bank that provides development financing to strategic sectors such as infrastructure, environment, social services, and micro, small and medium enterprises. Some of the loans and credits that it offers are:

• DBP EC Credit

This is a program that provides loans to electric cooperatives for the rehabilitation, expansion, and improvement of their power distribution systems. The interest rate is based on the DBP’s lending rate plus a spread of 1% to 3%. The loan amount and term depend on the project and repayment capacity of the borrower.

• DBP Small Business Puhunan Loan Program

This is a program that provides loans to micro and small enterprises for working capital, fixed asset acquisition, and business expansion. The interest rate is based on the DBP’s lending rate plus a spread of 1% to 3%. The loan amount is from ₱300,000 to ₱10,000,000, with a loan term of up to 5 years.

• DBP Endowment for Education Program: This is a program that provides loans to students for tuition fees, books, uniforms, and other school expenses. The interest rate is 6.5% per annum, with a loan amount of up to ₱300,000 per academic year. The loan term is up to 10 years, with a grace period of up to 5 years.

Al-Amanah Islamic Investment Bank of the Philippines: This is a bank that provides Shariah-compliant banking products and services to Muslim and non-Muslim clients. Some of the loans and credits that it offers are:

• Murabaha Financing: This is a financing arrangement where the bank purchases a commodity or asset and sells it to the client at a higher price on a deferred payment basis. The profit margin is fixed and agreed upon by both parties. The financing amount and term depend on the nature and value of the commodity or asset.

• Musharaka Financing: This is a financing arrangement where the bank and the client jointly contribute capital to a project or business and

Philippine National Bank

This is a universal bank that offers a wide range of banking products and services to various sectors and markets, such as corporate, commercial, consumer, and overseas Filipino. Some of the loans and credits that it offers are:

• PNB Sure Home Housing Loan

This is a program that provides loans to individuals and families for the purchase, construction, or renovation of their residential properties. The interest rate is based on the bank’s prevailing lending rate, plus a spread depending on the loan term and loan-to-value ratio. The loan amount ranges from ₱200,000 to ₱10,000,000, depending on the appraised value of the property and the borrower’s repayment capacity.

• PNB SME Biz Loan

This is a program that provides loans to small and medium enterprises for their working capital, fixed asset acquisition, and business expansion. The interest rate is based on the bank’s prevailing lending rate, plus a spread depending on the risk profile of the borrower. The loan amount ranges from ₱500,000 to ₱20,000,000, depending on the borrower’s cash flow and collateral.

• PNB Personal Loan

 

This is a program that provides loans to individuals for their personal needs, such as education, medical, travel, or debt consolidation. The interest rate is based on the bank’s prevailing lending rate, plus a spread depending on the loan term and credit rating. The loan amount ranges from ₱20,000 to ₱1,000,000, depending on the borrower’s net monthly income and debt-to-income ratio.

 

The Best (according to some online articles)

• UnionBank of the Philippines

This bank offers a wide range of accounts, cards, loans, and online banking services. Whether you need a personal loan, a business loan, a credit card, or a prepaid card, you can find it here and enjoy the rewards and benefits of UnionBank. 

Some of the unique features of UnionBank are:

• You can open an account through the app without going to the bank.

• You can deposit a check using the app simply by taking photos.

• You can enroll in UITF online and start investing.

• You can access your PNB credit card PIN.

• The interest rates for UnionBank personal loans vary depending on the loan term and the amount borrowed. For example, if you borrow ₱100,000 for 12 months, you can get an interest rate of 26.9% per annum. The processing fee for this loan is ₱1,750.

• Philippine National Bank

This bank also offers a wide array of competitive banking products and services. It was established by the Philippine government on July 22, 1916, during the American Era. 

Some of the products and services that PNB offers are:

• SSS Salary Loan and Pag-IBIG Multi-Purpose Loan with low-interest rates.

• CIMB Bank Personal Loan with a monthly add-on interest rate as low as 1.12%.

• Online Loans with various online lending platforms that offer fast and convenient loans with low-interest rates.

• PNB Digital App lets you monitor your accounts, transfer funds, pay bills, and access credit card services.

• The interest rates for PNB personal loans vary depending on the loan term and the amount borrowed. For example, if you borrow ₱100,000 for 12 months, you can get an interest rate of 29.48% per annum. The processing fee for this loan is ₱1,500.

• Bank of the Philippine Islands (BPI)

This is the oldest bank in the Philippines and Southeast Asia, and the country’s third-largest bank in terms of assets, deposits, and loans. BPI offers various cards, loans, deposits, insurance, and investments for personal and business clients. 

Some of the features and benefits of BPI are:

• You can earn more from your dollars with BPI USD SuperSaver.

• You can get interest-back rebates, rewards, installments, and travel perks with BPI credit cards.

• You can order a checkbook, generate a one-time PIN, and check your bank statements online.

• You can cash into eWallets, load prepaid accounts, and shop and pay online with your BPI online account.

• The interest rates for BPI personal loans vary depending on the loan term and the amount borrowed. For example, if you borrow ₱100,000 for 12 months, you can get an interest rate of 25.03% per annum. The processing fee for this loan is ₱1,500.

• CITIBANK Philippines

This is the largest foreign commercial bank in the country in terms of assets, revenues, and profitability. Citibank offers credit cards, loans, deposits, insurance, investments, and online banking for personal and business customers. 

Some of the advantages of Citibank are:

• You can get up to 300,000 points for your gadget or appliance upgrade with Citibank credit cards.

• You can get approved in as fast as 24 hours with a Citibank personal loan.

• You can transfer funds from your Citibank account to any bank worldwide with outward remittance via SWIFT fund transfer.

• You can redeem miles and rewards online with Citi ThankYou Rewards.

• The interest rates for Citibank personal loans vary depending on the loan term and the amount borrowed. For example, if you borrow ₱100,000 for 12 months, you can get an interest rate of 26.9% per annum. The processing fee for this loan is ₱1,500.

• Eastwest Bank

This bank provides a wide selection of deposit, consumer, and corporate banking products and services. Eastwest Bank offers savings and checking accounts, credit cards, loans, investments, and acquired assets for Filipinos. 

Some of the highlights of Eastwest Bank are:

• You can open a savings account faster and safer via EasyWay.

• You can earn more as you save more with the Eastwest Money Builder Savings account.

• You can get a multi-purpose, non-collateralized personal loan to help you achieve your dreams.

• You can access your accounts and transfer money through eGiveCash.

• The interest rates for Eastwest personal loans vary depending on the loan term and the amount borrowed. For example, if you borrow ₱100,000 for 12 months, you can get an interest rate of 35.78% per annum. The processing fee for this loan is ₱1,900.

• Security Bank: This bank offers deposits, cards, loans, insurance, investments, and online banking for personal and business clients. Security Bank offers deposits, cards, loans, insurance, investments, and online banking for personal and business clients. 

Some of the features and services of Security Bank are:

• You can apply for Citi Speed Cash in as fast as 1 minute.

• You can enjoy lighter payments on your purchases or bills with Security Bank credit cards.

• You can get a business express loan, a business mortgage loan, a truck loan, or an auto fleet financing for your business needs.

• You can enroll in e-statements, alerts, and online banking services for paperless and secure banking.

• The interest rates for Security Bank personal loans vary depending on the loan term and the amount borrowed. For example, if you borrow ₱100,000 for 12 months, you can get an interest rate of 29.48% per annum. The processing fee for this loan is ₱1,500.

For online loans, you might want to consider the following:

1. Tonik Bank: Offers a Flex Loan for as low as 1.7% monthly add-on interest rate for a maximum term of 24 months.
2. SB Finance: Offers a personal loan with flexible terms, competitive rates, and fast approval.
3. Evo Personal Loan: Offers up to a P100,000 cash loan in 20 minutes or less.
4. Uno Digital Bank Loan: Offers a loan of as much as PHP 200,000 without providing collateral and guarantors with various monthly installment payment plans available.

Considered low-interest loans:

If you are looking for low-interest credit and loan options in the Philippines, you may want to consider the following sources:

• SSS Salary Loan - A personal loan for SSS members with an effective interest rate of 10% per annum (based on diminishing principal balance). You can borrow up to one or two months of your salary, depending on your contributions.

• Pag-IBIG Multi-Purpose Loan - A personal loan for Pag-IBIG members with an effective interest rate of 10.5% per annum. You can borrow up to 80% of your total accumulated value (TAV), which consists of your contributions, employer contributions, and dividends.

• CIMB Bank Personal Loan - A personal loan from a digital bank with a monthly add-on interest rate as low as 1.12%. You can borrow from ₱30,000 to ₱1,000,000, with a loan term of 12 to 60 months.

• Tonik Bank 

This is a digital-only bank that offers a Flex Loan for as low as 1.7% monthly add-on interest rate for a maximum term of 24 months. You can borrow from ₱5,000 to ₱50,000, with no collateral, no guarantor, and no hidden fees. You can also enjoy free withdrawals, deposits, and transfers with your Tonik account.

• SB Finance

This is a subsidiary of Security Bank that offers a personal loan with flexible terms, competitive rates, and fast approval. You can borrow from ₱30,000 to ₱2,000,000, with a loan term of 12 to 36 months. You can also get a free eSecure Savings account with a high-interest rate of 4.5% per annum.

• Uno Digital Bank Loan

This is another digital-only bank that offers a loan of as much as ₱200,000 without providing collateral and guarantors with various monthly installment payment plans available. You can borrow from ₱10,000 to ₱200,000, with a loan term of 3 to 24 months. You can also access your Uno account anytime, anywhere with their mobile app.

Other Types of Loans 

• GSIS Consolidated Loan

 

This loan is available for active GSIS members who are permanent employees of the government, or elected or appointed officials. This is a loan product that combines five types of loans in one, and allows you to borrow up to 14 times your monthly salary, depending on your contributions. The interest rate is 7% or 8% per annum, depending on your paid premium payments. You can also enjoy a waiver on the surcharges and penalties of your existing loans.

• Pag-IBIG Multi-Purpose Loan

This loan is available for active Pag-IBIG members who have made at least 24 monthly savings and have at least one monthly savings for the last six months before application. They must also have sufficient proof of income and have no outstanding Pag-IBIG housing loan, Pag-IBIG short-term loan in arrears, or Pag-IBIG calamity loan in default. This is a loan product that allows you to borrow up to 80% of your total accumulated value, which consists of your contributions, employer’s contributions, and dividends. The interest rate is 10.5% per annum. You can use this loan for any purpose, such as home improvement, education, medical expenses, or business capital.

Other Types of Credits 

The Philippine government offers credit to various sectors of the economy through different programs and agencies. 

• MSME Credit Guarantee Program (MCGP)

This is a program that provides credit guarantees to banks that lend to micro, small, and medium enterprises (MSMEs) affected by the COVID-19 pandemic. The program aims to increase the availability of credit and provide working capital to MSMEs. The program offers a 50% guarantee coverage of the principal amount of the loan, with a maximum loan amount of ₱50 million per borrower. The interest rate is determined by the lending bank, and the guarantee fee is 1% per annum.

• Electric Cooperative-Partial Credit Guarantee Program (ECPCGP)

This is a program that provides partial credit guarantees to electric cooperatives that borrow from commercial banks to finance their power distribution system upgrades and reduce system losses. The program aims to improve the efficiency and reliability of electric cooperatives and promote rural electrification. The program offers a 50% guarantee coverage of the principal amount of the loan, with a maximum loan amount of ₱50 million per borrower. The interest rate is determined by the lending bank, and the guarantee fee is 0.5% per annum.

• Agricultural Guarantee Fund Pool (AGFP)

This is a program that provides credit guarantees to banks, cooperatives, farmers’ organizations, and corporations that lend to small farmers and fisherfolk. The program aims to increase access to credit and enhance the productivity and profitability of the agriculture sector. The program offers an 85% guarantee coverage of the principal amount of the loan, with a maximum loan amount of ₱150,000 per borrower. The interest rate is determined by the lending institution, and the guarantee fee is 1% per annum.

Please note that the loan application procedure and requirements vary from one lender to another. Always read the terms and conditions carefully before applying for a loan. It’s also a good idea to compare the interest rates and fees of different lenders to find the best deal for you.

Now go forth and conquer (wisely) the loan and credit world, kabayans! Knowledge is power, and with the right information, you can make informed financial decisions and achieve financial security and success.