Things to Consider When Applying for a Loan
Loans are a very attractive means of getting cash in times of financial emergencies.
From personal loan requirements to monthly interest rates to payment loans, here are some of the things you need to consider:
- Loan Requirements
- Monthly Interest Rates
- Mode of Payments
- Loan Approval
- Cancellation, Penalties, and other terms
Every type of loan, whether it’s a car, home, or personal loan from a bank or online lending app (like UnaCash), loan institutions will always ask for documents that would prove your identity as a borrower.
Bank requirements may vary from Non bank requirements, but personal loan requirements and bank loan requirements are usually the same:
- proof of identity (government IDs, birth certificate, etc.)
- proof of income and financial background (payslips, bank statements, banking history, etc.)
- proof of address (billing statements, rental agreement, various types of registration that reflect your residence)
The requirements would only vary in terms of verification calls etc. depending on the loan amount you are applying for.
These documents are necessary in any loan application so the financing company knows that you’re not a fraud, you’re capable of paying back your loan, and you have a legitimate address in the country where you’re applying for a loan.
Government agencies like SSS and Pag-ibig have different loan requirements. Aside from the requirements mentioned above, application for loans such as SSS Non-employment loans and Pag-ibig’s Multi Purpose Loan (MPL) are only available to active members who have a certain number of contributions.
Monthly Interest Rate
Always ask how much the interest rate is on the loan you wish to take. This will help you compare it to other loans from other lending companies to have a better idea on what interest rates work for you.
This will also help you plan how to pay your loans.
Sometimes, loans can look good at the onset due to the low monthly principal and interest. But consider subtracting the amount of the loan you wish to take from the total repayment amount of the loan (principal + interest), and ponder whether that amount is the lowest among your options and if you’re willing to pay as much.
Consider Annie’s Bedroom Package Story below:
“I was offered a special loan of 28,800 by the shop’s inhouse company. With the cash out of 6,200, my monthly payment is 3,434 for 12 months. My other option was borrowing 35,000 with monthly payments of 3,500 for 12 months. For Option B, I only paid 7434.04 of interest, while I would have paid 12,408 of interest for Option A. That’s almost 5,000 pesos in savings!”
Here is a loan payment formula that you can use to calculate how much you will pay each month.
Monthly interest + principal amount = total loan payment per month
The interest rate for a loan of ₱35,000.00, for example is 1.25% per month, multiply 35,000 to 0.0125. The product of that is 437.5 making your monthly interest ₱437.50.
You can get the principal monthly amount by dividing your loan amount to the number of months in your loan terms. So if you borrowed ₱35,000.00 which you will pay in installment for 12 months, divide 35,000 to 12. Your principal amount per month is ₱2916.67.
Add the monthly interest of ₱437.50 to ₱2,916.67 and this puts your monthly payments at ₱3,354.17.
Mode of Payments
Have you tried paying your loan on time but repayment channels are all offline, closed, or simply unreachable?
Check whether the loan provider has online and over-the-counter payments that are convenient for you. Also check the billing schedules to make sure that it fits your budget, salary pay out, etc.
If you’re tight on cash, the amount of time it takes for a loan provider to approve a loan can be a crucial factor to consider.
Aside from the fact that bank loan requirements are more extensive than other loan providers, there are slimmer chances to get approved and processing time takes longer (average of 2 weeks). But you’re looking for loan providers that offer higher loan amounts and longer loan payment terms, banks are your best bet.
On the other hand, online lending apps like UnaCash take shorter times to process and less loan requirements.
Though they offer lower loan amount (maximum loan amount ₱50,000) and shorter loan terms (from 1 day to 6 months), OLAs would still be your best choice if you need cash quickly.
Loan Cancellation, Penalties, and Other Terms
In the event that you cannot pay your loan on time, penalties or cancellation fees may apply, depending on how many days you’ve missed payment.
Check the loan agreement or terms and conditions of the loans you’ll apply for to know how much the penalties are for late payments, how many days you can delay your payments, and how much you will have to pay if you decide to cancel your loan.
Choose the loan provider that gives you the most amenable and lowest terms.
How to Apply for a Loan
Loan application processes can differ from one loan provider to another so it would be best to check online to learn about the specific steps on how to apply for a loan.
Here are some of the most common loan requirements and application.
1. Prepare the required loan requirements.
Bank loan requirements are more extensive. They usually require:
- 2 valid IDs: 1 government issued and 1 company ID. Make sure that your name, address, and other information in these IDs are the same.
- Proof of income: banks usually require at least 3 months of payslips or bank statements.
- Certificate for Employment: your chances of getting your loan application approved is higher if you’ve been hired for 6 months and more.
- Application forms
For online lending applications, loan requirements are almost the same but less in number and can be substituted with other documents. Here are the usual loan requirements:
- 1 valid government ID
- Proof of income: 1 month payslip is enough. For unemployed, you can still use your remittance slips, business permits, and other documents that can prove your income.
- Accomplished application form
For government offices, they usually require:
- Valid government ID (UMID, PhilSys, SSS, etc.)
- Accomplished application form: you may have to submit to your employer so they can accomplish the net pay section
- Certificate of Contribution
- Certificate of Employment or certificate of net pay
2. Fill out the application forms.
Every lending company, bank or non-bank would require you to fill out forms with your basic personal, professional, and financial information.
Make sure that the information you put in your application form is the same as the information indicated in your IDs, proof of income, and other submitted documents to avoid delays in your application.
3. Wait for approval
Wait for the approval of your application and always keep your lines open to receive verification calls from the lending company.
This is pretty standard to make sure that all the information you provided are true and correct.
4. Re-apply when declined
Anyone whose application has been declined is free to re-apply after a period of time.
Online lending apps like UnaCash have shorter waiting period, minimum of 30 days after date of declined application.
For banks, it usually takes 5 to 6 months to be able to apply once again.
For government agencies, re-application usually depends on employment status and number of contributions so be sure to ask about this from the government agency.
And those are some of the things you need to consider when applying for a loan. Do you agree with our list? Let us know in the comments.
1. Where to get a loan?
Banks, government offices, and private online lending application has a variety of loan offerings that fit your needs. Depending on what type of loan you want, check out the different loan requirements, interest rate, and processing time from these different institutions.
2. How to get a loan?
Get your loan by submitting a duly accomplished form, loan requirements, and wait for the approval. Loan disbursement can be done over-the-counter or through a specific bank account.
For example, Pag-ibig Multi-Purpose Loans (MPL) will only be disbursed through a cash card (Landbank) given upon approval of your loan.
3. What is loan application requirements?
Most loans require proofs of identity (ID), income, and/or address along with an accomplished application form; government agencies like SSS and Pag-ibig would require a minimum number of contributions.
4. How to apply for a personal loan?
Prepare the required documents, accomplish the application form, and submit your application through official channels. Wait for the approval and re-apply if your application is declined.
5. How to calculate monthly payment on a loan?
Monthly payment is calculated by adding the monthly interest rate plus the principal amount.
6. What is loan penalty condonation?
Loan penalties are added to your monthly loan payment when you fail to pay your monthly due amount after a certain amount of time. The penalties depends on the lending company. Penalties can be applied for each day of delayed payment or a certain period of time (e.g. every 15 days, 30 days).
Loan penalty condonation is when a lending company allows you to restructure your loan payments or extend your loan payments devoid of penalties to help you pay the full amount of your loan.
7. Why is it important to collect all the loan requirements?
Lending companies collect loan requirements such as personal, professional, and financial information for a number of things:
- Ensure you are a real person and not a fraud
- You are capable of paying off your debt
- Submit your information to the Credit Information Corporation. This would create a record of your credit history. This would make things easier for you when you need to get a bigger loan in the future.
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Written: Karla Maolen Visbal