Unsecured loans

A Guide for Getting Unsecured Loans in the Philippines

Have you ever tried to get a loan, and you just couldn't? Probably, you need money for an emergency, but you can't get a loan because you don't have the required collateral.

Some kinds of loans that may come in handy during emergencies are unsecured loans. But, what are they?

The Meaning of Unsecured Loans

These are loans that do not require any collateral to get. Every loan serves a purpose - lend you money to meet expectations and pay it back on a specific date in the future.

However, some lenders do not care if you don't have properties, shares, or assets before giving you a quick cash loan to sort out your present challenges. While there are different types of unsecured loans, it is essential to know the difference between secured and unsecured loans.

Differences Between Secured and Unsecured Loans: Pros and Cons

Secured loans are the direct opposite of unsecured loans. These are loans that require the intended borrowers to present collateral. As a borrower, you will get the loan after pledging any of your properties as collateral.

If you don't pay back at the agreed time, this collateral will be under the control of the lender until you pay. Collaterals can be your real estate, vehicles equivalent to the value of the money you're borrowing, stocks, high-end collectibles, etc.

These are the core differences between secured and unsecured loans in the Philippines:

• Secured loans emphasize collateral, while unsecured loans don't need your collateral. 
• Secured loans have lower interest rates since there is collateral that will be seized upon failure to repay. Unsecured loans have huge interest rates because there is no collateral, and the lender is taking a considerable risk.
• Secured loans are risky because you may lose what you used as collateral if you can't repay your loan. You may even need to sell the property to pay back. Unsecured loans are quick cash loans that are relatively less risky. On the grounds that you pay up at the time agreed upon, unsecured loans will not ask you for collateral.
  
• Secured loans have an extended period of repayment. Some unsecured loans allow a minimum of 60 days and a maximum of 180 days for repayment.
  
• Secured loans can still be obtained with poor credit history, but you can't get unsecured loans with a poor credit history.
  
• You can lend as much as your collateral can serve through secured loans. You can't lend so much from unsecured loans. Many online lenders do not exceed 25,000 PHP.
  

Types of Unsecured Loans Philippines

There are many types of unsecured loans you can access in the Philippines. Some of them are listed below:

1. Student Loans

Student loans are for your educational pursuit. Some student loans require repayment after five years, for example, the CHED UniFAST loan. A loan like GSIS Educational Loan gives you up to 10 years to pay back.

2. Personal Loans

These are loans that attend to your urgent needs. The emergencies that qualify for these loans include wedding ceremonies, car purchases, home renovation, medical emergencies, or debt consolidation.

3. Unsecured Credit Cards

This is a type of loan based on credit cards. Having a credit card means you can buy products or services without using your money, but you'll need to pay back every month.

Before you can access this loan, the company will look into your credit score and household income, and you may even need a deposit before you get a card.

4. Salary or Payday Loans

These loans are given based on your salary. You can borrow a loan to meet your emergency needs until you get your paycheck. However, your emergency needs must be within your gross salary.

How to Get an Unsecured Loan: Requirements 

Now that you know the types of unsecured loans available in the Philippines, you might want to know the requirements for getting one? 

Before you're given an unsecured loan, a lender will need you to provide documents like:

    I.     Your Credit Score History

Your credit score shows how responsible you are at handling debts. Good credit history is a prerequisite to getting loans, which is why many financial advisors always recommend that you pay up your unsecured credits before deadlines.

If you have outstanding debts, you will have a poor credit score, and you won't be able to take personal unsecured loans or any other. An individual with bad credit scores is usually not eligible for loans.

  II.     An Assessment of Your Income

Lenders want to know your salary before giving you their money. Before applying for a loan, prepare your proof of income and employment letter to show that you have a stable income and can repay.

   III.     An Evaluation of Your Debt to Income Ratio

It will help if you have a low debt to income ratio before taking a loan. Lenders will calculate the percentage of your debts with your income to see if you can repay their credit facility.

To know your debt to income ratio, add your monthly debt payments and divide it by your monthly income.

   IV.     Proof of Identity

You may be a Filipino, but you won't get a personal unsecured loan without evidence of citizenship. This may be your passport, birth certificate, driver's license, or other official documents.

Where to Get Unsecured Loans in the Philippines? 

After going through and meeting the requirements, you can apply for an unsecured loan at firms like:

• DiGiCo

This is a digital lending service for people between 21 to 70 years old. It will help if you are an employed Filipino resident. DiGiCo offers as much as 25,000 PHP with an interest rate of 11.9% per month.

• MoneyCat

This online lending service is for Filipinos between the ages of 20 to 60. Their interest rate is 0.54% per day. If you borrow 10,000 PHP with a repayment option of 10 days, you'd have accumulated 5400 PHP interest and would pay 15,400 PHP on your repayment day.

• Kviku

This online lending service provides between 1,000 PHP to 25,000 PHP in loans. Its interest per day is 0.16%.

• UnaCash

This digital lending service allows you to borrow between 1,000 PHP to 50,000 PHP. It has a 0.3% interest rate per day, although you need to be between 18 to 65 to get a loan.

• Security Bank

The bank allows you to borrow as much as 2 million PHP for home, car, or personal unsecured loans. Its interest rate starts at 1.89% each month.

• Asteria Lending, Inc

This digital lending company lets you borrow a salary, business, or personal loan with a daily interest rate of 0.9%. You can get as much as 20,000 PHP from the lender.

• Bank of Philippines Island (BPI)

BPI allows you to borrow close to 2 million PHP even if it is beyond your monthly income. You can repay the loans within 36 months, and the loans you can borrow are personal home or car loans. It has an annual interest rate of 25.60%.

Final Thoughts

There are many avenues for getting unsecured loans Philippines during emergency needs. Getting the right loan shouldn't be a problem with all the options provided above.

Although they come with high-interest rates, unsecured loans are a great way to get quick funds, especially if you don't have the required collateral. Unsecured loans are a great choice for low-income earners, and going for them may be what you need to stay afloat financially.

FAQs

1. What is the difference between secured and unsecured loans?

Secured loans need collateral, while unsecured loans do not need collateral, although you need an excellent credit score.

2. Which one is better for borrowers in the Philippines: a secured loan or an unsecured loan?

Both loans are a great option, although secured loans have lower interest rates. If you don't mind the high-interest rate, you can opt for unsecured loans as they are easier to get.

3. Is unsecured loan legal?

Yes, it is legal. The Securities and Exchange Commission authorizes banks and lending companies to grant the loan. Also, the Civil Code (the Republic Act No. 386) is one of the laws protecting lenders and borrowers for this type of loan.

4. What happens if you don't pay unsecured loans?

You won't go to jail. The lender will add late payment fees and increase your interest rate. If you still don't pay up, you will attract a lawsuit, and you may lose an equivalent property after a court hearing.