Unsecured loans Philippines and how Filipino can use such services and when it really necessary:
Any person who is going to receive financial assistance from a financial institution needs to have a clear understanding of what secured and unsecured loans are. This is a very important point that can influence your decision to apply for a loan.
If you don’t learn about these realities in a timely manner, you can make a mistake, which can lead to the saddest consequences. For example, the non-payment of secured credit can lead to the loss of property or even your own home. On the other hand, unsecured loans are a direct way to overpayment. But first things first.
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The Essence of Secured Credit
Secured loans are among the most beneficial forms of financial interaction between the borrower and the lender. With collateral, down payment, and a guarantor, it is easier for the potential borrower to guarantee the repayment of the amount of money, which increases the level of confidence in the borrower.
As for secured loans, then:
- To arrange them, the borrower must present the bank’s employees with a guarantee obligation.
- The collateral is usually personal property.
- They are issued at a lower credit rate.
- They are provided by banks, pawnshops and private individuals.
- They have high credit limits and long contract terms.
- Lenders’ risks are greatly reduced when they are granted.
- It takes some time for the lender to review the documents.
For the most part, such financing refers to long-term forms. A person can obtain a loan for a period of 5 to 15 years only if he/she provides a reliable guarantee, which reduces the risk of the lender. Often a car, apartment or other asset is used as collateral, which can be obtained through a loan. Insurance is usually an additional condition.
Description of the Unsecured Loans Philippines
But today we will talk about what unsecured loans are. This form of financing involves handing over a sum of money to the borrower without the assurance of repayment, which also includes posting collateral and engaging guarantors. This option is often attractive to potential customers.
- Does not involve giving the lender documents for the pledged property or assets.
- This type of mortgage has a high rate of interest.
- It is characterized by its short term nature.
- Can be obtained from a bank, microfinance organization, private individuals or credit union.
- Subject to restrictions on the size and duration of the unsecured loans.
- It is issued on the basis of a calculation of the client’s income.
- Issued on the day of application.
The main thing that characterizes an unsecured consumer loan is the lack of guarantees on the part of the borrower because he does not make any collateral. The credit application is not reviewed by a representative of the credit bureau, and only specialists from the credit organization handle it. Large microfinance institutions and commercial banks use special automated systems.
Why Take Unsecured Loans in the Philippines
Borrowing through unsecured loans are a very attractive form of cooperation for a borrower who has previously had their secured loan application rejected due to insufficient collateral to secure the loan. Those people who need money, what’s called right now, may also be interested in this loan option.
With the amount received, usually:
- Purchase some necessary goods and services (consumer type of credit).
- Paying tuition for college, college or university.
- Carry out repair or restoration work on houses, apartments, business premises.
- Repay medical debts.
- Starting or expanding a business that will be profitable in the future.
- Purchase or repair vehicles.
Make early payments on leases, make final payments on mortgages.
In some cases, the only financing option is unsecured loans. Therefore, this format of borrowing is a great source to raise the necessary amount of money. An unsecured loan in the RF is usually for short terms so that the borrower can repay the amount in a comfortable manner.
5 Types of Unsecured Loans in the Philippines
Unsecured loans include several types of loans
A common format of loans is where the customer gets the amount they need in cash or by transfer to a card. It does not require collateral or guarantors, so it is unsecured. If the bank asks loan, it is a secured one.
An extremely popular credit system characterized by important advantages. Forms of credit cards are instant, classic, preferred Gold or Platinum, which accordingly affect the limit.
If there is not enough money before payday or if there are unforeseen circumstances and money is needed urgently, having a credit card helps to solve the problem.
But it’s important to keep in mind that if you don’t pay off your debt during the grace period, which is actually the most attractive part, you will have to pay considerably more than you would in the case of an ordinary bank loan. In addition, it is better to pay for goods and services only with a card, withdrawing cash is not profitable, especially if you don’t want to lose the interest-free period, as well as due to the presence of the appropriate commission.
Literally, it means “overdraft”. With the help of this option, connected, as a rule, to the card to which the salary or other regular income is received, the client can spend more than he currently has. Such lending is subject to certain conditions, which you should be aware of before using the borrowed funds. Check with the specialists of the issuing bank. For legal entities, there is also the option of an overdraft with no collateral for a term usually not exceeding one year.
A consumer loan is taken out by the partner bank of the store when you buy household appliances, computer equipment, etc. In some cases, the items purchased serve as collateral until the loan is paid in full.
The Unsecured Loan Process
If a potential customer is interested in obtaining unsecured loans from a bank or other lending institution, he needs to learn and compare all available options offered by different lending companies. In addition, a lot of useful information can be provided by experienced consultants engaged in credit analysis. An important factor in this is trust in such specialists.