Salary Loan VS. Personal Loan? What’s the Difference?

Oftentimes, a lot of Filipinos find themselves in need of extra cash to pay off emergencies and to attend to short-term needs. Two of the most popular loans that are frequently applied for are the salary loan and the personal loan.

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Perhaps you thought they’re one and the same, just like many others. It’s therefore important to educate yourself first on what each one is, what they are for, what their differences are, and how they work. This way, you’ll also be able to figure out if you’re actually eligible to apply and which one is more suitable for your situation.

Salary Loan VS Personal Loan

What is a Salary Loan?

When you talk of salary loan, this refers to borrowing either from your employer or from a government institution like SSS and Pag-IBIG which you have been contributing to as an employee. Usually, it is utilized for sudden and short-term needs such as lack of tuition fee funds for children, house repair, and special occasions you wish to celebrate.

The terms would depend on the lender. For instance, SSS (Philippine Social Security System) allows a one-month salary loan which is equivalent to your average contribution during the last 12 months. A minimal 10% interest fee per annum is charged. You should have been contributing for a total of 6 months within the last 12 months in order to be qualified. Even if you’re not an employee, this is still possible as long as you’ve been posting monthly contributions on your own.

It is more advisable to get a salary loan from SSS and Pag-IBIG because the terms are better and the interest is significantly lower. You may also inquire with your own employer about their salary loan offers so you can compare. If your company allows new employees to loan, then this is of advantage to you if you haven’t reached 6 posted contributions to SSS yet.

Take note that with a salary loan, the payment is also easier if you’re an employee. The monthly repayments will simply be deducted from your salary and your company will be the one to handle it.

What is a Personal Loan?

The personal loan is also quite popular in the Philippines because most local and international banks offer this type of loan, along with different private lending companies. It serves the same purpose as the salary loan.

So how do these two loans differ? The personal loan can be availed from financial institutions rather than from government agencies and from your employer. Moreover, this particular loan will not be deducted straight from your salary but you will have to pay for it yourself on a monthly basis. More often than not, it also has a higher interest rate.

Some people who are still paying off their salary loans but are in need of urgent cash again opt for the personal loan. You will need to submit the necessary documents which will be evaluated by the private institution before you get approved. The loan amount will depend on your current income.

In addition, you ought to know as well that personal loans are also available for self-employed individuals and overseas Filipino workers.

Knowing the basic information on these two types of loan will thus enable you to review which one suits you better for the time being.

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How much can I borrow?
How much can I borrow?

You will only be approved for a loan that you can afford based on your salary and existing expenses. This depends on what your current salary is and it depends on how much you borrow.

What are my repayments?

Your repayments will be based on how much you borrow. You will be provided with a loan that you can afford to repay. You won't be approved for a loan that you can NOT afford to repay.

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