According to the results of the recent annual Consumer Financial Survey (CFS) of the Banko Sentral ng Pilipinas (BSP), the Philippines remain a consumer-spending driven economy. In a way, the Filipinos themselves help…read more >>
The Truth about Personal Loans
Personal Loans are loans that are usually not secured and not collateralized. Compared to the common loans such as housing and auto loans, personal loans only require little documentations for a borrower to furnish and lesser stringent measures to follow in order to qualify. Besides, it speaksof convenience since the release of funds is much quicker. Thus, being an easy line of credit, personal loans readily becomes a loan seeker’s top immediate option when needing emergency funds.
This type of loan can be used for almost anything. A personal loan is also an ideal method to prove to lenders that a borrower is stable financially. A perfect repayment history of loans entails a likely approval for bigger loan amount in the future. But no matter where the loan is supposedly intended, it is always advisable to have sound financial planning.
However, most people practically availpersonal loans for debt consolidation. This is largely due to the loan’s nature of yielding higher interest rates that ranges from 14 per cent to 24 per cent; yet, offering the affordability of repayments, which can be spreadconveniently within longer time periods and terms. With proofs of income stability and consistency, personal loans can truly assist individuals to get ahead of their repayments.
There are several factors that can affect the pegging of interest rate offered to a personal loan borrower. The importance of recognizing these criteria provides an advantage for the borrower in negotiating the loan transaction.
Factors affecting interest rates:
1. Job– Lenders generally have a rating system wherein they judge different entities. Higher chances of securing a loan are given to workers from any big and reputable companies.
2. StabilityandConsistency – Owning a house and being married increases a borrower’s stability quotient. Consistency builds an edge when possessing longer work tenure history records.
3. Location Image- Lenders are wary of granting unsecured lines of credit in smaller towns or places known for notoriety.
4. Credit Information Records- These records assist lenders to identify credit histories of borrowers and warn them against over-leveraged loan seekers.
5. Loan Guarantor- Borrowers must ensure that their loan guarantors also possess ideal credit history records.
6. Lender-Borrower Relationship
Processing fees which are anywhere between 1% and 5% of the loan amount can be waived off when borrowers show excellent history records, especially when they have been past borrowers and created a favorable background with their loan payments.