Loans 101: Basics at best practices ng paghiram

Every year, maraming Pinoy ang umuutang o kumukuha ng loans para maabot ang iba’t ibang purchases at opportunities. Examples of these are home purchases, college tuitions, or business capital. Loans are also popular para sa short-term emergencies o leisure spending.

Loans are a type of credit na mahihiram mo sa bank, other financial firms, kakilala, or even non-formal lenders. When done right, you’ll get a reasonable loan that improves your financial situation at kaya mong bayaran. The flip side is pwede kang mabaon sa utang if you don’t manage your loans properly. Kaya’t para makaiwas sa predatory loans, Loans 101 will teach you everything about responsible borrowing!

In this guide, you’ll learn:
  • The three basic components of any loan
  • What makes a good loan
  • Where to get a loan
  • Loan requirements
  • Loan types
  • Best practices for hassle-free loan application
Ang tatlong basic components of any loan
#1. Interest rate

When you take out a loan, paunti-unti mong ibabalik sa lender ang loaned amount in regular repayments. But on top of the loan amount, magbabayad ka rin ng additional fee called an interest fee. Ito ang bayad mo sa lender for loaning you money.

With this in mind, it’s best to go for loans with low interest rates. This helps make your monthly payments cheaper.

For example: Bank 1 offers a Php 100,000 loan na may 7% interest rate. Therefore, babayaran mo ang lender ng additional Php 7,000 on top of your Php 100,000 loan.

Meanwhile, Bank 2 offers a Php 100,000 loan with a 5% interest rate. Dahil mas mababa ang kanilang interest rate, you only have to pay Php 105,000 in total.

Loan interest is either fixed or floating. Fixed interest rate means that it will stay at the same percentage hanggang matapos ang loan term. Floating (also called variable or adjustable) interest rates change monthly depending sa market o sa terms ng lender. Loans that usually have a variable interest rate are home loans and credit cards.

#2. Collateral

Before giving you a loan, lenders need assurance na mababayaran mo ito. Hence, kailangan mong mag-offer ng security component o collateral. All loans can be divided into two types: secured and unsecured.

With secured loans, kailangan mong mag-offer ng assets sa lender to secure your loan. These assets are called collateral. It can be your home, car, business equipment, and other high-value items. If you’re unable to pay your loan, iki-claim ng lender ang iyong collateral as loan payment. Unsecured loans are loans na hindi kailangan ng collateral. Still, unsecured loans need proof of income.

In general, mas mahirap ma-approve for unsecured loans. You need a good credit score, good income, and stable employment. Mas mataas din ang interest rates ng unsecured loans. However, secured loans are riskier. You can lose your assets to the bank and get into more debt kapag hindi ito nabayaran.

#3. Term (also known as tenor o loan duration)

Ito ang length of time para mabayaran mo ang loan. Loan terms can be as short as 1 month or as long as 30 years. Generally, the longer the term, the lower the monthly interest rate. Still, kapag mas mahaba ang iyong loan duration, mas mataas ang total ng babayaran mong interest fee.

Term also covers the frequency of your loan payments. Most loans have monthly repayments that combine part of your loan amount plus interest rate.

As long as walang prepayment penalty, you can pay in full before your loan duration ends. Prepayment penalty is an extra fee na common sa home loans. It discourages you to pay early para hindi mawalan ng monthly interest income ang lender.

So what makes a good loan?

Given these points, the best loan is a loan na kaya mong bayaran in a reasonable amount of time. This is the best way to avoid getting deeper into debt.

From a financial literacy perspective, good loans are loans that make lasting positive impact on your well-being or net worth. May kasabihan na “it takes money to make money”. Loans can help you afford  education, business, o real estate opportunities. In contrast, loans can also be used for luho items na hindi income-generating o tumataas in value. Iwasang kumuha ng loan for these reasons. Pwede kang mabaon sa utang kapag nakasanayan mo ito.