Getting a Secured Loan in the Philippines
Getting a cash loan can help you bail yourself out of a tight financial spot. Now if you’re thinking about borrowing money, be aware that there are two main types of loans available in the country: unsecured and secured. For now, let’s focus on how you can get a secured loan in the Philippines.
How Do Secured Loans Work
A secured loan is a type of loan wherein you need to pledge an asset as collateral (that’s why they’re also called collateral loans). When you’re taking out a secured loan, you’re basically putting the collateral as security payment. In other words, the money lender would have the right to seize your property should you fail to repay your debt.
How Is It Better Than Unsecured Loans
There are at least three reasons why collateral loans are better than their unsecured counterparts. One, applications for secured loans tend to get approved more often. Lenders need to make sure you can repay the loan (that’s how they make their own living after all). They feel more confident in handing out secured loans because you’re putting your own assets on the line. In contrast, settling unsecured loans is guaranteed by the borrower’s promise, which is risky at best.
Two, collateral loans allow you to borrow more money. Pledging an asset as security payment puts banks and lending firms at ease, since they know they can seize your property should you fail to comply with the repayment terms. Thus, they’re more willing to grant you higher amounts of money in secured loans.
Three, borrowers with low credit scores can avail secured. Credit history is a factor often looked at by banks and lending firms whenever they’re reviewing loan applications. In short, unsecured loan applicants with poor or non-existent credit history tend to get rebuffed. Meanwhile, secured loan applications would get approved even with no previous credit history, and they offer an opportunity for you to build up your credit score.
How to Get the Best Secured Loan Product
If you’ve already decided to avail a secured loan product but don’t know what step to take next, then follow these tips.
Pick the Product With Low Interest Rates
Certain secured loans like car collateral loans tend to be very pricey because they’re aimed to cater to borrowers with little to no credit histories. Meanwhile, other collateral loans like home equity loans have lower interest rates. When browsing for secured loan products, make sure to choose the one you can easily afford. In short, opt for the program with the lowest interest rate offered.
Choose the Loan With the Shortest Repayment Term
You also need to think about the time you need to settle the credit you incur. Longer repayment periods usually come with lower monthly payments, but it also tends to come with higher interest rates. In contrast, shorter repayment periods come with lower interest rates. Thus, even though you’ll need to make higher monthly payments, you’ll still be able to free yourself from debt more quickly.
Find Out the Loan Minimum and Maximum
You need to know the minimum and maximum amount of money you can borrow from the program you chose. Since you’re putting your assets on the line anyway, you might as well max it out and borrow as much money as you can. Keep in mind, though, that the amount of money you can borrow would be affected by the value of the collateral you pledged.
Avoid Programs With Hidden Fees
Every secured loan product comes with fees aside from the monthly dues, including application fees, appraisal fees, and loan origination fees. And while you do need to shoulder these additional expenses, the money lender needs to notify you about these costs before you sign up for the loan. Avoid loan products with hidden fees; that way, you’ll be able to better prepare yourself better for the subsequent monthly obligations.
How to Get Your Secured Loan Application Approved
Following the tips above would help you smooth things out when you’re applying for a collateral loan. Still, to increase the chances of your application getting okayed, better follow these other pointers.
Improve Your Credit History
One of the reasons why many borrowers go for secured loans is that they’re more lax when it comes to credit histories. Still, a poor or non-existent credit score can negatively affect your chances even if you’re applying for a collateral loan, so better do what you can to boost it beforehand.
Enhance Your Financial Status
Aside from your credit history, banks and lending companies will also scrutinize your present financial standing when considering your secured loan application. So it wouldn’t hurt as well to do your best to improve it before filing an application.
Pledge Your Best Asset
While there are different types of assets you can present as collateral when applying for a secured loan, they’re not regarded equally by the money lenders in terms of value. For example, pledging vehicles tend to be risky since they’re considered liabilities by many firms. Thus, you need to put up your best idle property when applying for a secured loan.
Complete All Requirements
Of course this goes without saying, but you need to make sure you complete all the requirements needed by the bank or firm to grant you the secured loan. Have all the required documents on hand before filing in your application. And make sure you have enough budget to cover the processing fees.
Be of Excellent Character
Lastly, banks and firms look at the borrower’s character when considering their loan applications. They usually do this by compiling their credit histories, their financial status, and their impressions during interviews. Lenders tend to reject applications made by people with risky backgrounds, so make sure yours is as pristine as possible.
Are Secured Loans Right for You?
Secured loans offer a terrific way for borrowers to obtain financial assistance and build up their credit histories. Still, with the risk of your assets getting forfeited in the process, getting it is a big decision to make. So before filing your application, best ask yourself if it’s the best option you got.
