Banking terms: Personal Loan

CEBU, Philippines - The 15th and 30th of the month are the times when employees get the reward of their hardwork throughout the working days.

For most Filipinos, this is the time of the month when they seem to be busier shopping, rushing to the grocery stores and even having some kind of treat for themselves. While for others, pay days also mean the days to pay the bills.

Although, personal goals are always in their mind, this particular situation normally gives them a feeling of frustration that they can barely achieve the things they want for their lives. For these people, turning dreams into reality may seem to be quite blurred already.

However, minimum wage earners actually still have something to depend on to achieve their goals -- and that is to apply for personal loan.

A bank official said applying for a personal loan is one way for people to have a more positive outlook and avail the things prior to pay day or things that the monthly pay can’t afford.

In an interview, Amiel Crisologo, personal loan head of Philippine Bank of Communications, said people’s top three purposes for getting a personal loan include home improvement, business expansion and personal travel.

Crisologo and other bank officials were in Cebu recently to forge a partnership deal with Leuterio Realty & Brokerage aimed at enabling the bank to distribute its lending products through Leuterio’s brokers and agents.

Personal loan

In addition, others need the personal loan for education expenses, health and wellness, debt consolidation, utility bills, emergency needs and even for wedding.

Personal loan is an unsecured (non-collateral) consumer loan that is granted to a qualified individual for personal use and must be repaid based on the monthly amortization.

“We have pretty much basic requirements,” the loan head said. “We need to see their (applicants) income requirements.” Banks generally grant personal loan based on the borrower’s integrity and ability to pay.

Crisologo said both employed and self-employed people can have the consumer credit and should be paid throughout the loan term which can be between six to 48 months.         

Although workers such as the overseas Filipino workers and seamen are non-targeted customers for personal loan, the bank executive explained banks still consider them for the loan “on a case to case basis.”

“More often than not, I think this is unilateral in all banks all over the Philippines. The risk kasi is higher than our normal salaried folks.”

When asked if high risk candidate are to get higher interest rates, the PBCom official said lenders usually see the person’s ability to pay in order to make up the risk associated with personal loan.

He said employed and self-employed people who are earning an annual gross income of P260,000 and P300,000, respectively, can gain extra cash through the loan; but, the income requirement may probably vary depending on the bank’s rules.

Lending standards

A latest survey conducted by the Bangko Sentral ng Pilipinas showed that most banks continued to impose tighter lending standards on consumer loan borrowers.

The Senior Loan Officers Survey said the banks’ reduced tolerance to risk and perception of stricter financial system regulations have caused the tightening of credit standards for household loans.

The review is made to increase the central bank’s understanding of the lending behavior.

The BSP said that banks suggested stricter collateral requirements for all types of household loans -- except credit card loans -- and tighter loan contracts for auto and personal or salary loans.

The central bank also said most banks expect to keep their existing lending standards for consumers for the third quarter of this year.  (FREEMAN)