What to do when you need money? What kind of loan or credit should you take depending on your needs? Learn the differences between a loan and a credit in the Philippines and whether you can borrow money online.

Options on where to borrow money

Lending from a bank

Cash loan

Worth taking when you need a large sum of money that you can use however you like. Cash means money that you can spend however you want. The money can be handed out or transferred to a card. Such a loan can be applied for at a bank branch or online on a banking app. Approval and issuance can take from 10 minutes to several days. The loan term rarely exceeds 5-7 years.

The amount available will depend on your income and available credit load.

Targeted loan

Worth taking when you need a large sum of money for a specific purpose. For example, to buy a car, build a garage or renovate your house, or get education. Unlike a cash loan, the money can be spent only for a specific purpose, which is specified in the loan agreement. The funds go straight to pay for that purpose. They are transferred to the seller’s or contractor’s account.

Targeted lending is often more affordable because the bank knows that the borrower is spending the money to improve his or her well-being.

Secured loan

It is worth taking when you need a large sum of money at a favourable interest rate.  The most common types of such loans are mortgages and car loans. The property of the borrower is pledged to the bank. It takes time to formalise the pledge, so it is not possible to issue such a loan quickly and without visiting the bank office.

When issuing a collateral loan, the bank is more confident in the return of money, so it is more loyal to the borrower and is ready to offer very favourable terms.

POS-credit (microcredit)

It is worth taking when you need to buy something expensive and necessary, but have no money. POS stands for point of sale. This is a special consumer loan that can be obtained directly in the shop. The seller receives money from the bank and the borrower receives the goods he needs. 

A POS-credit is processed in 10-30 minutes. The bank usually only evaluates the credit history. It is convenient to use such loans.

Credit card

Worth taking when you need to buy some things from time to time.

It is a favourable credit if you use it wisely. Return the money within the grace period, which in some banks reaches 365 days, and do not pay interest. Convenient, but only when it comes to purchases in shops. It is not recommended to withdraw or transfer money from a credit card – the terms will be very unfavourable.

Loans from microfinance organisations

Loan
It is worth borrowing when you need a small amount of money for a couple of days and you are 100% sure of repayment. Microfinance organisations lend a small amount of money for a short period of time (from a few days to 3 months on average). The interest is high, but if you borrow a small amount for a short period of time, the overpayment will be insignificant.

The money is issued quickly and without any special checks on the borrower. Checks are minimal – they look at the debt load in the credit history and check the identity by passport data. Debt in other microfinance organisations will not be a reason for refusal..

Secured loan

It is worth taking when you need money for primary purposes, but you cannot get a credit. If you need to get an average amount from microfinance organisations for a period of six months to a year, you will need collateral. It can be a car or property. The rate will be lower than for a microloan, but still much higher than for a credit.

Whether it is worth taking microloans and loans over the Internet

Online registration of loans and credits is safer than visiting an office.

The only danger is on the part of the borrower. Many do not read the terms of the contract, they are in a hurry to get money. This leads to problems at the time of repayment.

It often turns out that the borrower did not take into account some commission or incorrectly calculated the terms. Also, he may not see the warning that the transfer of payment may be delayed. As a result – penalties for late payment and ruined credit history. To avoid risks, read the contract carefully. Apply for money only to trusted organisations that have a licence.