Money lenders

Need a quick personal loan? If you’re a typical Juan dela Cruz, the Philippines’ better-known commercial and savings banks would perhaps be your last choice of source given their long list of requirements and slow processing time.

In the same way, banks like BDO, BPI or Metrobank have the least inclination to process personal loans because of the large amount of time they need to spend vis-à-vis the meager earnings they would get if compared to processing a bigger loan request, say, by a company.

This is why the profile of the Philippine banking system is still largely keeling towards investment banking and treasury, despite encouragements by the government to strengthen retail banking, and to support the growth of micro, small and medium enterprises.

As a result, there is a proliferation of what we have grown to know as the bumbay with their ubiquitous motorcycle who can best be seen on a daily basis making the rounds of small commercial and retail establishments collecting the weekly or daily installment of loan payments.

While the bumbay (for Indian) or even the local equivalent usurero (usurer) charge rates that are often morally unacceptable, they continue to survive and thrive, and are received with open arms – not necessarily open hearts – by those who rely on them.

Quick source

For the small store owner, these informal lenders provide a quick source of temporary capital when business is slow or when there’s a need to invest in extraordinary goods or services that can make a quick profit, never mind the higher interest rate.

For the employees of small shops, it’s a lifeline for emergency needs – like paying hospital bills, or responding to a call for help by a close relative in the province, or for extraordinary repairs or maintenance work on a vehicle or the house – again, notwithstanding having to pay 20 percent or more every month.

The President had earlier vowed to run after usurers, not just because they are charging extraordinarily high interest rates on loans, but also because they represent lost revenues for the government, being often unregistered and unregulated.

Now, the Securities and Exchange Commission (SEC) is cracking down on spurious lending companies that operate online through popular social media sites like Facebook, Twitter and Linkedln.

From complaints by duped borrowers, these companies ask for general and personal information, require a fee to process the loan, and once the payment has been made, simply disappear. Some supposedly have fake websites to make them appear legitimate.

Information campaign

The SEC also released a warning on masquerading lending companies that have not registered with the regulator, thus making them deceitful and illegal. Presumably, these supposed lending firms are also not recognized by the Banko Sentral ng Pilipinas (BSP), which makes them even more dangerous.

Evidently, tracking down and apprehending illegal entities require extensive police work that is beyond the capability of the SEC and BSP. But one quick way of forcing lending mafias to go legit is to come up with an information campaign targeting those who are likely to avail of illegal loans.

This will not only force such lenders to get the proper documentation and pay the corresponding fees and taxes, but could also help bring down the rate of lending to a more conscientious levels.

This could lead to a more level playing field in the personal and small loan sector of the banking industry and could help small rural or family banks by creating a more productive lending window that ultimately will benefit the economy – although this could be a long shot.

Tips to getting a personal loan from banks

Now, if you feel more at ease about going to the bank and borrowing a personal loan, here are some tips from www.imoney.ph.

1. Have a fixed source of income.

If you have a permanent job, even if it’s not in the six-digit monthly category yet, you’re likely to pass the first important criterion to getting a personal loan. A fixed and stable source of income gives the bank an assurance of repayment.

2. Have a good relationship with your bank.

A long history with your bank gives you an even better chance of getting a personal loan. Your track record should include your savings and checking accounts, as well as credit card. They speak volumes about your credibility and accountability.

3. Keep an unblemished credit history.

If you had unpaid credit cards or loans, or even bounced checks, expect your loan application to go through more scrutiny and vetting. These are seen as warning signs of a borrower’s possible unreliability when paying back a loan.

4. Build your credit history.

Most likely, banks will hesitate to extend a loan to a person with no financial records – bank or credit statements. While this does not say that you are not credit worthy, banks are generally uneasy about borrowers whose credit worthiness is unclear or questionable.

One other good way of establishing a credit history is having a well-maintained credit card account. As long as you’ve prudently maintained this by having paid your dues on time, it’s a quick and painless way of conjuring that all-important credit history.

5. Do not have unpaid debts.

An outstanding personal loan, even if in another bank, will likely leave a red mark on your potential as a borrower. Banks share information on delinquent borrowers, and you will be surprised how quick a tainted history gets around the industry.

6. Don’t apply for an unrealistic loan amount.

As a rule of thumb, borrow only what you can pay, taking into consideration your earnings versus your living expenses, plus payments for other debts, if any. Usually, banks will be able to compute your paying capacity right away. If you ask for too big a loan, chances are you’ll have your application turned down.

As a parting reminder, make it a habit to religiously set aside some money every month for emergencies. This way, you don’t have to spend extra for interest payment which, in the end, is simply a waste of your hard-earned earnings.

Facebook and Twitter

We are actively using two social networking websites to reach out more often and even interact with and engage our readers, friends and colleagues in the various areas of interest that I tackle in my column. Please like us at www.facebook.com and follow us at www.twitter.com/ReyGamboa.

Should you wish to share any insights, write me at Link Edge, 25th Floor, 139 Corporate Center, Valero Street, Salcedo Village, 1227 Makati City. Or e-mail me at [email protected]. For a compilation of previous articles, visit www.BizlinksPhilippines.net.