How Salary Loan Works In The Philippines?
Salary loans or Payday loans, how many like to call them, are monetary funds provided to borrowers, which must be paid in full or in installments when the borrower receives the next paycheck. The amount you can borrow is relatively small and is based on your monthly income.
However, keep in mind that these types of loans usually involve high-interest rates, which isn’t a suitable solution for many people. In the end, you are repaying much more than you initially borrowed. So, now, you must be wondering why people take salary loans when they are so unfavorable?
Well, you may need some quick cash to pay for emergency situations, such as car repairs, utilities, or on the spot medical expenses. Therefore, if you think of applying for a salary loan, then you must consider whether you are responsible enough to pay off your installments on time. In case you fail to meet any payment, the lender will impose additional charges and fees.
So, let’s see how they work in the Philippines!
Getting a salary loan through a government
Some companies provide Pag-IBIG loans for their employees, while others don’t. However, if you wish to apply for this type of loan, then you must complete the following steps.
First of all, make sure to get familiar with all terms and conditions before you head to the nearest Pag-IBIG branch. Additionally, you should bring copies of government and employment issued IDs, the latest payslip, as well as an application form.
On top of that, you must show the original valid IDs so that the loan officer can start with your application. It will take at least two weeks for your request to be approved. The amount you can borrow is based on your monthly income.
Getting a loan through a social security system
Only people employed or currently self-employed can qualify for the salary loan program. However, as with the previous one, you must meet specific terms and conditions to be able to apply for a salary loan.
For instance, if you request a one-month loan, then you must have 36 posted monthly contributions, and six of them have to be in the last six months. Additionally, if you are applying for this type of service, then your employer should be updated in contributions and loan remittances.
When it comes to the amount you can borrow, it depends on your average monthly income in the past 12 months. On the other hand, if you wish to apply for a two-month salary loan, the amount cannot exceed P24,000.
Considering the repayment terms, a one-month or two-month salary loan can be repaid within two years, in 24 equal monthly installments. The interest rate is 10% per year, and it’s applicable to the entire loan.
If you fail to pay your installments on time, then you will be charged with an additional 1%.Keep in mind that the lending company will charge you a processing fee of 1%.