What are Secured Loans in the Philippines?

Secured loans in the Philippines represent a financial arrangement where borrowers offer collateral, typically an asset, to secure a loan from a lender. This collateral serves as a form of guarantee, mitigating the lender's risk and allowing for more favorable terms for the borrower. The most common types of secured loans in the country include home loans (mortgages) and auto loans. In these instances, the property or vehicle acts as collateral, assuring the lender that they have recourse in case of default. The use of collateral distinguishes secured loans from unsecured ones, offering a structured and risk-mitigated approach to lending in the Philippines.

Features

1. Collateral Requirement. Secured loans necessitate borrowers to pledge collateral, such as real estate, vehicles, or other valuable assets, to secure the loan. This provides lenders with a tangible guarantee and reduces the associated risk.

2. Common Collateral Types. Real estate properties, including vacant land and agricultural plots, often serve as collateral due to their appreciating value. Vehicles, especially automobiles, are commonly used as security for auto loans. In some cases, borrowers may also offer their savings or time deposits as collateral.

3. Lower Interest Rates. Secured loans generally come with lower interest rates compared to unsecured counterparts. This benefit is attributed to the reduced risk for lenders, as the collateral provides a safety net.

4. Extended Repayment Terms. Borrowers opting for secured loans enjoy longer repayment periods. This leads to lower monthly installments, providing flexibility and easing the financial burden on the borrower.

Pros and Cons

Pros

Cons

How to Get a Secured Loan?

Apply for a loan

1. Assess Eligibility and Collateral. Begin by assessing your eligibility for a secured loan. Understand the types of collateral accepted by lenders, which commonly include real estate, vehicles, personal assets, or savings deposits. Ensure that the asset you intend to use as collateral meets the lender's criteria.

2. Research Lenders. Explore various financial institutions, banks, and credit unions offering secured loans in the Philippines. Compare interest rates, terms, and borrower reviews to identify a reputable and suitable lender.

3. Check Credit Score. While secured loans are backed by collateral, lenders may still consider your credit history. Ensure your credit score is in good standing, as this can influence the interest rate and approval process.

4. Prepare Documentation. Gather necessary documentation, including proof of identity, income statements, and ownership documents for the proposed collateral. Having these documents ready streamlines the application process.

5. Submit Loan Application. Complete the loan application form provided by the chosen lender. Include accurate and detailed information about your financial situation, the purpose of the loan, and the collateral being offered.

6. Collateral Evaluation. The lender will assess the value and condition of the collateral to determine its suitability. This step may extend the approval process, so patience is key.

7. Loan Approval. Once the collateral is evaluated, the lender will review your application. If approved, you'll receive a loan offer detailing the terms, including the interest rate, loan amount, and repayment schedule.

8. Read and Understand Terms. Carefully read and understand the terms and conditions of the loan agreement. Pay close attention to the interest rate, repayment schedule, and any fees associated with the loan.

9. Sign the Agreement. If you agree to the terms, sign the loan agreement. This legally binds you to the terms outlined by the lender.

10. Receive Funds. Upon signing the agreement, the lender disburses the loan amount to your designated account. Ensure that you use the funds for the intended purpose, whether it's purchasing a home, a vehicle, or another approved expense.

Requirements and Conditions

Requirements

1. Collateral. As the cornerstone of secured loans, borrowers must possess eligible collateral, which can include real estate, vehicles, personal assets, or savings deposits. The collateral's value and condition are crucial considerations for lenders.

2. Proof of Identity. Borrowers are typically required to provide valid government-issued identification, such as a passport, driver's license, or national ID card.

3. Income Statements. Lenders often request proof of income to assess the borrower's ability to repay the loan. This may include recent pay stubs, tax returns, or other financial statements.

4. Credit History. While secured loans are backed by collateral, some lenders may still assess the borrower's credit history. A positive credit score can influence the interest rate and loan terms.

5. Ownership Documents. For collateral such as real estate or vehicles, borrowers need to provide ownership documents, including titles, deeds, or certificates of registration.

Conditions

1. Interest Rates. Lenders specify the interest rates applicable to the loan, and these are often lower for secured loans due to the reduced risk. The rate may be fixed or variable, depending on the terms of the loan agreement.

2. Loan Amount. The approved loan amount depends on the value of the collateral and the borrower's creditworthiness. Secured loans generally allow for larger loan amounts compared to unsecured loans.

3. Repayment Terms. Lenders outline the repayment schedule, indicating the duration of the loan and the frequency of payments. Longer repayment terms can result in lower monthly installments.

4. Fees and Charges. Borrowers should be aware of any associated fees, including application fees, appraisal fees, or late payment charges. Understanding these fees is crucial for accurate budgeting.

5. Collateral Evaluation Process. Lenders detail the process of evaluating the proposed collateral, including any inspections or appraisals that may be conducted. This process ensures that the collateral meets the lender's criteria.

6. Default Consequences. The loan agreement outlines the consequences of default, including the potential repossession of the collateral. Borrowers should understand the risks associated with non-payment.

7. Insurance Requirements. Lenders may require borrowers to secure insurance for the collateral, such as homeowner's insurance for a mortgaged property or comprehensive insurance for a financed vehicle.

8. Prepayment Options. Some lenders allow borrowers to repay the loan before the agreed-upon term. Borrowers should inquire about any prepayment penalties or fees.

Best Places to Get a Secured Loan Today

Security Bank

Security Bank's Home Equity Loan provides a convenient option for individuals looking to leverage the value of their homes to access quick cash. Whether for financial needs or refinancing purposes, this loan allows borrowers to utilize the equity in their homes as collateral. The option to use the loan to refinance or take out another housing loan from different banks provides flexibility. Security Bank emphasizes the speed of the process, making it an attractive choice for those seeking a swift financial solution.

GDFI

The GDFI Car Collateral Loan stands out for its affordability, offering interest rates as low as 1.30%. This loan provides a practical solution for individuals in need of fast cash while allowing them to retain use of their vehicles. Similar to Security Bank's approach with car loans, GDFI only retains the vehicle's official documents (OR/CR) during the loan period. This feature underscores the borrower's ability to continue using their car while benefiting from the financial assistance provided by the loan.

Blend PH

Blend PH's Auto-Sangla (ORCR) Loan offers a quick and efficient lending solution, with the potential for loan requests to be approved within 24-48 hours. The platform provides flexibility in choosing loan terms, ranging from 6 to 24 months. The application process is streamlined through Blend PH's online platform, requiring users to create an account and complete necessary requirements within a specified timeframe. The endorsement of applications to Blend PH partners and the notification process upon approval contribute to the loan's accessibility.

BPI

BPI's Property Equity Loan stands out for its affordability, offering low interest rates and flexible payment terms of up to 5 years. The application process is designed to be straightforward, with options to apply through BPI branches nationwide or via the bank's accredited brokers and developers network. This loan product caters to individuals seeking cost-effective financing solutions for various purposes, leveraging the equity in their properties with the assurance of a reputable banking institution like BPI.

Best Places to Get a Loan Today

Digido

Apply for a loan

Digido is an online loan company in the Philippines, offering non-collateral cash loan services. They provide a fully automated online portal for a seamless loan application process. Key features include:

• Automated application process.
• Loans for various purposes, including emergency and OFW loans.
• No collateral required.
• Online loan calculator.
• Transparent interest rates, with a commitment to fair lending practices.
• Loan accessibility for unbanked individuals.
• Secured operations, fully licensed and registered under the SEC.

MoneyCat

Apply for a loan

MoneyCat is an online payday loan provider in the Philippines, offering efficient financial solutions with an easy-to-navigate online registration form. Their features include:

• Swift approval process, usually within 24 hours.
• Flexible loan amounts ranging from PHP 500 to PHP 20,000.
• Convenient application methods via website or mobile app.
• First loan free of charge for new users.
• Licensed by the SEC, ensuring reliability and legitimacy.

Finbro

Apply for a loan

Finbro is an online lending platform providing quick loans with durations of up to 12 months and amounts ranging from ₱1,000 to ₱50,000. Their service includes:

• Online application process that can be completed in 15 minutes.
• Transparent conditions with no extra costs.
• 24/7 service availability.
• Data protection for users.
• Higher interest rates for repeat loans.
• No mobile app for accessibility.

Kviku

Apply for a loan

Kviku is an online lending institution known for providing short-term loans with a fully automated online service. Their main features are:

• Simple and user-friendly loan procedures.
• 24-hour approval process.
• No hidden fees or charges.
• 100% online lending experience.
• Competitive interest rates at 0.16% daily.
• Flexible repayment terms up to 180 days.
• Registered and authorized by the SEC, ensuring reliability.

Ways to Receive the Money

1. Direct Bank Deposit. The most common method is receiving the loan amount through a direct bank deposit. Once the loan is approved, the lender transfers the funds directly into the borrower's designated bank account. This provides a secure and convenient way for borrowers to access the funds.

2. Wire Transfer. In cases where borrowers have accounts with banks that support wire transfers, lenders may opt to transfer the loan funds electronically. Wire transfers provide a quick and reliable way to receive funds, especially for borrowers with accounts in different banks.

3. Electronic Wallets. With the rise of digital financial services, some lenders may provide the option to transfer loan funds to electronic wallets. Borrowers can use these funds for online transactions or transfer them to their bank accounts as needed.

4. Cheque Issuance. Although less common in today's digital age, some lenders may issue a physical cheque for the approved loan amount. Borrowers can deposit the cheque into their bank account for access to the funds.

Things to Pay Attention To

1. Interest Rates. Understand the interest rates associated with the secured loan. While secured loans generally offer lower rates, variations may exist between lenders. Compare rates to ensure you secure the most favorable terms.

2. Repayment Terms. Carefully review the repayment terms, including the loan duration and frequency of payments. Longer repayment periods may result in lower monthly installments but may also lead to higher overall interest payments.

3. Fees and Charges. Be aware of any fees and charges related to the loan, such as application fees, appraisal fees, and late payment penalties. Understanding these costs helps in accurately assessing the total financial commitment.

4. Collateral Evaluation Process. Inquire about the collateral evaluation process. Understand how the lender assesses the value and condition of the collateral and whether any associated costs are involved.

5. Default Consequences. Clearly understand the consequences of defaulting on the loan. Know the conditions under which the lender may repossess the collateral and the legal processes involved.

6. Insurance Requirements. Check if the lender requires insurance for the collateral. Understanding insurance requirements ensures that you comply with the terms of the loan agreement and protects both parties in the event of unforeseen circumstances.

7. Prepayment Options. If you anticipate paying off the loan before the agreed-upon term, inquire about prepayment options. Be aware of any penalties or fees associated with early repayment.

8. Loan Amount and Eligibility. Confirm the maximum loan amount you are eligible for based on your collateral and creditworthiness. Ensure that the loan amount meets your financial needs without compromising your ability to repay.

9. Loan Purpose. Clearly articulate the purpose of the loan and ensure it aligns with the lender's guidelines. Some secured loans have specific usage restrictions, so it's essential to communicate your intended use of the funds.

10. Customer Reviews and Reputation. Research the lender's reputation and read customer reviews. A reputable lender with positive feedback provides more confidence in the loan process and customer service.

11. Loan Agreement Terms. Thoroughly read and understand the terms and conditions of the loan agreement before signing. Seek clarification on any points that are unclear or require further explanation.

How to Repay a Secured Loan?

1. Understand Repayment Terms. Familiarize yourself with the repayment terms outlined in the loan agreement. This includes the duration of the loan, the frequency of payments, and the total number of installments.

2. Create a Budget. Develop a comprehensive budget that considers your monthly income and expenses. Allocate a specific portion of your budget to loan repayments to ensure timely and consistent payments.

3. Set Up Automatic Payments. Whenever possible, arrange for automatic payments from your bank account. This minimizes the risk of missing a payment and incurring late fees. Check with your lender on the available payment options.

4. Prioritize Loan Payments. Make loan repayments a financial priority. Prioritize them over non-essential expenditures to avoid defaulting on the loan. Timely payments contribute to maintaining a positive credit history.

5. Communicate with Lender. In case you encounter financial difficulties or anticipate challenges in making a payment, communicate with your lender promptly. Some lenders may offer flexibility or temporary solutions to borrowers facing financial hardships.

6. Consider Extra Payments. If your financial situation allows, consider making extra payments towards the principal amount. This can help reduce the overall interest paid and shorten the repayment period.

7. Review Loan Statements. Regularly review your loan statements to confirm that payments are accurately recorded. If you notice any discrepancies, address them with your lender promptly.

8. Financial Counseling. If you find it challenging to manage your finances or repay the loan, consider seeking financial counseling. Professional advice can help you navigate challenges and make informed decisions.

Alternatives

1. Payday Loans. Payday loans are short-term, small-sum loans typically due on the borrower's next payday. They are quick and accessible but often come with higher interest rates. Payday loans are suitable for urgent, short-term financial needs.

2. Quick Online Loans. Digital banks and fintech platforms offer quick online loans with streamlined application processes. These loans are often suitable for individuals seeking rapid access to funds.

3. Pawnshop Loans. Pawnshops provide loans in exchange for valuable items, such as jewelry, gadgets, or other possessions. The borrower can reclaim the item upon repaying the loan.

4. Credit Cards. For smaller financing needs, credit cards can serve as a convenient alternative. Users can make purchases and repay the balance over time, although high-interest rates should be considered.

Editorial Opinion

Important

How to Choose a Lender in the Philippines

1. Ensure that the lender is registered with the Securities and Exchange Commission (SEC) of the Philippines.

2. Investigate if the lender is a member of recognized industry associations in the Philippines, such as the Chamber of Thrift Banks or the Philippines Finance Association.

3. Carefully examine all terms and conditions of your loan contract. This includes understanding the repayment schedule, fees, and any penalties for late or missed payments.

4. Payday loans can have high-interest rates. Make sure the contract clearly outlines the interest rate and total cost of the loan, including any processing fees or additional charges.

5. Familiarize yourself with your rights regarding cancellation. In the Philippines, consumers may have the right to rescind the loan within a specific period after signing the agreement.

6. Research the lender's reputation through customer reviews, complaints, and feedback available online.

Methodology

In Finanso, we've carried out a comprehensive analysis of over 50 lenders in the Philippines, assessing them based on 35 different parameters across six key categories: accessibility of loans, customer relations, quality of service, interest rates, and transparency of conditions.

In each category, we carefully considered the most critical factors in selecting a lender. These factors include the interest rates, available loan amounts, minimum credit score, minimum income, application fees, and the speed at which funds are transferred.

At Finanso, we highly value our users, which is why we also focus on the quality of customer service, user reviews, and additional features that can aid our users in making a well-informed decision.