Overseas Filipino Workers (OFWs) is one of the Philippines economy’s biggest financial drivers. Between January and November 2017, remittances to the Philippines from OFWs around the world contributed over US$28 million in personal remittances and over US$25 million in cash remittances, with a growth rate of 5.1% and 4% respectively. These remittances keep the economy afloat as it contributes greatly to the Philippine’s GDP.
Despite the prestige that comes with the title, financial services such as loans still impose a rigorous screening process for OFWs. Income alone isn’t going to guarantee approval for OFWs who are seeking financial aid from banks and other lending companies. However, unlike regular borrowers, OFWs have better access to fast and collateral-free personal loans from lending companies that aren’t necessary established banks.
Private lending companies
Private lending companies are financial establishments that grant all types of basic loans. They are more straightforward with their loan services and their requirement, making them a good alternative for almost everyone who needs quick cash in the Philippines. While banks offer more flexible repayment options and wider range of financial products, lending companies on the other hand bank on the accessibility of their products and services.
- Should you apply for a loan from a private lending company?
Personal loans offered by banks are still more competitive compared to those offered by private lending companies, in terms of interest rates and payment flexibility.
However, due to a more stringent approval process, this is only possible if the applicants have established a good credit record. This leaves those who do not have a credit record the option of getting a loan from private lending companies.
Private lending companies come in when borrowers need immediate cash but their credentials can’t meet a bank’s standard requirement. This is especially relevant to those who are just starting out in their career and building their credit record, as well as for OFWs. Compared to banks who mostly require conventional employment and income documents, Private Lending Companies impose less stringent process which is tailored for the employment (documents) of OFWs.
If you have a stable flow of income but can’t fulfill the requirements asked by banks, private lending companies are the best option for you.
- Are private lending companies legit?
Private lending companies are also regulated by the Bangko Sentral ng Pilipinas (BSP), which makes them as credible lenders as banks. Most of the private lending companies provide loans from a minimum of ₱20,000 and a maximum of ₱1,000,000, depending on the assessment.
- How much can I borrow?
Private lending companies determine the amount of approved loan depending on the monthly salary of the applicant. Most of them approve twice the amount of the applicant’s monthly salary and their interest rates are usually between 2% and 4% per month. Unlike banks, amount of loan granted by private lending companies is usually twice the monthly salary of the borrower.
- What is the loan repayment and the loan tenure like?
Compared to a personal loan from a bank, their payment terms aren’t as flexible. The majority of these private lenders only offer up to 12 months repayment. Payment method is usually done in a more conventional way – over the counter in the company’s office. However, borrowers especially OFWs also have the option to pay through remittance centers and even banks.
The good news is, they process loan applications faster, even though there are more paperwork involved compared to a bank loan.
Benefits of private lending companies
- Lower income requirement (may vary per private lending company).
- Lesser documentary requirements than banks.
- Screening process is straightforward and sometimes it’s done upfront.
- Faster loan process and approval.
For OFWs, the documents needed are minimal. Unlike the regular loans offered by banks, private lending companies typically ask for the following from OFWs:
- Minimum salary requirement of at least ₱17,000 (but can be higher for other lenders)
- 3 months’ pay slips
- Employer contract (POEA validated and notarized)
- Overseas Employment Certificate (OEC)
- Scanned copy of passport
- Scanned copy of work visa or work permit
- Plane ticket (for pre-deployed OFWs)
- A co-maker (first degree relative)
Applying for an OFW loan from a private lending company isn’t as document heavy as banks. However, the process is a lot tedious because of the fact that they mostly offer unsecured loans with a lower income requirement. The process is simple and can be easily done online.
- Go to their website.
- Fill up their application form.
- Wait for a call or email (3 to 5 business days).
- Submit your documents
- Skype interview (or face-to-face for OFWs who in the country for vacation or pre- departure).
- Wait for the approval.
Fees, interest rates and loan tenure
Compared to banks, private lending companies have lesser flexibility with their payment terms. After all, unsecured loans are high risk loans; while it’s easy for borrowers to apply for, lenders on the other hand have no guarantee of getting it back. Thus, interest rates are higher and loan tenure is shorter than regular loans from banks.
- Interest rates: 2.5% to 3.5% per month
- Loan tenure: 3, 6, 12 or 18 months
- Processing fee: Around 5% of the loan amount (deducted upon the release of the loan)
- Late fees: 15% of the amortization or ₱1,500, whichever is higher
While bank loans remain to be the best loan option for OFWs, not everyone has a good credit record established with their banks. Private lending companies come in when bank loan requirement can’t be fulfilled by the applicants, especially those that are holding jobs that aren’t traditional by bank standards (one of which is overseas employment). If you have a stable flow of income but can’t fulfill the requirements asked by banks (like OFWs), private lending companies are the best option for you.
A personal loan can be a good way to achieve your financial goals if you know how to manage your repayments well. However, as with any credit facilities, you need to consider all aspects — from the interest rates to your ability to pay it — before you apply for one. Use it carefully and see to it that your loan lives up to what it’s supposed to do – make your finances a little bit better.