The Truth About Quick Online Loans in the Philippines

In this blog, we will share information that lending companies usually keep to themselves about quick online loans in the Philippines.

Quick online loans, also known as payday loans in the United States or other countries (and also called salary loans, instant cash loans, fast loans) provide money that seems easy to borrow but comes with very high interest rates.

In the Philippines, quick online loan companies can lend you up to 30,000 pesos with repayment terms from a few weeks up to 12 months.

In our blog, we will explain why it’s like this and also discuss if you really need a quick loan. 

Why are Quick Loans So Expensive?

In the Philippines, the interest rates of quick loans can be up to 50% per month or the annual percentage rate (APR) can even be more than 600%. Why is this so? Does it sound like a scam? Not really.

Let me explain. For example, banks like Metrobank, BPI, Unionbank, and others, offer loans with low interest rates, but not everyone can get a personal loan from them. The reason is that banks don’t want to take risks with people who may not pay back the money. So, banks give loans when they feel sure that the borrower will repay the loan. They usually give loans to people who have a stable income, a job, and a good credit history. Sometimes, for larger amounts, banks also ask for collateral.

On the other hand, quick loan companies are non-bank companies ready to lend you money without many requirements. But, these companies face a risk that the borrower may not pay back the money on time or at all. This is why the interest rates are so high. Non-bank lending companies need to have a debt collection team, lawyers, and many team members to make sure they get their money back and keep their services going.

In simple terms, the interest rates are tied to the risks that lending companies take when they lend money to borrowers. 

When Are Quick Loans Necessary?

One of the main reasons why quick loan companies are useful is because of the technology they use, called Fintech, which enables fast and easy approval. Sometimes you can get a cash loan  in 15 minutes, sometimes even instantly. It’s a system that can do quick checks on borrowers, calculate credit scores, and make automatic decisions based on data. The money is transferred to your account automatically by the system. But this fast approval system is not perfect. Even with a lot of data, it can’t predict how every borrower will behave. This is why quick loan companies have high interest rates compared to banks.

Quick loans are very useful when you need a small amount of money urgently and have no other sources to borrow from. You can even get money instantly from quick loan companies, thanks to their technology.

Quick online loans can be helpful when you have a few days left before your salary comes in and you need to make some urgent payment, like paying bills. That’s why some people call these loans salary loans. If your salary is coming next week, then a quick loan could be helpful for you.

But remember, never borrow money from a quick loan company if you don’t know exactly when you will be able to pay it back. And read the terms and conditions about extending the repayment term and penalty fees.

Quick online loans are only useful when you use them wisely. 

When Should You Avoid Quick Loans?

Because of high interest rates, you should be very careful with quick loan services.

Do not borrow money from quick loan companies:

• If you are not able to pay back this loan;
• If you don’t know when you will be able to pay back;
• Never borrow money for gambling;
• Avoid quick loan companies if there are too many hidden terms;
• Do not borrow money under the influence of alcohol;
• Do not borrow money for someone else.

These are the most important unwritten rules you should follow if you don’t want to fall into debt. And always think twice, if you really need to borrow money at all. 

Are Quick Online Loans Legit?

Quick loan companies who are registered with the SEC are legit, but sadly, regulations in the Philippines are not so strict. So almost every quick loan company has different hidden terms.]

Sometimes you see a good interest rate on websites, but don’t notice that the rate is only for a 7-day loan. Or sometimes the terms you see on websites apply only if you can provide more information about your income. If you don’t have a stable income, then you face different terms and conditions, and higher interest rates.

So, be careful with all the terms and conditions, read agreements carefully, check repayment dates, and calculate all costs. We did research on some of these companies and read user reviews on many forums. Sometimes borrowers are upset with online loan companies, but the main reason for their disappointment is not the company, but because they didn’t read the agreement carefully.

Always remember to check if the online loan company is legit, registered with the SEC, and doesn’t have any warning signs. Learn more in our blog article about legit online lending in the Philippines. 

What to do if You Cannot Repay the Loan in Time?

First, you need to be honest and talk to the lending company to discuss your situation. Agree with the lender on what you can do in this situation.

If you act dishonestly and ignore the repayment terms, then the lender will start to charge penalty fees.

Here are a few options you can consider:

• Extend the repayment term;
• Talk to the lending company about paying back the loan in smaller installments;
• Think about consolidating your loans from another company, with a lower interest rate and monthly payments over a longer period. But there’s no guarantee you will be able to get such a loan. Besides, loan consolidation adds an extra interest rate on your existing loan.

Never cover an existing quick loan with another quick loan from a different company. This will trap you in a debt cycle and you will end up with even higher debt amounts.

Do You Really Need a Quick Loan?

Yes and no. First, you need to understand all the costs of the loan. Understand what will happen if you don’t pay back. And of course, understand that quick loan companies are not trying to rob you. They gave you money in an emergency, so they want to get back the money they lent you. There are costs for their services and for the team of people who provide these services.

But on the other side, be careful and read all the terms and conditions when applying for a loan. In the Philippines, quick loan lenders often don’t clearly show the costs on their websites.

If you are looking for a best quick online loan and understand that you will need to pay high interest rates, you can check our online loan comparison table.