If you’ve ever used a credit card for purchases, or availed of a consumer loan for a big expense, or even simply borrowed lunch money from a co-worker, you are not alone—according to data from the Bangko Sentral ng Pilipinas, nearly 50% of adult Filipinos have an outstanding debt, while another 33% had borrowed money in the past.
Out of these borrowers, there is a growing segment that has taken loans from lending or financing companies. And it’s hard not to see why these “non-traditional” consumer finance companies are growing in popularity: for one thing, their requirements are usually much fewer than what banks ask for, and the approval process itself tends to be pretty fast, too.
That being said, there are those who still feel overwhelmed by the thought of applying for—and repaying—a consumer loan. After all, a loan, no matter how small, is a big responsibility. On the other hand, there are those who dive straight into borrowing, without knowing if they are 100% capable of being a good borrower.
If you belong to either of these camps, take a moment to read these handy tips from consumer finance company Home Credit and its government partner, Credit Information Corporation (CIC). Master these tips, and you’ll be a master borrower in no time!
Have a good credit record. Before you even enter the store or the bank to apply for your next loan, ask yourself if you’ve been a good borrower in the past. Have you ever missed any due dates, or worse, defaulted on a loan? All of these may reflect in your credit history, which financial institutions take a look at before granting loans. If your credit history is good, then chances of approval are high. If not… you might just want to skip that loan application altogether.
First-timers have a chance, too. But what if you don’t have a credit record, period—that is, you’ve never had a loan before? It can be a vicious cycle—some people don’t get approved for loans because they have no credit records, but how can they get a record if they’ve never gotten a loan in the first place?
But there’s good news: Home Credit, for one, can provide loans even to first-time borrowers, thanks to their sophisticated system for screening applications. The CIC, on the other hand, can get credit data even from telcos, and cable companies, and share these with financial institutions. So if you have paid bills to these companies, then it just might be the ticket to getting your loan approved!
Know your rights, and read the fine print. Before you sign your loan contract, find out if there are any special conditions, or better yet, benefits that come with your loan. For instance, Home Credit offers the option to avail of insurance along with the loan; a 15 day “cooling-off” period that allows customers to pay back the full loan at no added cost within this time period; and a loan “safety guarantee” that promises full transparency on loan products with no hidden charges.
On time? Good. Ahead of time? Even better! Once your loan is approved and signed, remember your dues—that is, know exactly what you owe total, what you owe each month, and for how long. And of course, remember your due dates! “On time, all the time” is a good rule of thumb, but consider paying your monthly dues a few days in advance. That way, you’re protecting yourself from unforeseen hiccups—e.g. technical issues, bank clearing delays—that can lead to delays in posting payments, which of course leads to penalties (and a blemish on your credit record).
Want an even better tip? Enroll your loan into bank auto-debit, if possible. That way, you don’t need reminding every time your due date approaches. Just remember to keep your bank account funded!
If you run into trouble, just let your lender know. Even the most responsible borrowers can encounter financial difficulties that can impact their ability to repay. Sudden illness, unemployment, and unforeseen expenses are just some of the things that can derail our loan payments. If ever this happens to you, the last thing you want to do is to hide from your lender, or ignore their calls to remind you of your (over) due dates.
Your best course of action? Reach out to them, and be transparent about your difficulties. More often than not, they are willing to help—or at the very least, listen. In Home Credit’s case, they even have a special unit in the company which reviews cases of customers experiencing extraordinary financial difficulties, and try to find solutions for loan repayment.
Turn that good credit record into a GREAT credit record. At this point, you may have realized already how big of a role your credit history plays in getting a loan—and how big of a role your handling of your loan plays in further shaping your credit record. Regardless of how small your loan is, missed or late payments can spell bad news for your credit history. On the other hand, if you are prompt and diligent with your payments, that small loan can do wonders for your credit history—and pave the way for more opportunities in the financial system!