Kash Avena
Getting a cash loan does not have to mean glossing over the process and regretting your decision come repayment time.
Be it for a planned expense such as crossing off an item in your travel bucket list, or a pressing financial need like coping with an increase in your child’s tuition fee, you may consider getting a cash loan. More often than not, when in comes to cash loans, quicker is often seen as better. However, this should not mean that you have to rush through the process to the point that you’re not even sure if you’re getting the right loan for you or not.
Securing a cash loan affects not only your current financial standing, but can seriously affect your finances in the future. Before you sign any agreement, you must make it a point to ask yourself “Will this loan improve my life’s financial aspect in the long run?”
We created the following list of important questions to ask yourself before availing any cash loan:
Is my cash loan secured or unsecured?
A ‘secured loan’ is a type of credit where repayment is backed or guaranteed by a collateral or valuable asset from the borrower. In general, an unsecured cash loan has a higher interest rate compared to a secured loan because the lender is taking on a higher risk or losing money if the borrower defaults.
How do you know which between the two loan options are right for you? It depends on your current financial standing and need. If you legally own a valuable property that you are comfortable to put up as collateral, and have a stable source of income in the foreseeable future, you can enjoy lower interest rates with a secured loan. Otherwise, your option becomes finding the right unsecured loan.
Is the loan company asking for your ATM card as a collateral? Stop right there. This may be considered a red flag and sign of opportunistic or payday lending. One practice of opportunistic or payday lenders is to have direct access to your monthly income through your ATM card as a way of paying your loan. The danger in this lies in the possibility of being overcharged or wrongly charged, since you won’t have control of your repayment.
What’s the payment period for my my cash loan?
The rule of thumb is, the longer your payment period, the higher your overall interest and repayment amount will be. Ideally, your term should be as short as possible to reduce your payment. However, your primary consideration should be whether or not you can comfortably pay the amount monthly, without affecting your ability to afford basic necessities and other expenses. If you think the amount is too high, discuss with your potential lender if he or she can come up with another scheme for you.
What is my monthly interest rate and APR?
In reviewing your loan’s interest rate, make sure to consider both the monthly interest rate and Annual Percentage Rate or APR. The APR is a percentage that represents the actual yearly cost of your loan. While a 20% monthly interest rate may seem reasonable at first glance, especially if you have a pressing need for cash and your time or options are limited. However, this interest can pile on quickly once you consider the APR.
For example, if you borrow Php 20,000 at a 20% monthly interest rate, you’ll have to shell out Php 4,000 on top of the principal or original loan amount. If you’re unable to pay back in a month, it means your interest rate can balloon to Php 8,000 by month 2 aside from potential late payment fees. A 20% monthly interest rate equals a 240% APR, which is outrageous compared to single or double digit APRs offered by banks and reputable lending companies. This is the typical rate of a 5-6 loan (for every 5 Pesos you borrow, you have to pay back 6).
Is this lender legitimate?
Before getting into an agreement with a lender, make sure that the company is operating legally. Check if the lender you’re dealing with is an accredited bank. If you’re considering borrowing from a non-bank financing company, you can check if it is registered in the Securities and Exchange Commission (SEC). This will lessen the chances of getting a disadvantageous, usurious, if not an outright illegal type of cash loan.
How can I find a legitimate cash loan?
No matter how pressing your financial need is, it pays to research and check if you are getting the right and legitimate cash loan for you. However, not everyone has time to go to multiple banks and lending companies to check the best loan terms given our day jobs and other responsibilities. Thankfully, a lot of this information is readily available online. You can check out financial websites such as Loansolutions, the Philippines’ #1 Loans Marketplace. Their network of legitimate lenders consisting of banks and lending companies will help you make an informed financial decision and get the right cash loan.
