The Truth About Salary Loan vs. Personal Loan: Read the Facts Before Applying for a Loan

There are misconceptions on what loan services are available to employed individuals in the Philippines. Should you apply for a salary loan or a personal loan? Here, we clear the air so you can make better financial choices.

One of the inevitable things in life is loans. From the billionaire business tycoon to the street-smart, money-savvy entrepreneur to the everyday employee, almost everyone needs credit at different points of our life for different reasons.

For us regular Juans, one of the most common reasons we apply for a loan is to cope with a financial shock or emergency that we’re unable to cover with a single paycheck. We avail of a loan when we need to pay for something on top of our regular bills and living expenses, or when our cash flow decreases (for instance, if our spouse is in between jobs).

There are however misconceptions that stop us from making smart financial decisions, such as the loan type and source we should seek. A lot of us don’t know the difference between a salary loan and a personal loan, and confused on how to proceed.

The Truth Behind Salary Loan vs. Personal Loan

Banko Sentral ng Pilipinas (BSP) gave a formal term for salary loans as “Salary-Based General-Purpose Consumption Loans” in a media release in 2015. Salary loan was defined as an “unsecured loan for a broad range of consumption purposes” including education, hospitalization, emergency, travel, household and other personal consumption needs, but excluding credit cards, auto loans and other personal loans, that are covered under other existing BSP regulations.

BSP also added that a salary loan is for individuals with a regular salary, pension, or other fixed compensation and who will repay by salary deductions, debits from the borrower’s deposit account, over-the-counter payments and other types of payment agreed on between the borrower and lender.

In short, salary loan is a type of unsecured personal loan – meaning you can avail of it even though you don’t put up a valuable property for collateral. Before you start applying for a salary loan, you must know first that not all salary loans are created equal.

Some informal lenders, who are not regulated by the BSP or Securities and Exchange Commission (SEC), take advantage of employees or pensioners by offering salary loans at a high interest. People who have negative credit are especially prone. Make sure that you apply for a salary loan with a legitimate lender.


Ready to Apply for a Low-Interest, Legitimate Salary Loan?

Loansolutions, the Philippines #1 Loans Marketplace. Our 3-Step Online Loan Application is cross-referenced with the criteria of top banks and lenders in the Philippines, to make sure that we find lowest interest bank loans that you can qualify for.  A dedicated Loansolutions Concierge will contact you to answer all your loan questions, help review and submit the required documents to banks and lenders on your behalf, and be with you throughout the loan process all the way to approval.

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Written by Kash Avena

Kash has been with Loansolutions.ph in marketing and business development roles since 2014. Now based overseas, she is happy purveyor of financial literacy for OFWs and their families.

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