The word “loan” may sound terrifying, especially if it’s your first time getting a loan. Horror stories about perpetually getting buried in debt due to missed payment deadlines and soaring interest rates often come to mind.
However, unbeknownst to many, loans are essential to sound financial health. Take credit cards, for example—failing to pay on time and in full can spell trouble. Still, if used responsibly, they can boost your credit standing and open up opportunities for financial growth.
Other than improving your standing, loans can also aid in your time of need. For instance, government entities offer calamity loans to help typhoon victims. Loans can be beneficial, provided you’re borrowing with the right mindset.
6 Tips for Getting a Loan for the First Time
With ample preparation, loans don’t have to be daunting. Here are some essential loan tips if you’re borrowing for the first time.
1. Know your credit score and history
In a nutshell, credit scores inform lenders about how financially responsible borrowers are. A higher number makes you more attractive to lenders, so they may offer lower interest rates, better terms, and other perks. You can increase your score by paying bills and personal loans consistently and on time.
The Credit Information Corporation (CIC) is the Philippines’ sole registry for managing the country’s credit data. You can request a credit report to check if your score meets your lender’s criteria. The score ranges from 300 to 850, the latter being the highest possible.
2. Prepare the necessary documents for the application
Make the borrowing process seamless by preparing the requirements, which typically include application forms and documents proving your identity and capacity to pay. Inquire about your preferred lender’s requirements to know what you need to bring. Incomplete documents, such as not having proof of securities for collateral loans, can make you ineligible.
You can expect to submit more documents, outside of the usual identification and credit report, when taking out a business loan, including a copy of your Barangay Business Clearance, Mayor’s Permit, and pictures of your business’s location and building.
3. Borrow a reasonable amount
Knowing your boundaries is crucial even if you’re eligible for significant loan amounts. Otherwise, you may accrue too many payment obligations to handle that you start racking up penalties. Only borrow what you need to avoid potentially hurting your credit standing.
Moreover, some loan types lend a fixed amount depending on their purpose. For example, auto loans and truck loans typically offer a maximum of 80% of the vehicle’s price since you may need to pay at least 20% as a down payment. These loans eliminate your need to fuss over how much you need to borrow.
4. Choose a reliable lender
Different lenders have varying terms, so shopping around for one that meets your needs is essential. You can contact their customer service and ask questions about their timeframe, fees, application process, repayment schemes, and other terms.
Ultimately, choose a lender that’s accessible and offers a seamless application process. The importance of a reliable lender is evident with used car loans, where terms are pretty competitive and greatly vary among dealerships.
5. Practice honesty
Honesty is critical when applying for and managing loans. After all, you aren’t asking for peanuts—lenders can offer upwards of ₱10,000, hence the importance of honesty throughout the process.
Being honest entails accurately representing your income, employment, and assets. Even amid the popularity of online loans in the Philippines, where applications can be remote, systems are in place to ensure your submissions are valid. Fabricating them to make you more attractive is a serious offense, which can lead to lawsuits for fraud.
6. Build a relationship with the bank
While creditworthiness is an essential factor in your eligibility for getting a loan, your relationship with the bank can also come into play. Being a good-standing credit cardholder or long-term client can demonstrate loyalty and make your evaluation easier.
You can build a relationship with your bank by being a responsible and active client, establishing a solid financial history, availing of their products, and making full payments on time. Being honest with your requirements and physically interacting with the bank’s staff can also help.
Nurture Your Financial Health with Loans
While borrowing money with interest can be daunting, it’s essential to nurturing your financial health. With an excellent initial credit standing, all that’s left to do is find the right lender to help you reach your goals.
Asialink Finance is one of the top financial companies in the Philippines. Our slew of convenient and accessible loans can make your first loan experience hassle-free. Apply now for a used car loan to enjoy our competitive rates!