Should I Take a Personal Loan?

There comes a time in a person’s life when a situation presses them to borrow money. Fortunately, in such cases, applying for a personal loan in the Philippines is not as complicated as it used to be.

There are different mortgages that you can apply for like home or car loan (evidently money to spend for buying a car or home), but a personal loan is one that you can take out for no specific purpose. The most common reasons behind it, though, include debt consolidation, payment for monthly dues, medical emergencies, home or car repairs, and tuition for school.

To learn more about personal loans, please read our other blog post, 6 Critical Situations Your Personal Loan Can Save You.

The amount to lend depends on which financial institution or creditor you decide to apply with, but it will be based on your credit history and how confident they are with your ability to pay back. The loan will then be paid in installment basis, which means you have to repay every month, for 12 to 84 months or until the term is up.

Another thing you need to learn about personal loans is that it’s an unsecured loan or a type that doesn’t require collateral. If you have an asset like a real estate property that you can use as collateral, you may opt for a secured loan. When you fail to pay your monthly fees under a secured loan, the creditor can claim your asset as payment.

Personal loans are appealing, especially to those who really are in need, thanks to its low interest rates for approved applicants. It’s also favorable because even those who only need a small amount can request for a loan. But borrowing isn’t the best solution all the time, and there are different factors to think about before you submit your documents.

Considerations When Applying for a Personal Loan

Perhaps the most significant factor when deciding is the reason why. As mentioned, personal loans can be taken for whatever reason. If you do have the capacity to repay the loan, you can go for it. Getting a small personal loan is also a way to build up your credit reliability—provided, of course, that you’re able to keep up with the payments.

Here are the factors to look out for.

  • Capacity to repay

Take a loan only if you think you can effortlessly make the monthly repayments. Set up a budget and figure out if your loan-to-income ratio is within the acceptable limit that will allow you to fulfill the payment terms. Then, try to find a deal that fits that budget.

Gauging your capacity will help you against lenders who will convince you to get a higher loan that you can’t afford. Make sure that you’re comfortable with the interest and monthly payments, so you don’t feel trapped.

  • Lender and Interest rate

Each lender is different, and so are their offers. As a borrower, it’s your responsibility to look for the right, trustworthy lender who can offer you the deal that fits your financial situation the best. Shop around and compare terms from all sources—banks, credit unions, consumer finance companies, peer-to-peer lenders, and online lenders.

Interest rates also vary—fixed interest rates are higher compared to variable interest rates, but the monthly payment will be the same until the end of the term. In contrast, a variable interest is considerably low but will change as time passes, leading to an increased monthly payment.

If you have good credit standing, you may be qualified for a low-interest rate. However, the longer your payment term is, the bigger the interest to pay.

  • The Fine Print

Before agreeing to a loan offer, make sure to read the terms. More likely than not, there will be hidden charges that you’ll have to pay aside from the interest (and late payments, if any). So, make sure to ask your chosen lender for full disclosure of the loan terms, but do your part and understand the fine print.

Make your own computations the way you understand the terms, and double check if you’re getting the same figures as the ones you’re presented with. If there’s a difference, then there may be more charges you’re unaware of.

  • Complete requirements

Some borrowers underestimate the importance of documents when applying for a loan. However, with incomplete paperwork, you won’t even be accommodated by the lender. Before you submit your application—online or in person—make sure that you have everything that the lender asked for.


Personal loans should be requested to ease the problems of financial challenges, not to get yourself deeper into debt. Think long and hard if your reason to borrow money is logical, and find other ways to solve it if you think you can’t pay it back.

For an easy personal loan application and equally easy approval, download the Cashalo app now. Applying for a loan with Cashalo begins with only a few requirements, and our credit-scoring technology provides a loan decision in less than 24 hours. It’s a seamless and fuss-free solution to your financial woes.