I have bad credit, can I get a loan in the Philippines?

This is another question we get almost daily, usually in the form of “please help me!!”. We’ve all struggled at times with finances, and sometimes have dug some fairly deep holes that we need to get out of. If you qualify for a Personal Loan from a bank at a good rate, this can be a great way to pay down a credit card, or to replace a high interest loan and save on interest costs.

The 2 main areas banks check for when you apply for a loan are the following:

1. Credit Card history. All banks have access to a common credit card database. If you have ever canceled a card because you could not pay, this will stay in the database for years. Usually, cancellation is made by the Bank when the cause is non-payment. However, there are two kinds of cancellation: voluntary and bank cancellation. If you voluntarily cancel the card and pay off the balance, no problem. If the bank cancels your card because you can’t pay, this is what will go into the records. Pay these off before they get canceled! Also note that banks can see your balance and credit limit. Even if you haven’t ever canceled a card, the bank will see that you cannot budget well enough to pay down the balance. Some banks even require applicants to have a credit card in order to approve them for a personal loan. This gives them the ability to see your truly budgeting capability. Thus, Raining Pesos’ advice is to get approved for a credit card, but if you buy something you can’t pay for all at once, always pay more than the minimums and pay it off as fast as you can. Remember, the banks can see this. Thus, if you ever find that you need cash to help with tuition or some other life event, you will easily be approved by most banks in the country at a good rate.

2. Court cases filed by the bank upon loan default. If you’ve defaulted on a loan in the past, there is a bank-wide database that records the court cases. These will stay with you for many years. When you apply for a loan, you will need to show proof that you settled the court case and paid back the bank. Some of the more conservative banks will still say no to you even if you’ve settled the case. However, there are a few that are more forgiving and will look at your recent credit activity to judge your ability to repay the loan. Raining Pesos will help you find the “more forgiving” banks in the event that you have a prior default but you’ve since paid it off.

If you can’t get approved at a bank of one of the many lending companies we work with, there are a few high-interest rate alternatives in the case you have a big emergency. We advise to avoid this since you can end up paying more than 2x the loan amount in interest! Try asking friends of family to help you. Also, you can take loans against your house or car if you own one.

The best solution is to start a budgeting plan that puts a little extra cash into your bank account each month so that you are ready for these types of emergencies.

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