1. No Collateral – Personal loans are for the most part non-collateralized that is they do not require any collateral, security, deposit or guarantor. Personal loans are given based on the identity and income documentary proof submitted by applicants and in tune with the issuing bank’s loan policies and guidelines.
2. Multi-Purpose – Home loans and auto loans are specific purpose loans; they are issued and taken for meeting a specific purpose – buying or renovating a home or for buying a car. They cannot be used for any other purpose.
Personal Loans on the other hand, are multi-purpose. You can use them for the purpose of your choice, be it taking a vacation, buying the latest gadget or appliance on the market, for dealing with an emergency, to cover a cashflow shortfall, for paying your kids’ tuition fees, for consolidating other debts, whatever it is that you want.
3. Higher Interest Rate and Lower Tenors – If you are buying a home or a car with a loan, the loan-issuing bank will either own the asset or have a right to repossess the asset in case you default on loan repayments.
With personal loans, however, banks do not have any possession / repossession rights as there is no security or collateral pledged with the bank. Hence, the default risk is higher and to compensate for that, banks generally charge a higher interest rate on such loans. Effective interest rates on personal loans can actually range from about 23% to even 37%.
This is yet another reason why personal loans do not have exceptionally high tenors like home loans; tenors on personal loans are capped at between 1 – 5 years. Standard Chartered Bank’s EZ Loan, for instance, has a highest tenor of 48 months, while Citibank’s Citi Personal Loan has a maximum tenor of 5 years.
4. Personal Loan Calculators – Many banks offer personal loan calculators on their websites. There are generally two types of calculators out there: eligibility calculators will show the quantum of loan you are eligible for given your income and debt status while repayment calculators will tell you what your monthly installments will be given the loan amount and loan tenor you want.
However, remember that such loan calculators will not take into account any fees that may be deducted from your loan proceeds like processing and disbursement fees, documentary stamp tax, insurance, etc.
5. Eligibility Requirements – Although the exact eligibility requirements for personal loans vary from bank to bank you can use the below as a guideline:
Age – Should generally be in the range of 21 to 65 years.
Residential Status – A Filipino or a foreigner with valid residential status.
Employment Status – Employed or self-employed.
Minimum Gross Annual Income – Php 200,000.
Other Possible Requirements –
An existing credit card issued by another bank in the Philippines.
A landline at home or an active mobile phone and landline at business address.
Must have favorable credit ratings.
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