Payday loans are also known as check advance loans or cash advances. This is a short term loan used to fill up financial gaps until the next pay day. These loans are a quick fix for those who need cash now. Payday lenders (online and physical) provides a platform for you to borrow money fast.

In the Philippines, payday loans are getting more popular especially among those who need cash fast. These loans are usually for a few days only and serves as a financial lifeline until your next pay day. You must understand the details (interest rates and finance charges) of payday loan services if you will use it.

Features

• Short Term. Most payday loans in the Philippines are short term loans, usually until your next pay day, sometimes just a few days.

• Fast Access to Funds. One of the key features of payday loans is quick access to cash. This fast and easy process is perfect for those who need cash now.

• High Interest Rates. Note that payday loans have high interest rates. This should be considered by borrowers since the cost of these loans are high.

• Small Loan Amounts. Payday loans are usually for small amounts of money. Designed to address immediate short term needs, the loan amount is usually equivalent to the borrower’s income.

• Available to Borrowers with Limited Credit History. Unlike traditional banks, many payday lenders have more relaxed credit requirements, so these loans are available to those with minimal or bad credit.

• Online and In-Store. In the Philippines, payday loans can be applied through online and in-store, so borrowers have a choice on how to apply and get the funds.

Pros and Cons

Pros

• Fast access to funds. Payday loans gives you fast and easy access to cash, sometimes even within a day, perfect for urgent needs.

• Relaxed requirements. These loans have minimal qualification requirements and no high credit score requirement, so more people can qualify who can’t qualify for traditional loans.

• Easy application. Applying for payday loan is a quick and easy process, requires less documentation.

Cons

• High cost. The cost of borrowing through payday loans is high due to high interest rates and additional charges from lenders.

• Debt cycle. Short repayment period can be challenging for many borrowers to pay on time, so they may rollover the loan and incur more fees and get trapped in debt cycle.

• Limited borrowing amount. Payday loans have small loan amounts which may not be enough to address bigger financial problems.

• Credit score impact. Late or missed payments on payday loans can affect your credit report and score.

• Strict terms. Most payday loan lenders requires direct access to the borrower’s bank account for repayment, which may be seen as intrusive by some.

Requirements and Conditions

Conditions

• Loan Amount and Term. Lenders have different maximum amount and term. In the Philippines, payday loans usually have small amounts for short term, up to the next pay day of the borrower.

• Interest Rates and Fees. Filipino lenders may charge high interest rates and fees on payday loans. Borrowers must read the agreement to understand the total cost of the loan.

• Repayment Method. Payday loans are usually paid in full on the borrower’s next pay day, with the lender authorized to deduct the payment from the borrower’s account.

• Late Payment Penalty. Delayed payment will incur additional late fees, so borrowers must understand the consequences of not meeting the payment deadline.

• Renewal or Rollover Option. Lenders may offer to renew or rollover the loan for those who can’t pay the loan on the due date which may incur extra charges and may trap them in debt cycle.

Requirements

• Age. 18 years old and above, according to the legal age in the Philippines to apply for a loan.

• ID. Valid ID from the Philippines, can be a passport, driver’s license or any government-issued ID.

• Bank Account. Philippine bank account is required for loan disbursement and repayment process as lenders don’t accept credit cards for these transactions.

• Stable Income. Proof of steady income is required, lenders will ask for proof of employment and income to ensure repayment capability.

• Income Documentation. Income documentation, like recent pay slips or tax returns, is often required but some lenders may not ask for this for smaller loans.

• Mobile Number. Local mobile number is required for verification and to receive loan updates.

• Residential Address. Proof of local residential address is required, may be a utility bill or similar document.

• Loan Agreement. Borrowers must sign an agreement to the loan terms which includes loan amount, charges, interest and repayment plan among others.

• Bank Access Authorization. Lenders will require permission to access your bank account for automatic loan repayment and fee deduction as per the loan agreement.

How to Get the Money

• Direct Deposit. The preferred way to disburse funds is through direct deposit to the borrower’s bank account. After loan approval, the payday lender will deposit the loan amount to the borrower’s account and the borrower can have access to the cash immediately.

• Electronic Transfer. Another way lenders do is to transfer funds to a borrower-linked prepaid card account. This is a modern way for borrowers to get the loan without a traditional bank account.

• Money Transfer Services. Some payday loan providers partner with money transfer services to release loan amount to borrowers. Through this arrangement, borrowers can get the loan amount at specific locations or via electronic money transfer services.

• E-Wallets. Loan funds from payday loans can also be deposited directly to the borrower’s e-wallet. E-wallets is a digital way to manage financial transactions, borrowers can use the funds for various expenses.

How to get a loan? Step-by-Step

• What’s Your Loan For

  Firstly, specify what you want to use the loan for, whether it’s to buy property, start a business or to cover personal financial needs. Knowing the purpose is important as different loans are designed for different purposes and will guide you to the right funding option.

• Loan Terms

  Read the loan agreement carefully, including interest rates, repayment schedule, fees and early payment penalties. Being aware of these terms will help you understand your financial commitment.

  Apply

• Documents

  Lenders will require certain documents from you, which may include income proof, employment confirmation, credit history and purpose of loan. Having these documents ready beforehand will make the application process smoother.

• Apply

  Fill out the loan application form for your chosen lender. While many lenders allow online applications, some may require a personal visit. Make sure to fill in all information accurately.

• Approval

  After submission, your application will be reviewed by the lender who will assess your creditworthiness, income and loan purpose. The timeframe for this process varies by lender, some will give you a preliminary approval.

• Get Loan

  Once all requirements are done, the lender will release the loan. The loan will be deposited into your bank account or given as a check depending on the arrangement.