In previous years, the personal lending industry started to boom in the Philippines. Most Filipinos are hesitant to explore their products and services, and the application process is tedious.

Banks are the most common source of funds but they usually have a long paperwork process and collaterals are required.

Recently, several money lending companies offer more innovative and streamlined personal loan products which attract borrowers. If you are interested yet confused about which is appropriate for you, read on to understand.

This will serve as your guide before you decide.

1. Offers lower interest rate

Many borrowers pay higher interest rates in credit card compared to a personal loan from an online credit company like Cash Mart Philippines. If a personal loan is available with a lower interest rate, it could help the borrower save money.

Take this example. If you have credit card accounts and owe $20,000, you will be paying an average APR of 18%. Paying your debt for a four-year period will require a monthly payment of $587, which will have a total interest of $8,200.

Contrary to this, a personal loan that has a 12% rate for a four-year repayment schedule would require a $526 monthly payment. The total interest rate is $5,280, making you save almost $3,000.

When shopping for a personal loan in the Philippines, interest rates differ among local lenders. Compare and evaluate first before you finalize your decision.

2. Compliant in the payment schedule

Moneylending companies advise their borrowers to commit in an aggressive repayment schedule compared to a credit card. To elaborate, a personal loan will commit you to repay an equal installment for a period of time.

While a credit card prefers minimum payment that stretches your debt for a longer period thus increasing the interest charge.

Having personal loan forces you to accelerate your debt repayment by eliminating the low-payment option. Discipline and proper financial management are very significant.

3. Credit cards encourage overspending 

Credit cards let you spend without actual cash on hand. This means you do not experience the pain of handing out your hard earned cash to the cashier.

Within seconds, you will be able to purchase things that you might not be able to afford should you opt to pay in cash. Add to that, monitoring your expenses will be trickier.

With personal loans, you will be using cash from a reputable money lender who can also give you financial advice. Banks usually do not bother to discuss the fine print for using their credit cards.

One missing bill and you will be in a snowballing credit card debt. On the other hand, money lenders will ask for the purpose of your loan and they will be able to give you the right loan product that will fit your need and ability to pay.

It has been identified that there is a significant difference between a personal loan and a credit card debt. If you have a promotional credit card, make sure to pay it off before the promotional period ends.

If you are not confident that you can finish the repayment on time, better to choose an option that you can confidently repay.

You have to remember that banks are rarely forgiving with overdue bills. On the other hand, private lenders are more flexible and easier to approach.

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