Job loss, medical emergency, and sudden death in the family - these are some of the many situations that could lead to financial issues. As much as you want to prepare for it, life happens and saving for the rainy is easier said than done.
Who do you turn to in case of emergency? Family and friends are always your first option, but will you rely on them most of the time? Plus, you don't want to make them feel that you are taking advantage of them, right?
Your next best option now would be banks through their personal loan facility. Compared to other loan facilities, personal loan is easier and more feasible to apply to because there is no collateral involved. Before you apply for a personal loan, make sure you familiarize the following fees - and think twice whether or not this facility is the best one for you:
1) Monthly Interest Rate
This is the rate charged to your total amount due or outstanding loan balance. An interest rate will likewise be charged on any unpaid personal loan fees and charges. Interest rate is likewise compounded every month, which means you have no choice but to pay for this until your loan is fully paid.
Unfortunately, interest rate is and will always be part of every loan. While you cannot totally eliminate this type of charge, the best that you can do is to negotiate for a lower rate. To do this, make sure you are in good credit standing to have a upper hand in the negotiation process.
2) Processing Fee
This is another non-negotiable. Most banks chargea fixed rate that covers the processing expenses of your loan application. Take note that banks need to request certification or credit reports from third-party entities and the processing fee will pay for those expenses. This usually ranges from P1,500 to P2,500, depending on the bank. If you're lucky, then you might find a bank that doesn't charge processing fee.
Processing fee is often deducted on the total proceeds of your loan. Consider this on your computation before you apply for a personal loan.
3) Disbursement Fee
This type of fee is charged whenever you withdraw a portion of your loan proceeds. Although this is not that common in the Philippines, there are banks that still charge this. One would be Citibank wherein you will be charged with P1,750 every time you withdraw money from the loan proceeds.
The good news is you can avoid it. All you need to do is to cash out the entire loan so you don't have to worry about paying for disbursement fee.
4) Documentary Stamp Tax (DST)
This is another non-negotiable fee. BIR requires that banks charge Documentary Stamp Tax of P1.50 per P200 of the loan amount amounting to Pmore than P250,000 for personal loan and any amount for business loan. The amount will be remitted by banks directly to the BIR; hence there's no escaping. Nonetheless, if your loan is less than P250,000, you will be exempted from DST.
Take note that Documentary Stamp Tax is deducted as well from the loan proceeds.
5) Late Payment Fee
As much as possible, you need to avoid this type of fee. Every time you miss a payment, banks charge three to eight percent of the overdue amount or P500 per month, whichever is higher. Some lenders even charge on a daily basis instead of imposing the late payment fee on the unpaid amount.
Regardless, make sure you don't miss any payment. You still have interest fee to worry about and don't let late payment fee add to your burden.
6) Notarial Fee
Unfortunately, some lenders charge a different fee for notarial services. In fact, this is a separate expense that covers, among others notarial fee and cost of collection and litigation in case you defaulted.
7) Early Payment Fee
Yes, not all lenders agree that you pay off your loan earlier than the due date. If you do, you will be charged with Early Termination Fee of four to eight percent charged on the outstanding balance, depending on the bank. They charge such amount to cover the interest they could have collected if you pay off your loan earlier than the due date.
Make sure you ask about this fee first and place it among your top considerations.
8) Amendment Fee
Let's say your circumstances changed and you want to pay for your loan early (assuming there is no early termination fee), or you want to negotiate a lower rate, or you want to change the terms of the loan. Some banks may allow modifications on the loan contract but for others, amending the terms would mean charging you with at least P500 for each modification.
9) Returned Check
Some lenders require post-dated check as a form of loan repayment. You have to make sure that your checking account has sufficient funds, otherwise, you might be charged with P1,000 to P2,000 for every returned check. You don't want that, do you?
Is there a more affordable alternative? Consider online cash loan - a facility offered by Loan Ranger. You will only be charged with interest rate and processing fee - and nothing else. In case you are unable to pay on time, give us a call so we can make necessary arrangements that will make loan repayment easier and more convenient for you.