Before you borrow: a checklist that takes ten minutes
Written byFinmart Editorial Team
Most loan problems are visible before signing. These checks take about ten minutes and prevent the expensive ones.
A loan is a commitment stretching months or years ahead, made in a few minutes. The checks below are ordinary, quick, and prevent the situations that are hardest to undo.
First, should you borrow at all
Borrowing works best when it funds something that either holds value or generates income — tools, tuition, a vehicle used for work, or a genuine emergency. It works worst when it covers a recurring monthly gap.
If the loan is meant to cover regular expenses because income does not reach the end of the month, a loan postpones the problem and adds interest to it. That is the situation in which people end up with several loans at once.
Can you afford the repayment
Work out your actual monthly surplus: income minus rent, utilities, food, transport, school expenses and existing loan payments. What remains is what is available for a new instalment — and you should not commit all of it.
If the new instalment leaves nothing for irregular expenses, the first unexpected cost becomes a missed payment.
Check the lender
- Find the full corporate name and SEC registration details in the app or on the website.
- Confirm the company holds a Certificate of Authority to operate as a lending or financing company, and that the app itself is registered.
- Check current SEC advisories for entities operating without authority.
- Never pay anything before the loan is released. Advance "processing fees" are the most common pattern in lending scams.
Read three numbers
Ask for the disclosure statement and locate three figures:
- Net proceeds — what actually reaches you after deductions.
- Total amount repayable — every payment added up.
- Effective interest rate — annualised, so it can be compared.
Compare offers on the same amount and the same term. If a lender will not provide these in writing, that is your answer.
Know the cost of being late
Before signing, ask in writing what happens if a payment is missed: the late fee, the penalty rate, whether the full balance can be called at once, and how collection is handled.
Also know what a collector may not do. Threats, obscene language, false claims of criminal liability, and messaging people in your contact list who never guaranteed your loan are prohibited by SEC rules, whatever the state of your account.
Alternatives worth considering
Before an online loan at a high effective rate, it is usually worth testing the cheaper options:
- A salary loan or advance through your employer, or through SSS or Pag-IBIG if you are a member.
- A cooperative loan, if you belong to one — rates are typically well below app-based lending.
- An instalment arrangement directly with the hospital, school or merchant. Many will agree to one if asked before the account falls overdue.
- A bank personal loan, if you have the documents and can wait a few days.
These take longer to arrange. That is usually the only respect in which they are worse.
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