For many people, getting financing or a loan is mostly perceived as a burden. To us Filipinos, getting a loan is perceived to be “nakakahiya”, keeping it a secret from others.
However, in first-world countries, getting a personal loan is not only for acquiring what they need but is also part of strengthening their creditworthiness (that they can pay their monthly installments completely and on time). They develop their “payment history” and reputation as good loan clients to have access to more financing from more financing institutions.
Also, financing should be perceived as a “resource booster” for your business. With more cash inflow through a loan, you don’t have to dip into your savings for the cash. This enables you to manage your cash outflows through your monthly payments. If you need cash to buy inventory or a new delivery van, you either get the money from your pocket or, get it through a loan from a financing institution and only pay monthly payments. The second option is better as it will not drastically change your cash position.
Thus, getting a loan for additional cash, working capital, or assets (e.g. vehicle) for personal or business use is not supposed to be “nakakahiya” or a burden. It should be a budget booster so you can provide a better life for your family or grow your business faster and provide better products or services to your clients.
However, you should not get a loan on a whim. Getting a loan just to acquire the latest cellphone or more cellphones, or the latest car model to satisfy your wants will eventually become a burden if you cannot afford it. Thus, we have some tips for you to become a RESPONSIBLE BORROWER.
KNOW WHAT YOUR LOAN IS FOR
Be sure of your decision to get a loan or financing and stick to it. You need to get a loan to repair or renovate your home to make it safer for your family. You get car financing because your family is getting larger, it is safer or reliable or is more fuel efficient. You get a loan to buy a new delivery van because you want to expand your delivery services and save on maintenance costs. Thus, before getting a loan, you have to know why.
Research financing institutions. Look into their social media or website and find out how long they have been in the business. You can go to the BSP or SEC websites and find out if these financing institutions are registered. You can go to their branch or offices to inquire more. With all the scams happening now, it is always wise to know more about these institutions and if they are accredited by our government institutions.
Get organized and budget your loan payments. When you get a loan, the monthly payments will eat into your budget. Thus, you have to determine if you can still afford the loan without sacrificing much on the budget for your family’s basic needs. For your business, will this loan help generate more revenues and income for me, making that additional revenue cover the cost of the monthly payments?
When applying for a loan, financing institutions will often ask for a CO-MAKER (a person who will also share responsibility for the loan payments). A person willing to be your CO-MAKER vouches for your character, that he/she knows you to be a responsible and trustworthy person capable of paying your loan obligations on time. You do not want to disappoint your CO-MAKER by not paying your loans as they will assume that responsibility.
Therefore, do not borrow more than what you need. You may be approved for a higher loan amount than you expected, always stick to the loan amount that you need. Also, do not apply for the loan amount that you know is impossible for you to pay. Financing institutions have their credit assessment processes and will know your payment capacity.
Now that you have been approved for a loan, always pay completely and on time. By paying completely and on time, you are building your credibility or “creditworthiness” in the financing industry. Having a good payment record enables you to gain access to more financing institutions, higher loan amounts, cheaper rates, and longer loan terms, and gets you approved faster. Failing to pay for your loan will deny you these advantages and most financing institutions will know through their credit investigation process. Thus, your reputation as a good borrower is on the line.
Lastly, if possible, pay more than your monthly installments. It will help you ease future payments (lower the amount on succeeding monthly payments) or close your loan account ahead of time (financing institutions may give you discounts for early payments). This will not only further enhance your reputation as a borrower but will also ease your financial responsibility.
