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Salary loans are a quick and easy way to get cash quickly when you need it the most, but they should always be used responsibly. Here is Asteria’s top 10 tips for salary loan customers in the Philippines.

1. Understand What Salary Loans Are

Unlike property loans, or personal loans, salary loans in the Philippines are designed to be used as a short term means of supplementing your income until the next time you receive a payment. As a way of making sure your family always has groceries and essentials in the house, they can be perfect, but they should never be used for anything other than this purpose. The interest rates are generally very high as most people are likely to be approved for this type of loan. Always bear this in mind before agreeing to anything or signing documentation.

2. Only Ever Borrow What You Really Need

No matter how sensible you might think you are when it comes to money, when somebody presents you with an opportunity to get cash quickly, it can be very tempting to take as much as you can. If you want to use salary loans in the Philippines effectively, always avoid this way of thinking. The best way to prevent interest spiralling out of control is to see this transaction to borrow from yourself. As soon as you receive your next salary payment, ensure that you use as much as you can afford to make your repayments.

3. Make a detailed plan of what the money will be used for

If you need to pay for new clothes for the kids or perhaps a weekly grocery shopping trip, try to estimate how much this will be by doing some research. Allocate specific amounts for every area your salary is not currently covering and be as conservative as possible if you can. The less you borrow, the less you will have to pay back.

4. Compare Lenders in Detail

Every lender is different, and they all come with their own set of drawbacks and advantages. In the Philippines, legitimate lenders are regulated and controlled by a central agency. If you find an offer or an interest rate that seems unusually low, always check that your dealing with a legitimate, legal lender. Illegal money lenders use unscrupulous practices to trick customers in to agreeing to terms that are unfair and are also potentially dangerous. Responsible lenders will have good customer service, clear information about their products and they will also be able to answer any questions confidently.

5. Prepare to live on less for a while

This is never a prospect that anybody likes to think about but if you want to pay off a salary loan quickly and without incurring too much interest, it’s the most sensible approach to take. After you have taken out your initial salary loan, investigate the areas of your daily life where you can realistically reduce spending. Going without a streaming service or a couple nights out can make a surprising difference to the amount you can afford to pay back each month. Though you probably won’t enjoy it at the time, you will thank yourself when the loan is paid off quickly and cheaply, rather than taking years and costing you more than you can afford.

6. Understand Penalty Charges

If you miss a payment on a loan that you have agreed with a lender in the Philippines, you are likely to be charged a penalty fee on top of the existing amount you owe. This can come as a nasty shock to some people, especially if they have rushed in to taking out the loan without considering if they can really afford to pay it back. Ensure that you ask about penalty charges if they are not clearly mentioned on the website or anywhere in the information you are given. All legitimate companies will be happy to explain how their policies work.

7. Use Apps to Manage Your Money Effectively

Once the loan has been approved and the money is in your account, if you aren’t careful, it can end up being spent on things you don’t really need. Contactless payments, impulse buys and direct bank transfers you may have forgotten about can end up eating into your overall amount, so consider using apps to earmark specific amounts of funds for essentials. There are range of free apps available and many of the newer banks provide this service as standard.

8. Make Your Money Work for You

If possible, try to use some of your salary loan in a way that will help you to generate an income or financial return. This could be in the form of an investment, such as repairing a vehicle or buying a laptop for a home business, but it could also be worth looking at things like reselling items online or buying low risk shares. This is only really an option if you have already accounted for your essentials, but it can be a way to make some of the repayments a little more easily.

9. Never Borrow When You’re Out of Work

Payday or salary loans have their name for a good reason. If you aren’t working and have no means of generating an income, never consider using this type of loan as a substitute for working. Most providers will be reluctant to offer you a loan if you can’t demonstrate that you have a steady income and those that do are likely to charge extremely high levels of interest. Use alternative options if possible and always remember that you can’t borrow your way out of debt.

10. Plan Repayments in Advance

The last thing you want is to be worrying about where your next repayment instalment is going to come from. Deliberately set aside a portion of your salary each month so that you know for sure that you can comfortably pay back what you owe while still covering the basic cost of living.

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