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Personal finance can be confusing at times and with more loan products and borrowing options available to the consumer than ever before, it’s easy to become overwhelmed with the sheer volume of information that’s out there. In this article, we challenge some of the most common myths about salary loans in the Philippines.

1. Salary Loans Are Always Expensive

Though paying off a high interest rate salary loan over a long period of time is inevitably more expensive than a fixed rate personal loan or credit card, this because loans of this nature are designed to be used in the short term. The quick approval rate and fast processing times of salary loans in the Philippines means that finance providers need to ask for a higher annual percentage rate of interest. Unlike personal loans, salary loans require fewer checks and are available to a broader cross section of people. The increased interest rate reflects the fact that this kind of credit is designed as a short-term solution, rather than as a long-term funding option. Providing they are used correctly; salary loans don’t have to be the most expensive option. The key is to resist the temptation to pay off the minimum amount only, as this can make things for more costly in the long term.

2. They Damage Your Credit Rating Permanently

Though applying for a salary loan in the Philippines can trigger changes to your credit rating, providing you pay back what you have borrowed within an agreed timeframe and avoid default charges, will be able to redress the balance quite quickly. The only time this type of loan is likely to cause serious problems for your credit rating is if you consistently use them, despite already being in significant debt to other creditors. This practice should be avoided as it can take longer for your credit score to recover if you keep increasing the amount of your short-term debts. Generally speaking, after 3 to 5 years of responsible financial behaviour, credit scores are likely to be restored or even increased to a higher level. Just remember that salary loans in the Philippines are designed for short term use, not as a regular means to supplement your income.

3. Loans of This Type Are for Large Purchases and Treats

The way salary loans are used makes a real difference to how they can impact on the rest of your life. As they are still a relatively new invention when compared to the more commonplace personal loan, some consumers can be unsure of how to use them correctly. Unlike credit cards and personal loans, this style of borrowing should be seen as a last resort and a kind of safety net when it comes to covering the cost of everyday essentials that your salary can not cover. As interest rates are substantially higher than any other type of credit, those who choose to use salary loans to make ends meet will need to make a solid plan that allows them to repay what they have borrowed as quickly as possible. Not doing so will mean that you will end up paying considerably more over time. Always consider personal loans or credit cards if you are looking for a way to finance a large purchase as salary loans are not really designed for this purpose.

4. All Salary Loan Providers Are the Same

Though there may be more companies to choose from than ever before in 2020, not all loan providers are the same. When you’re considering taking out a salary loan, the chances are that you’re struggling with money and are eager to find a solution. This means you could be vulnerable to sneaky advertising tactics or worse, unlicensed or unregistered lenders who operate outside of the law. Though interest rates are unlikely to vary too much, it makes sense to do a little comparison between companies before you decide to go through with an application. Terms and conditions can be very cleverly worded so make sure you read through everything you are expected to sign or agree to ensure you fully understand what you are signing up for. Hidden penalty charges or sudden changes in the percentage of interest you are expected to pay can be triggered by missed or late payments, so always be mindful of this.

5. They Are Aimed at Everybody

For young people, those with no experience of borrowing or people without a sustainable income, salary loans are not usually a good idea. Though they can be extremely useful when trying to make ends meet in times of financial hardship, they aren’t really designed for first time borrowers who don’t understand the way interest rates can impact on the overall amount that needs to be paid back. Similarly, those who are looking for funds to make a large purchase or investment such as a new vehicle or business should consider personal loans or credit cards before they consider borrowing from a salary loan provider. In the Philippines, approval rates for this type of loan are very high, but this means it can sometimes be a little too easy to get yourself in to unmanageable debt.


Though we would always advise caution and careful planning when it comes to short term borrowing of this type, it’s important not to listen to myths and hearsay when it comes to salary loans in the Philippines. There may be an element of truth to all the five points on our list, but providing you use them correctly, this type of loan can be an effective way of covering the essentials in your life, even if your salary doesn’t quite stretch far enough. The key is to make sure you have a solid and realistic plan to repay what you owe over a time period that won’t cause you any long-term financial difficulties.

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