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When you are searching for credit in the Philippines, you will notice there are two distinctive types of loans that are usually available to non-residents or ex pats. These are Salary Loans, characterised by their high interest rates, swift approval times and efficient transfer of funds and personal loans, which are designed to be paid off over a longer period. Both products are designed for very different purposes. In this article, we discuss how to effectively use a salary loan in the Philippines.

Always Consider Your Alternatives First

Salary Loans are generally considered to be a last resort for most people and should not really be used as a means of long-term income. If there are other ways you can potentially increase the amount of money you have coming in each month, it’s a good idea to try these first before you make any applications. Salary loans can affect your credit score negatively and missed repayments can be very costly, so unless you’re sure this is your only option, its generally a good plan to consider things like side jobs and tighter budgeting as an alternative before you decide to borrow

Allocate Funds for Essentials, Not Luxuries

When you’re using your salary loan in the Philippines, it should never leave you worse off than when you applied, so always make sure that you are spending responsibly. Things like food, transport, housing costs, medical bills and other essential life expenses should be covered first, and any luxury purchases should be kept to an absolute minimum. Before you start spending, divide up the amount you’ve borrowed and allocate specific funds for specific areas of your life. For example, if you borrowed £1000 and need to feed a family of 4. It would make sense to use at least £200 to £300 of this on food. Similarly, if you know you are going to struggle to pay your electricity bill, earmark the amount you owe, plus next months bill if you can. Ultimately, you’re borrowing this money with a view to paying it back as soon as possible, so if you don’t happen to use it all, that’s something of a bonus.

Remember to Account for Interest

Salary loans are very rarely offered with a low interest rate and you certainly won’t find any at 0%. Its easy to forget how much a high interest rate can impact on your monthly finances and if you’re not careful, things can spiral out of control. When you set up your repayment plan, try not to get tempted by minimum payments. As a short-term option, it will save you money, but in the long term, it will cost you a lot more. You should be aiming to pay off both the interest and some of the amount you owe as quickly as possible, so try to budget a few months in advance at the very least.

Don’t Spend What You Don’t Need

When people apply for Salary loans in the Philippines, they can sometimes end up borrowing a little more than they though they needed. The temptation here is to treat yourself to something nice like a holiday or a few meals out at some top restaurants, but this isn’t generally a good idea. Once you have payed for everything you intended to use the loan for, put any excess in to a savings account and use it to pay off the outstanding total amount. This short-term sacrifice will always pay off and though you might feel as if you are denying yourself the joy of spending, you will thank yourself for your restraint a little further down the line.

Never Borrow More Before You’ve Paid Off Your Existing Salary Loan

When you’re in financial difficulty, it can be extremely tempting to continue borrowing to keep up with repayments. This is not a good tactic and will have severe consequences for your long-term financial stability. Always make sure that you pay off the highest interest debt first. Salary loans are usually much more expensive than standard personal loans as the interest rates are much higher. Borrowing more might seem like a good idea at the time, but unless you can increase your income, it is not something any lender would recommend as a solution to long term debt.

Shop Smart and Spend Carefully

Every year, people waste thousands on by buying products they don’t need or overpaying for things they could find cheaper elsewhere. Though your salary loan will allow you access to funds quickly, that doesn’t mean you have to spend it all right away. Try to get the best value you can from any loans that you take out by getting as much for your money as possible. Buying second-hand clothes, cars and electronics is a tried and tested method of saving. The loan is one step towards solving your financial problems, but you will also need to act as responsibly as possible, too. There’s no need to buy brand new if you don’t need to and switching to non-branded household products such as tinned goods or cleaning materials can reduce your shopping bill considerably. Instead of sticking to your old spending habits, try to make a few changes and tighten your belt. It might mean going without a vacation one year or perhaps eating at home more often, but that’s a small price to pay for the peace of mind that comes with long term financial security.


Salary loans can be a quick, effective way of getting cash when you need it fast, but to make them work for you, its essential to understand that they are to be used as short term solutions. Planning and budgeting coupled with a little restraint and an understanding of interest rates can make using this type of credit a simple, painless and easy process. Providing you stick to these rules, there’s no reason you can’t benefit from borrowing a little extra until pay day.

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