How to Get a Bank Loan in the Philippines

Last Updated – Nov 22, 2022 @ 11:32 am

Do you need cash urgently but you’re not comfortable asking your family or friends for help? A bank loan may be the perfect answer to your dilemma. 

Whether you want to fund your wedding, an emergency, or home improvement projects, a bank loan is a quick and relatively easy way to get the money you need in a hurry.

But before you rush off to the bank to apply for a loan, there are a few things you need to consider.

In this article, we will show you the steps you must follow when applying for a bank loan, as well as how to ensure the process is as smooth as possible.

Related: 9 Ways to Borrow Money in the Philippines

What is a Bank Loan?

A bank loan is an amount of money that you borrow from a financial institution. The loan is repaid through regular installments from your income or savings.

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Types of Bank Loan products in the Philippines?

In the Philippines, there are two kinds of bank loans you can apply for. These loans can either be secured or unsecured.

Secured loans are secured with collateral. This means that you must use an asset to guarantee the repayment of the loan.

These assets can be properties like land, houses, or cars, among many others. If you fail to repay the loan, the bank has the right to seize the asset and sell it to recover its money.

Meanwhile, unsecured loans are loans that do not require you to place any collateral. As such, these loans usually involve smaller amounts of money.

When applying for a loan, you can either go for a consumer or commercial loan. Here are the different loans that fall within these umbrellas.

Consumer Loan

A consumer loan is a loan used for personal use. Here are the different types of consumer loans you can apply for in the Philippines.

Personal loan

As the name implies, this refers to a loan for personal use. These loans are secured by personal assets like your car, house, or salary – but it can also be unsecured.

You can use a personal loan for anything like paying for a wedding, medical expenses, school and tuition fees, or even a wedding. 

Student loan

A student loan is meant to finance education. It is designed to help students who need assistance in paying tuition or other related expenses but don’t have enough money to pay for it. 

Home loan

A home loan is a type of loan designed to help you buy a new home or improve your current home. 

Auto/motorcycle loan

An auto loan is a type of loan designed to help you finance the purchase of a car/motorcycle.

Commercial Loan

A commercial loan is a loan used for business purposes. Here are the different types of commercial loans you can apply for in the Philippines.

Revolving line of credit

A revolving line of credit is a type of loan that allows you to access a certain amount of money regularly. As long as businesses do not exceed the limit, they can use this loan to pay for purchases.

Accounts receivable financing

An accounts receivable financing is a type of loan designed to help businesses get access to money fast. It is usually done by selling the company’s unpaid invoices to the bank. 

Fixed-rate loan

A fixed-rate loan is a type of loan that charges an interest rate that does not change for the entire duration of the loan.

Bills purchase line

A bills purchase line is a loan that gives businesses fast access to money, at a low interest rate. The company just needs to present their checks to the banks that are deposited in their name.

Therefore, they do not have to wait for the checks to clear.

Equipment loan

An equipment loan is a type of loan that helps you acquire, construct, or purchase a piece of equipment. These loans are usually short term and have a relatively low interest rate.

Micro Financing

Microfinancing is a type of loan used to help small businesses get access to finance. These businesses usually do not have enough assets or collateral to secure a loan.

Therefore, microfinancing is the best option for them. This loan also offers a long repayment period and a low interest rate, and it is easy to qualify for.

Related: Best Business Bank Accounts in the Philippines

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How much is the interest rate for loans offered by Banks in the Philippines?

The reported interest rate (per annum) in the Philippines is 6.542%.

This is still considered low, especially when compared to countries such as Armenia (12.22%), Azerbaijan (14.277), Sri Lanka (9.710%), Peru (11.517%), and Myanmar (14.500%).

However, it is higher compared to countries such as Thailand (5.415%), Taiwan (2.440%), Singapore (5.250%), Qatar (3.822%), China (4.350%), Canada (2.700%), and Japan (1.475%).

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Pros & Cons of Bank Loans

To help you decide whether bank loans are the right choice for you, we’ve compiled their advantages and disadvantages below.

Pros

Flexible use

A bank loan gives you freedom to choose how you spend the money given.

High loan amount

If you urgently need a large amount, you can apply for a large loan. However, you need to meet the requirements of your chosen bank.

Most loans don’t require collateral 

If you want to keep your assets in your hands and not grant the bank any collateral, you can apply for an unsecured loan.

Many banks offer this type of loan that doesn’t require you to put up any collateral.

Quick approval

If you’re in a hurry to get a loan and don’t have time to wait for weeks for the bank to approve your application, then a bank loan is for you.

Most banks are known to approve loan applications on the same day or less than a week.

Good way to build credit

By applying for a loan, you are actually helping your credit score increase.

As long as you keep on paying your loan on time and you don’t default, this is a good indication that you can be trusted.

Predictable monthly payment 

One of the most significant benefits of bank loans is that it is predictable. When you have a bank loan, you have to pay a set amount of money every month, without fail.

Some lenders even let you schedule the payments so that you will never miss a payment. This way, you can set up your budget.

Cons

High interest rates

When you take a loan, you must pay interest. This can vary depending on the bank you choose.

High fees 

On top of the interest, banks also charge you a processing fee of your loan application. They also charge you a late payment fee, if you fail to pay your loan on time.

This can be a deal-breaker for those who are on a tight budget.

Additional debt

When you take out a loan, you are accumulating more debt in the future. You might owe a lot of money, which can eventually add up to a significant amount.

Strict requirements

Banks are very strict when it comes to loan application requirements. Your application may be rejected if you do not meet the requirements.

For example, a bank loan may not be granted if you do not have an active job, or if you have a bad credit history.

Rigid repayment terms

Most banks offer loans with set terms and conditions. This means you have to make payments on time. If you fail to do so, you can have your loan taken over and have your assets seized.

It may hurt your credit score

If you fall behind on your payments or if you default on your debt, this may affect your credit score. As such, banks are not as likely to take chances on you in the future.

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Bank Loan Requirements in the Philippines

When you apply for a bank loan, the bank wants to make sure that you can give them their money back.

They will look at your income, debt, and credit history. In addition, they may also require you to submit some documents, such as:

• Valid Philippine government-issued, photo-bearing ID with signature
  • Passport
  • Driver’s License
  • Postal ID
  • Voter’s ID
  • Professional Regulatory Commission (PRC) ID
  • Taxpayer Identification Number (TIN)
  • ID issued by the National Council on Disability Affairs
  • Integrated Bar of the Philippines (IBP) ID
  • Government Service Insurance System (GSIS) e-Card
  • Social Security System (SSS) card
  • Senior Citizen card
  • Overseas Workers Welfare Administration (OWWA) ID
  • Overseas Filipino Worker (OFW) ID
  • Armed Forces of the Philippines (AFP), Home Development Mutual Fund (HDMF) IDs, or any ID from a Government office/Government-owned and Controlled Corporation
  • PhilHealth Health Insurance Card ng Bayan
  • National Bureau of Investigation (NBI) Clearance
  • Police Clearance
  • Barangay Certification
  • Company IDs issued by private entities or institutions registered with or supervised or regulated either by the Banko Sentral ng Pilipinas (BSP), Securities and Exchange Commission (SEC) or Insurance Commission (IC)
  • Seaman’s Book
  • Alien Certificate of Registration / Immigrant Certificate of Registration
  • Department of Social Welfare and Development (DSWD) Certification
  • Professional ID cards issued by Maritime Industry Authority (MARINA)
• DTI/SEC Business Registration Certificate
• Completed application form (from the bank)

For employed:

• Latest income tax return (ITR), BIR Form 2316

For self-employed:

• Latest ITR or BIR Form 1701
• Audited financial statements with independent auditor’s report and balance sheets and tax receipt

For foreigners:

• Alien Certificate of Registration (ACR)
• Valid passport
• Any valid proof of residency

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How to Apply (and Qualify) for a Personal Loan in the Philippines

If you’d like to explore the possibility of getting a bank loan, then you should know what to expect from the application process.

Here’s a step by step guide.

Step 1: Find out how much you can borrow and how much money you need

The first thing you need to do is to find out how much you can borrow. Banks can grant you a loan amount within a certain range.

If you want to make it easier for yourself, you can check your bank’s website. You can also call your bank to determine how much you can borrow.

It is also important to factor in how much money you need. Once you know these amounts, you can decide the amount you should borrow.

Take note that the amount you get may vary from the amount you need. For example, if you only need P50,000, it wouldn’t make sense for you to borrow P250,000 since you may have a hard time paying the interest.  

Step 2: Assess different loans and find the best one for your needs

At this point, you can check out different loan options. Banks offer a wide range of loan products, such as car loans, home loans, home improvement loans, quick online loans, and personal loans, among many others.

You can choose the loan product based on your needs and preferences.

Do not forget to compare different loan options. Make sure to check interest rates, processing fees, and loan amounts, among other key details. This will help you decide which loan fits your needs.

Step 3: Apply for the loan

Once you know the type of loan you want, you can choose a bank and apply for it. Make sure that all the information you provide on your application is accurate and you can provide supporting documents if required.

The application process may take a few minutes, or it may take a few days depending on the bank’s loan application process.

Step 4: Close your loan

After you are approved for the loan, the bank will prepare the final paperwork.

Make sure to review all the paperwork before signing anything. In this step, you will also be required to pay processing fees.

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Top Personal Loans from Banks in the Philippines

Check out the best bank loans with the lowest interest rates you can get in the Philippines.

Tonik Big Loan

Since it launched in the Philippines, Tonik has revolutionized how Filipinos do banking. This digital bank has a wide range of offers such as savings accounts with high-interest rates, quick loans, and installment loans.

Now, Tonik users can also enjoy Tonik Big Loan. 

With this digital bank personal loan, you can get as much as Php2.5 million and cash in on the value of your home. This money can be used to:

• Finish your home improvement projects
• Pay for a vacation
• Buy a new car
• Settle your tuition fees
• Start a small business.

You don’t need a credit card or credit history to apply for this loan.

• Monthly add-on interest rate: 1.0825% (12.99% APR)
• Loan amount: As much as Php2.5 million
• Processing duration: 30 minutes pre-approval, 7 days loan disbursement guarantee
• Loan terms: up to 60 months
• Processing fee: Php5,000

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Citibank Personal Loan

If you’re looking for a loan that could get approved in less than a day, this is worth considering. Citibank Personal Loan also offers low rates and great repayment terms of up to five years.

To apply for this loan, you must be 21 to 60 years old and must have a minimum annual income of P250,000.

• Monthly add-on interest rate: 1.26%, 26.9% annual contractual rate
• Loan amount: P100,000 to P2 million
• Processing Duration: 24 hours
• Loan Terms: 12 to 60 months 
• Processing fee: P1,750 

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HSBC Personal Loan

With the HSBC Personal Loan, you can enjoy low interest rates for the first 24 months. This is a great choice for people who want to apply for a loan to fund their education or pay off credit card debt.

To apply for this loan, you must be 21 to 69 years old and must have a minimum annual income of P168,000, or have a gross monthly income of P50,000 for self-employed, and P14,000 for employed. 

• Monthly add-on interest rate: 0.65% for first 24 months 
• Loan amount: P30,00 to P500,000
• Processing Duration: up to 5 working days
• Loan Terms: 6 to 36 months 
• Processing fee: P1,500

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Security Bank Personal Loan

Another personal loan worth considering is the Security Bank Personal Loan. It offers long repayment terms, and applications can be made online through its website.

However, this loan has a higher processing fee compared to other banks. 

• Monthly add-on interest rate: 1.39% to 1.89%, 37.53% annual percentage rate
• Loan amount: P200,000 to P2 million
• Processing Duration: 5 working days
• Loan Terms: 12 to 36 months
• Processing fee: P2,000

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BPI Personal Loan

This collateral-free loan is an incredible choice for Filipinos who are looking to borrow money with low interest rates. It also allows you to borrow up to 3x your monthly income.

To apply for this loan, you must be 21 to 60 years old. You must also have a minimum annual income of at least P240,000 or a gross monthly income of P20,000. 

• Monthly add-on interest rate: 1.20%, annual effective interest rate starts at 25.03%
• Loan amount: P20,000 to P2 million
• Processing Duration: 8 to 13 working days
• Loan Terms: 12 to 36 months
• Processing fee: P1,500

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Maybank Personal Loan

With this personal loan, you can finance travels, emergencies, and even tuition fees. To apply for this bank account, you need to open a linked bank account and provide a landline number.

You must be 23 to 66 years old. You must also have a minimum annual income of at least 300,000 or a gross monthly income of P25,000. 

• Monthly add-on interest rate: 1.3%
• Loan amount: P50,000 to P1 million
• Processing Duration: 5 to 10 days
• Loan Terms: 12, 18, 24, and 36 months
• Processing fee: P2,000

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RCBC Personal Loan

With this loan, you can borrow up to 1 million, and enjoy low interest and flexible terms. However, the approval may take a long time.

To be eligible for this loan, you have to be 21 to 65 years old and have a minimum annual income of P360,000 or a gross monthly income of P30,000. 

• Monthly add-on interest rate: 1.3%
• Loan amount: P50,000 to P1 million
• Processing Duration: 7 to 21 working days
• Loan Terms: 3 to 36 months
• Processing fee: 1% of the loan amount of P1,500, whichever is higher

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EastWest Personal Loan

Another collateral-free that offers a low interest rate is EastWest Personal Loan. With this loan, you can borrow up to P2 million. 

To apply for this loan, you must be between 21 to 65 years old. You must also have a gross annual income of P180,000, or a gross monthly income of P15,000.

• Monthly add-on interest rate: 1.49% to 1.89%, annual contractual interest rate starts at 31.51 for 12 months
• Loan amount: P25,00 to P2 million
• Processing Duration: 5 to 7 working days
• Loan Terms: 12 to 36 months
• Processing fee: P1,900

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CIMB Bank Personal Loan

Another competitive option is the CIMB Bank Personal Loan. This is a great choice for people who prefer digital applications.

All you need to qualify for this loan is to apply on your phone through the CIMB App. If approved, you’ll receive an email that contains your loan contract. 

• Monthly add-on interest rate: 1.12% to 1.95%, with an annual contractual rate of 24%, 30%, or 36%
• Loan amount: P30,000 to P1 million
• Processing Duration: 10 minutes application, approval in 24 hours
• Loan Terms: 12 to 60 months 
• Processing fee: P1.50 per P200 of the loan amount

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PS Bank Flexi Personal Loan

This low-interest loan is collateral-free and has a revolving credit line and fixed term. With this loan, you will also get an ATM card, and receive rebates under PD Bank’s rebate program when you make excess or advance loan payments. 

To apply for this loan, you must be 22 to 54 years old. Self-employed individuals must have a gross monthly income of P30,000, and P15,000 for employed.

Monthly add-on interest rate: Effective Interest Rate P.A. of 42.88% for 24 months (and 41.29% for 36 months)
Loan amount: P20,000 to P250,000
Processing Duration: 5-9 working days
Loan Terms: 24 to 36 months 
Processing fee: Handling fee of PhP1,500 or 1% of the approved credit line, whichever is higher

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Tips to Get Approved for a Bank Loan

This section will provide you with some tips to increase your chances of getting approved for a loan.

Be realistic in determining your loan amount

The most common reason why people fail to get approved for a loan is because they applied for an amount beyond their budget.

Before submitting your loan application, you should make sure that you can afford the monthly payments. Do not hesitate to ask loan officers for tips.

Make sure you meet the criteria

To get approved for a loan, you need to make sure that you meet the requirements such as age, income, and employment status.

Banks have strict requirements, so don’t get disappointed if you get rejected if you fail to meet their minimum requirements.

Ensure you have enough savings

When you apply for a loan, banks will check your monthly income against your current monthly obligations.

They will also deny your application if you don’t have enough savings to make your loan payments.

As a general rule, your savings must be equivalent to an amount that is at least twice the size of your monthly loan payment.

Review your credit report

Credit scores are vital and are important factors when banks decide if to approve your loan application. To increase your chances of getting approved, you should check your credit report and correct any errors. 

Have a steady source of income

You need to have a stable income before you apply for a loan so banks will have a clear idea of how much money you can truly afford each month. 

Get requirements ready

You will need to provide a lot of documents to prove that you are eligible for a loan.

Have all the required documents such as an updated employment contract, income tax return, and latest salary slips ready in advance. Remember that banks can ask for these documents at any time.

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Bank Loans in the Philippines FAQs

Here are the most frequently asked questions people have when applying for a bank loan.

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