Boosted by the rise of smartphone and internet use, digital lending has also grown exponentially. The government even plans to convert the Overseas Filipino Bank as a digital lender expanding its reach to 10 million Filipinos overseas. The massive growth came with a significant toll on lending standards leading to the closure of 19 illegal online lending firms as ordered by the Securities and Exchange Commission (SEC). The order was made in connection to complaints on unreasonable terms and conditions imposed by the firms. To help borrowers land in the hands of the best digital lender in the country, GoBear has come up with a list of things to consider before grabbing that quick cash.
1. Online lenders don’t do rigid credit checks
The fact that they can provide loans in as fast as 24hours, online moneylenders do not conduct credit checks. This will be very helpful to those who have a problem with their credit scores and are continuously denied credit by the banks. Anyone with a smartphone and valid government-issued IDs can apply, regardless of his or her credit score.
And since no strict credit investigation is conducted, the processing of loans is fast, and borrowers can get feedback even hours after their application.
2. Digital lending offers concise loan terms
Most mobile lending apps offer loan tenor from 15 days up to three months. The problem with very short loan tenors is that the interest rates imposed are for 15 days only as compared to usual personal loans, which cover the entire 30 days of the month. This leaves digital lending with very high-interest rates, which are computed and applied daily.
Another issue with very short loan tenors is that you won’t have enough time to prepare for payment. You might need to wait for the next payday before you can settle the amount. And by the time your money is ready, your payables might have already doubled up due to the interests imposed.
3. There are upfront payments
When you borrow from online lenders, expect that you won’t get the full amount. Chances are you end up receiving almost half of the money because there are fees deducted from it. Make your initial calculations. If the net receivable amount will still not be enough to cover for your emergency need, then mobile lending might not be suitable for you.
4. You need to provide many character references
Character references are used by lenders when conducting background checks. However, modern mobile lending companies, especially those shut down by SEC, have redefined character references. These firms contact the people you named to inform them that you have not paid your debts yet. Sometimes, they, too, are being harassed by the firm’s representative.
Be careful when giving out names as references. As much as possible, ask for the person’s permission before giving out his name to the lender.
5. Some disbursements do not reach the borrower
Most online lenders release funds through your nominated bank accounts while others via third-party payment centers like Cebuana, PayMaya, and Western Union. There will be instances when the loan is already reflected in your account, even when you haven’t received the money yet. There are also times when the money was already disbursed, but it wasn’t you who received it. The problem worsens when the lender already imposes the interest charges on day one, even when you received the money on day seven.
When choosing an online lender, make sure that disbursement processes are organized and systematic.
6. Some lenders aren’t available on your smartphone
Digital lenders allow you to borrow money by downloading the app. However, there are times when the app is only available either on GooglePlay or the AppStore. You might want to know which one is available on your phone to make sure that you can download the app and monitor your account regularly.
7. You can only borrow small amounts
Online lending lets you borrow cash from Php3,000 to Php10,000. You might need to check your emergency first before grabbing any offers because you might not be approved for your desired loan amount. First-time borrowers need to prove their worthiness before they can renew the loan and apply for a loan amount up to Php50,000. If your desired loan amount reaches more than Php30,000, it might be wiser to opt for short-term loans from traditional lenders like banks.
What do you need when borrowing from digital lenders?
Compared to banks, digital lenders let you apply for a loan in easy steps. You don’t have to undergo the tedious application process for days or even weeks because all you need to do is:
- Download the app
- Login with your mobile number and complete your profile
- Pick the loan amount and payment terms
- Wait for the company’s feedback
- Receive your money
Emergencies are unavoidable, so most Filipinos would opt for easy ways to get money. Digital lending has redefined our loan culture by providing quick cash without the hassles. There are a lot of options out there, and the first thing you should do is to compare. In general, easy money comes with a lot of cons. Be careful with what you download and apply for. Know your rights and responsibilities as a borrower to make sure everything falls within legal bounds. When in doubt, check your choices through GoBear. We will help you choose the best short-term loan that’s right for your needs.