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Microloans: A Quick Microfinancing Solution for Your Various Needs

Introduction

Saving money is difficult for most people because monthly wages are often just enough to cover everyday expenses and bills. Even if individuals can set aside a small amount of money, it may still take some time to earn enough for large purchases, whether essential or not. In cases like these, financing options, such as loans, may be the best recourse to obtain the necessary funds.

What Is a Loan?

A loan is a sum of money that is lent to another party. The full amount of the debt must be repaid in the future, including any interest charged by the lender. Recipients may also be asked to provide collateral before any funds are exchanged.

Loans may be given to individuals, companies, and even governments to help them cover planned and unplanned costs. Those in need of additional funds may acquire loans from banks, corporations, and other financial institutions.

What Are Loans Used For?

One of the common reasons consumers apply for loans is to cover large purchases and general living expenses. Loans are also common for individuals who may want to start their own businesses or grow their brands. To meet the financial needs of their customers, most institutions offer a wide variety of loan programs.

Types of Loans

All loans are categorized as either secured or unsecured. The former refers to loans that require collateral, while the latter does not. Since unsecured loans do not require collateral, they tend to have higher interest rates because of the risks.

Personal Loans

This is a highly versatile type of loan because it can cover the costs of medical emergencies, vacations, college tuitions, relocations, and much more. It is also common for consumers to get personal loans in the Philippines to consolidate their debts.

Salary or Payday Loans

These loans are short-term financing options that offer small amounts of money, which are typically due by the borrower’s next payday. While these loans may be helpful for emergencies, they could potentially lead consumers deeper into debt because of high interest rates and additional fees.

Calamity Loans

Individuals who live in areas under a state of calamity can take advantage of these loan programs to ease the financial burden caused by disasters. These types of loans are typically offered by government agencies.

Auto Loans

Consumers can get auto loans in the Philippines to purchase new or used vehicles. These financing options are usually offered by car dealerships, banks, and other lending institutions. For these types of loans, the vehicle being bought is also used as collateral if the borrower misses payments.

Home Loans

People planning to purchase houses, condo units, or empty lots can benefit significantly from a home loan. This financing option makes home-buying more accessible to average consumers because it provides them with the funds they need to buy or build a place to live. Some home loans in the Philippines can also be used for property renovations or additions.

Gadget or Appliance Loans

These types of loans are specifically used to purchase electronics and appliances, including computers, mobile devices, refrigerators, and ovens. Gadget or appliance loans usually have shorter payment terms that range from 6 to 24 months.

Credit Cards

Every transaction made using a credit card is essentially like taking out a small personal loan that must be repaid next month. If the balance is not paid in full, the credit card company may charge interest and additional fees.

Unlike traditional loan programs, credit card plans often come with various benefits and rewards for the purchases made. Some credit card companies also promote zero-interest periods as an incentive for consumers to apply for their plans.

Business Loans

Small business owners often apply for loans to keep their establishments up and running. There are a variety of business loans that provide these owners with the funds needed to pay for daily expenses, rent, equipment, and more. These types of loans are also typically used to start new businesses or expand existing ones.

What Are the Advantages and Disadvantages of Getting a Loan? 

Loans give consumers quick access to cash that they may need for immediate concerns. These financial products also allow individuals to make nonessential transactions that could help increase their quality of life.

However, applying for loan programs can be a complicated process with a lot of paperwork and requirements. High interest rates could also potentially increase the borrower’s debt. Aside from these, loans are not easily accessible to low-income individuals because they do not meet qualifications set by lenders. This inaccessibility is what led to the rise of microfinancing options, such as microloans.

What Is a Microloan? 

Much like traditional loans, microloans are sums of money that must be repaid to the lender. The main difference of this financial product is the amount of funds given to the borrower. These loans are typically smaller because they are meant to help low-income or disadvantaged individuals with their financial needs.

Microloans also typically have simpler application processes and more flexible requirements compared to traditional loans. These qualities make microloans much more accessible and convenient for those in need.

If you’re looking for microloans in the Philippines, turn to Cebuana Lhuillier! We offer a variety of programs to assist you with your financial needs. Whether you need money to pay for a hospital bill or a new phone, you can rely on us to give you the funding you require.

How Does a Microloan Work? 

These microfinancing options work just like traditional loans. However, they are usually provided by microlending companies instead of banks. Traditional lenders, such as banks, often focus on making a profit, and microloans are not considered profitable because of the various risks for the lender. On the other hand, microlenders aim to develop the informal sector by giving low-income individuals and households access to additional funds.

What Are the Differences Between Microloans and Traditional Loans?

Amount of Funds

Microloan programs typically offer smaller amounts of money to borrowers, which makes them excellent solutions for urgent payments, such as hospital bills and vehicle repair fees. In the Philippines, Cebuana Lhuillier offers microloans for as low as 5,000 PHP.

Interest Rates

Interest rates for microloans tend to be higher than traditional bank loans because of the risks they pose for lenders. However, since the loaned amounts for these programs are smaller, they are easier to pay back. This means that an individual pays less overall interest if the microloan is repaid early.

The interest rates for Cebuana Lhuillier microloans range from 4% to 10% per month.

Loan Terms

Microloans typically have shorter repayment terms because lenders only offer a small amount of money. At Cebuana Lhuillier, borrowers are expected to repay the loaned amount within three to four months, depending on the loan they get.

Microloans in the Philippines

The microfinancing industry in the Philippines has been growing steadily over the years because of its accessibility to minimum wage earners. The Bangko Sentral ng Pilipinas (BSP) reported a 32% increase in microloans from 2017 to 2019. Based on this data, it is clear that Filipinos are looking for more affordable alternatives to traditional financial products.

As part of the government’s advocacy for financial inclusion in the country, the BSP has implemented several regulations to ensure that microfinancing institutions continue to provide affordable options for low-income households and individuals.

Since microloans are targeted towards people in the informal sector, application processes are often simple and easy to understand. Individuals interested in applying for loans typically only need a valid government ID and proof of financial stability, such as payslips, utility bills, or statements from current loan accounts.

These microloan programs also tend to have flexible repayment terms to give recipients adequate time to pay back the money they borrowed.

Who Should Get Microloans? 

Traditional lenders are often not inclined to accept loan applications from low-income individuals because of the lack of information on their credit history and ability to provide collateral. Because of this, microloan programs serve as the best option for people who do not qualify for traditional bank loans. Microloans allow those in underserved communities to gain immediate access to additional funds that can help pay for their urgent needs.

Aspiring entrepreneurs who want to jump-start their businesses also benefit greatly from microloans because it allows them to acquire the capital they need. Additionally, microloan programs provide small business owners with money that can help further the growth and development of their companies.

What Are the Advantages of Getting a Microloan?

Fast Approval

Since microloans are often used by people who need emergency funds, microlending companies tend to approve applications within a short period of time. Cebuana Lhuillier has an easy application process, so you don’t have to worry about wasting valuable time in long lines.

Fewer Complications

Because microloan processes are simplified, complications are less likely to happen. These financial products are specifically designed to make repayments easier for borrowers so that they do not fall into debt.

Easy Eligibility

Microlending companies typically do not need a lot of requirements for loan applications. Potential borrowers do not need credit histories or high credit scores to be able to acquire the funds they need. At Cebuana Lhuillier, individuals applying for microloans can simply provide valid identification and proof of financial stability. However, those applying for business loans need to present additional legal documents, such as business licenses and registrations.

More Opportunities

According to Plan International Canada, families who receive microfinancing are “less likely to pull their children out of school for economic reasons.” This means that microloans can help households improve their quality of life and potentially lift themselves out of poverty.

Microloans also allow entrepreneurs to establish their businesses and keep them operational. The establishments they put up can also create job opportunities for other individuals in their local communities.

Essential Things to Remember Before Applying for a Microloan

Taking out a microloan is a decision that should not be taken lightly. Before you even consider your options, you should determine if a loan is really necessary for your situation. If there are other solutions to your financial concerns, you shouldn’t disregard them just because a microloan seems more convenient.

Research Your Options

The most convenient microloan programs are not necessarily the best options available to you. It is important to look at offerings from various microfinancing institutions and traditional lenders to see how each financial product can benefit you. Even if you think you won’t qualify for a specific program, it could still be worth applying to.

Compare Your Preferred Microloan Programs

Once you’ve narrowed down your search, compare the terms of each program. Take note of how the loan amounts, interest rates, and repayment periods can affect your ability to pay back the loan. You should also try to find out if lenders charge any hidden fees. After studying the specifics of each microloan, choose the one that best meets your needs.

Prepare Requirements

When you’ve finally decided which lender to go to, prepare the necessary documents before filing your application. The most common requirements include government IDs, financial documents, and cash flow statements. In case the lender requires collateral, you should also prepare the necessary assets.

Where To Get Microloans in the Philippines

No matter where you are in the Philippines, you can rely on Cebuana Lhuillier to provide you with excellent microloan programs. We have around 2,500 branches nationwide, which allows us to provide highly reliable financial services to clients throughout the country.

All of our microloan programs have simple application processes and minimal requirements so that you can quickly acquire all the funds you need. Our programs also have flexible terms to make them more accessible to you.

To make the application process even more convenient, you can apply for any of our loans through our website. We also have a five-point application for the disbursement process that ensures all our services are delivered on time.

What Kinds of Loans Does Cebuana Lhuillier Offer?

Under our microloan programs, we provide Lucky Loans and Happy Loans. The former is offered to registered entities and small to medium enterprises to help them achieve their business goals. On the other hand, Happy Loans are personal loans in the Philippines that allow individuals to get money for their necessary expenses. We also offer Gadgets Loans for people who want to get funds to pay for various electronics or appliances.

Cebuana Lhuillier also offers exceptional home loans and auto loans in the Philippines. Whether you want to buy a new house or car, renovate your existing property, or have your vehicle repaired, we have a loan program that meets your needs.

Aside from these programs, we offer Agricultural Loans for small agricultural businesses. These loans are perfect for farmers who want to increase their resources and develop their professional expertise.

Employee Salary Loans are also exclusively available for all regular employees of the PJ Lhuillier Group of Companies.

Conclusion

With a wide range of innovative microfinancing options available in the Philippines, you no longer have to worry about not having access to essential financial services. Taking advantage of these products can help you take another step toward achieving financial freedom.

You can apply for a microloan if you need emergency cash or want to invest in ways to boost your quality of life. If you’re an aspiring entrepreneur, you can also finally get the money you need to start your business and improve your financial situation. Whatever your reason for getting a microloan, you can rely on Cebuana Lhuillier to make the process as simple as possible.

We have decades of experience in the industry, so you can trust that we have the knowledge and skills to help you find the right microloan program for your needs. Our team will work closely with you to give you a better understanding of our financial products and assist you in determining the best one.

Feel free to get in touch with us today to learn more about our loans and microloans. You may also reach out to us for information about our other financial services. We will be more than happy to address any of your questions or concerns. Our team looks forward to serving you!