There are tons of loan facilities available for OFWs that will suit your needs – from purchasing your first car to buying your new home to even putting up your own business. Whatever your needs are, one thing is for sure: you will always encounter the same loan terms in every application.
Before you apply for a loan, make sure you familiarize yourself with these terms and concepts:
Eligibility
This refers to the requirements you need to meet in order to qualify for a loan. Eligibility requirements vary from lender to lender. Nonetheless, the most basic requirements, especially for OFW Loan includes:
- At least 21 to 60 years old at the time of the loan maturity
- Overseas Employment Certificate (for both land-based and sea-based workers) or Seafarers Registration Certificate (for sea-based workers)
- Passport
- Working Visa
- Proof of Residence such as electric bill
- Valid and government-issued ID
- Employment Contract
There are several lending companies that accepts these requirements such as Balikbayad. Nonetheless, check the eligibility requirements needed by lending companies before you apply to speed up the processing of your application.
Interest Rate
There are two kinds of interest rates: fixed and variable or adjustable.
Fixed rate remains constant. This means if your initial rate is at 8%, it will remain 8% the entire duration of the loan, regardless of the changes in the market. On the other hand, variable rate is based on the prevailing standard market rate and changes over time.
The type of interest rate depends on the nature of your loan.
Security or Collateral
In the context of loans, security or collateral is any asset used to guarantee the payment of the loan. It can be a real property (land, house, or condominium unit), chattel (car), stocks, bonds, goods or fruits of the business, deposits, or any other assets with monetary value.
A collateral is necessary especially if you are applying for a housing loan or business loan. On the other hand, personal loans and credit card application are examples of unsecured loans and do not need collateral.
Read more about secured and unsecured loans here.
Loan Term
This refers to the duration of your loan in which you have to pay back before the term ends. Depending on your loan facility, loan term can be as short as 30 days to even 15 or 20 years.
Credit Standing
Also referred to as credit score, credit standing is your reputation for repaying or meeting your financial obligations. The higher and the better your credit score is, the more willing a lender will be in financing your cash flow needs.
Before you apply for a loan, it is important to look into your credit standing first. This will help you check whether you are credit-worthy or not. Don’t worry. There are many ways to help you boost your credit score and get your loan approved. You can learn more about it in this post.
Processing Fee
Every lending company charges its clients with a fee for the processing of loan application. This is called processing fee or loan application fee.
Some lending companies deduct the processing fee on the total loanable amount. For instance, if you borrowed P10,000, you cannot get the amount in full because fees were deducted. On the other hand, there are lending companies such as Balikbayad that deduct the fees on the monthly installment.
Payment Terms
This refers to the manner and mode of payment for your loan.
For convenience, most lending companies recommend automatic debit arrangement wherein your account is linked. Some require issuance of post-dated checks that will cover the entire amount including interests or remit directly to the lender’s corporate bank account.
Payments are also done in a monthly basis. Make sure that you are able to pay on time to prevent issues in the future.