Taking out a loan from your bank isn’t a bad idea if you have the right reasons for borrowing money. Understanding when to borrow money is crucial for managing finances and avoiding unnecessary debt.
Responsible borrowing begins by fully knowing what you're getting into. For instance, what are the uses of loans, and how are they different from credit cards? Unlike credit cards, which usually have variable interest rates and payments, loans are more predictable, allowing you to plan your budget and allocate a set amount for monthly disbursements.
Another difference is that credit cards fall under the category of revolving credit. This means you can use your credit card up to a specific limit, called a credit line. You can keep spending within that limit as long as you make monthly payments. Meanwhile, loans are given as a lump sum, which you repay through monthly installments until the loan is entirely paid off.
Here are the most common types of bank loans:
Personal loans generally come with fixed parameters in interest rates, monthly payments and repayment schedules. This helps you set clear expectations upfront. Moreover, personal loans are typically unsecured, which means you don't have to provide collateral. But even if your assets are in no danger of being seized by creditors, there are still repercussions if you don't repay your loan: your credit will drop, and your loan will be under default status.
* CBS China Bank Savings offers the Easi-Funds Personal Loans a cash loan with no collateral, giving you quick access to up to PhP1 million in cash.
Also called a mortgage, a home loan is used for purchasing homes and other real estate properties, such as lots, houses and lots, condominium units, and townhouses. It can also be used for home construction or renovation and repayment for a newly acquired property. In this loan type, the property functions as the loan security. Mortgages come at fixed or adjustable rates.
*Chinabank HomePlus offers affordable monthly payments and lets you choose fixed rates for one, three, or five years, protecting you from rate increases in the future.
This type of loan usually has lower interest rates than personal loans and is only used to buy a car. If you fail to make payments, the lender can take possession of your car to recover their losses. Like a mortgage, the lender maintains asset ownership until you complete your payment.
*Chinabank AutoPlus gives loans of up to 80% of a brand-new car's selling price. Light monthly payments can be made via auto debit or post-dated checks.
Some companies partner with reputable banks so they can offer salary loans for their employees. This type of loan uses the borrower's income as the basis for the loan amount and repayment terms. Monthly installments are typically deducted from the borrower's salary. Salary loans often provide competitive rates and flexible terms that are suitable for short-term financial needs.
Before securing a loan, you must be aware of your borrower responsibilities. These include making payments according to the accepted terms and schedule, constantly communicating with the lender, and fulfilling other obligations related to the loan.
Once you know how to be a responsible borrower, you can fully reap the advantages of borrowing money. These reasons will show how smart borrowing can help you reach your goals while staying financially stable.
Prioritizing your education means investing in your future. Borrowing money to fund your education allows you to acquire knowledge and skills that unlock job opportunities. Finishing college or undergoing specialized training can boost your earning potential because of better employment prospects.
With a strong resume and a solid educational foundation, you're better positioned for high-paying jobs that help repay your loans and improve your financial standing. Additionally, some careers require specific certifications or courses, which, aside from job placements, can lead to internships and networking opportunities that can enhance your career.
For most Filipinos, purchasing a home is the ultimate dream. This frees you from paying never-ending rent and lets you invest in your own property. As you consistently pay off your mortgage, you build equity in your home, which becomes a valuable asset.
Many consider real estate an excellent investment because of its steady appreciation over time. Your property's value can increase, potentially giving you returns if you wish to sell in the future.
Being a homeowner also provides security and stability for your family. Unlike renting, where your living situation is subject to landlord decisions and lease agreements, homeownership ensures your long-term living space.
Are you thinking of starting your own business and being your own boss? A personal loan can financially support your venture if you're a new entrepreneur. Immediate access to capital can fund startup costs, such as equipment purchases, leasing expenses, and starting inventory. A loan can give you total ownership and control of your business, as opposed to having investors who may have a say in your venture. If your company is already established, banks offer flexible business loans to meet your specific needs.
*Chinabank offers various term loans and credit facilities to help you grow your business.
Borrowing money for emergency expenses can be a good strategy for maximizing the advantages of loans. It gives you instant access to urgent situations, letting you address them without wasting time. This also prevents the problem from worsening and costing more in the long run. Crucial repairs, a sudden job loss, and expenses from accidents and natural disasters are examples of scenarios that merit a loan.
Instead of borrowing from friends or disreputable lenders, a loan from a trustworthy financial establishment may be a better option. With the latter, you get a formal repayment structure, letting you pay the loan in installments instead of a one-time sum.
Merging multiple debts into one loan streamlines your financial commitments, helping you manage payments easier and faster. With this strategy, you avoid late repayments and penalties, which save you money. Getting a lower-interest rate loan to pay off your current debts is more efficient and potentially boosts savings.
Debt consolidation is often used by those struggling with high-interest credit card debts. With this, the borrower obtains a fixed interest rate and an organized repayment plan, which makes it easier to fulfill their obligation. Make sure you compare interest rates and check your monthly repayment capacity so you can leverage this strategy's benefits.
Need to make a big purchase immediately? Aside from houses and cars, buying big-ticket items like large appliances and electronics necessary for your schooling, business or home requires significant amounts of cash. Businesses may offer installment plans for the goods they offer. Still, it pays to check if it's more cost-efficient to secure a loan and pay for the item in full, rather than making staggered payments.
Though saving is an excellent technique for acquiring high-value items, there are times when waiting to save means missing out on opportunities and favorable market conditions. This is especially true in real estate and stock markets, where time is of the essence.
Some medical emergencies require you to shell out a huge amount to ensure you and your loved ones undergo treatment without delay. Your health insurance may have limited coverage, leaving you responsible for out-of-pocket payments. Because medical bills tend to be substantial and unexpected, it can lead to financial strain if you try managing them in one go.
By taking out a loan, you spread out the total cost of treatment, ensuring that you or a family member receive much-needed care without compromising your financial stability.
Are you thinking of acquiring a loan? Here are some pointers to help you be in control of your finances.
Read and understand the loan agreement, which includes the terms and conditions. Here, you can confirm the loan amount, interest rate, repayment schedule, and any penalties and fees. It also helps to read up on lending laws. The "Truth in Lending" Act requires the lender to fully disclose the costs of the loan, including charges and interest rates.
If you currently don't have the means to repay your loan, it's a good idea to back out. Taking on debt without financial preparation can lead to missed payments and damaged credit scores. Only borrow what you can sustain within your means. If you're unsure about your capacity, delaying borrowing and seeking financial advice from an expert may be wise.
Lenders give varying interest rates, fees, charges, and repayment schemes. By shopping around, you can find the lowest available rates and friendliest terms, which lower the total cost of borrowing. Read reviews and ratings to see how responsive and transparent your targeted lenders are. Customer service may also influence your decision.
Ready to obtain your loan? Achieve your dreams with Chinabank’s consumer and business loans—all with convenient application, low interest rates, and easy payment terms.
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