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Choosing the right loan for beginners

Loans are great for serving a number of purposes. They come in handy for purchase of big ticket items, or a means to buy your dream house or car, or simply as a buffer for emergency cash needs.

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Loans are great for serving a number of purposes. They come in handy for purchase of big ticket items, or a means to buy your dream house or car, or simply as a buffer for emergency cash needs.

However, applying for a loan for the first time can cause confusion, to say the least, and can come with serious financial consequences. To set you off to a good start, eComparemo, the country’s largest online financial supermarket, guides you to choose the right loan for you.

Types of loans

Personal Loan

Personal loans are usually unsecured loans, which means it’s based purely on your credit score and does not require any collateral unlike secured loans. The interest rates may range from 1.2% to 8%, depending on the financial institution, and payment terms are typically shorter, from 6 to60 months.

Car Loan

Car loans are for people who don’t have enough cash to shoulder the full purchase of a vehicle. It has flexible payment terms of 3 to 5 years. It’s easy to apply for a car loan–just submit valid IDs and proof of income to get pre-approved. It may require you to have the down payment for the car to get approved.

Home Loan

Housing loan interest rates are decided between you and the financial institution, with payment terms ranging from 5 to 30 years. The lender maintains property rights as collateral, and an appraisal fee typically applies.

OFW Loan

OFW loans work similarly as personal loans, but are specifically targeted at overseas Filipino workers (OFWs) with valid contracts. A co-borrower or immediate relative based in the Philippines is required. It usually has flexible payment terms to accommodate the specific needs of OFWs and their families.

Credit Cards or Cash Advances

Cash advances are short-term loans with higher interest rates and is typically paid for the following month. Some credit card companies offer longer terms from 3 to 12 months. The amount you can borrow depends on your credit limit.

Business Loan

Business loans can be used for a new business or the expansion of an existing one. Examples are line credit, equipment loan, and conventional business loan. Submit your business registration and tax documents to apply. Terms depend on the nature of your business and the agreement between you and your lender.

For more information, please visit eComparemo.com.

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