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Business Finance
USES OF SHORT-
TERM AND LONG-
TERM FUNDS
INTRODUCTION
1. Pawnshops
2. Government non-bank financial
institutions
3. Lending Companies
4. Insurance
5. Ventures
Loan and Its Requirements
A loan is a financial arrangements where a borrower who receives
money from a lender agrees to repay the principal (the amount borrowed)
along with interest (add on rate) within a specific period of time. The loan
interest rates vary significantly based on the type of loan, loan repayment
terms, and the borrower's background.
1. Personal Loan
A Personal Loan is a type of loan from Banks that may or may not
require any form of collateral as security of payment. This is sometimes called
"character loan" which requires the consideration of the personality of the
borrowers by the lenders either as one of the valued customers or being a
good payor.
1.1 Types of Personal Loan
1.1.1. Secured - A secured loan requires the borrower to have some sort of
collateral as payment security for loan lenders. In cases of non-payment of the
loan amount by the borrowers, payment will be recovered from the collateral
either by using or selling it.
1.2. What are the requirements and eligibility for personal loans?
a. Must be a resident of the Philippines with a valid Philippine billing address.
b. Must be at least 21 years of age or older.
c. Must have an annual income that meets the requirements of the chosen
personal loan provider.
d. Must have a landline or a post-paid mobile phone under the account of the
borrower.
e. Must have at least two valid ID cards issued by government agencies or by
the employer.
1.3. Personal Loans Interest rates and fees
Depending on the bank or financial institution you apply with,
interest rates may range from 1% to 3% Moreover, some charge an additional
fee for the processing of your application. The processing fee varies from
P1,000 to P2,000 depending on the lender.
1.4. Personal Loans charges and payments
Banks and financial institutions offer flexible payment terms to
attract more borrowers but subject to what will be agreed upon by both
parties. The payment terms may vary within the range of 3 months to 1 year
and may be extended for the period of 5 years.
A penalty or late payment fee is being charged by lenders for non-
payment on time or in case of payment beyond agreed due date. Usuall, Banks
charge around 3% to 4% per month aside from the compounded interest rate.
2. Housing Loan
Another type of financing offered by a bank or a financial institution
to a borrower is housing loan.This can also be used for refinancing an existing
housing loan. Housing Loans are granted to homeowners and individuals who
want to have their own homes but do not have enough savings or liquid funds
to make immediate purchase a House.
1.1. Eligibility Requirements
a. Must be a Filipino citizen, For foreigners they are allowed to apply
as long as they submit acceptable visa like working visa issued
embassy officials, quotation immigrant Visa or sec 13A visa.
b. At least 21 years old without going over 65 years old upon loan
maturity.
c. Must have a minimum a monthly salary of P50,000.
d. Must have a source of income either from employment or
business.
e. For employment applicant, must have a regular working status
with at least 2 years of tenure.
f. For self-employed, must own a business for at least 2 years of
successful and profitable operation.
1.2. Documents Required
a. Completed and signed housing application form.
b. Clear copy of at least 2 valid ID with photo such as Company ID, SSS ID,
PRC ID, passport, driver's license.
c. For employed applicant: photocopy of latest ITR or income tax return,
original copy of certificate of employment, copy of at least 2 months pay
slip.
d. For self-employed applicant: validated photocopy of DTI or SEC
registration, audited financial statements for the past 2 years, and other
proof of sources of income from self-employment.
e. For foreigners: validated photocopy of Alien Certificate of Registration
(ACR) indicating Visa status as Permanent Immigrant, or Alien Employment
Permit (AEP), or Visa ID.
3. Auto Loan
A car loan allows an individual to buy a vehicle that is
more expensive than what could be afforded in a lump sum, or cash
purchase.
These are many ways by which consumers can make use of an auto
loan:
a) Purchase a new used vehicle through bank financing and pay it
back for a specific period of time, which is usually in equal
monthly amortization of principal interest.
b) Reimburse the cost of brand new vehicle within 30 days from
purchase
c) Get cash loan by using your existing car as collateral
d) Refinance an existing auto loan