Reader Mail #20: Personal, Housing and Business Loans in the Philippines

Updated: August 5, 2011

I usually receive around three text messages every week from numbers I don’t know – all offering personal loans from different commercial banks.

Sometimes, their offers are very tempting… terms such as “no collateral”, “instant approval” and many others would really make you consider applying.

I myself have wondered at times how I could leverage these loans to make money.

Fortunately (but unfortunate for the agents), my emergency fund have always been a reliable source of “instant cash” whenever I really needed money.

But don’t get me wrong, I have nothing against these loans – in fact, I recommend availing them but only if you have the right reasons.

And that is what today’s Reader Mail is all about.

Featuring, three questions about three different types of loans sent to my email, which I now share with you.

From Mr. S

Hi. Thanks for your wonderful blog. I’d like to ask if it would be wise to avail a personal loan to use as capital for a business. Do you think that’s financially smart?

In my opinion, personal loans should be one of your last options if you need money because they tend to have high interest rates. But more than that, it’s really important to consider how you’re going to use the cash.

For luxuries and other non-essentials, I would immediately say that it’s a bad idea. It’s indeed unfortunate that some people avail of these loans to buy something they just wanted and not really needed.

In your case, however, I would say that it depends on the type of business you’re planning. Draft a business plan first if you don’t have one yet. This will help you see exactly how much money you’ll need.

More than that, tabulating your income projections would give you a better answer to your question because you’ll have a more realistic estimate that will tell you if the business can make the monthly payments of your personal loan.

From Mr. D

Good day sir. I’d like to ask if you can use Pag-ibig loans for other purposes other than buying a house. I’m planning to have our home renovated soon. Thanks in advance.

The short answer is yes. If you will check the Home Development Mutual Fund website here, you’ll read that aside for the purchase of real estate, you can borrow from Pag-ibig to finance construction or completion of an owned property which I believe also includes home improvement.

I am not very well versed with the rules and regulations so I highly advise that you call their office to get a more accurate answer to your concern.

Moreover, aside from Pag-ibig, you might also want to consider house loans from commercial banks because I believe that they also grant financing for these type of situations.

From Ms. T

Hello. I’m planning to start a business but I don’t have enough capital, so I’m thinking of applying for a business loan. Before I go to the banks, can you give me some pointers on how I should apply so I will get approved? Thank you.

Hi. The criteria of approval for a business loan varies from bank to bank but in general, a good credit history would be your most important asset here. Aside from that, a well-crafted business plan would also be important.

However, most banks tend to be conservative and are usually hesitant to approve business start-ups. My advice is to also look into other ways to fund your business.

Don’t be afraid to start small. Run your business for a few months, up to maybe a year. When your cash flow is good and stable, then you’ll be in a better position to get a business loan approval from commercial banks.

This is the end of another edition of Reader Mail. Please remember that I am not a financial consultant and the advise given are simply based from what has been successful in my own experience.

So please, don’t be afraid to share your thoughts and opinion regarding these matters below through the comments section.

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Photo credits: omaromar and wwworks


  1. Hello Sir Fitz,

    I also wanted to get personal or salary load to start a business but I have not done it yet. Nagdadalawang isip parin ako if I will pursue to get a loan or just save money to start the business I want.

    Thank you sa post na ito.

    God Bless po.

  2. KMBI (Kabalikat para sa Maunlad na Buhay) is an NGO (Non-Government Organization) which provides loans to Filipino Microentrepreneurs. For more of their services, you can check them out on the web at: Aside from their microfinance services, they give livelihood training to their clients, microinsurance and a Capital Build-Up which will teach their clients the value of saving up money.

  3. I would really suggest that before you decide to take out a loan. You need to first consult a financial adviser or a mortgage consultant. However, you should also ensure the credibility of the broker or adviser you want to deal with. It should be someone who really know the property market in your area or someone you know personally.

  4. Most Philippine banks will only provide business loans for businesses with more than 5+years of profitable operations, in additional to collateral and on top of that up-to 18% per annum interest rates. Its more practical to just use personal savings, since taking loans from banks will already set a higher cost of capital (you would need to have a decent ROI to meet the 18% interest rate from banks). In my case, I just took my business online and created my own e-commerce website and actively posts in free classified ads such as OLX AYOS and Everything is actually going online. I am expecting that Philippines will also follow the trend of 1st world countries, wherein most shopping is now done via online.

  5. Good day I’m interested to know how much is the highest authorized or legal interest rate on personal loans…kindly enlighten me… More power

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