Category: Credit

Credit, Invest

How Does Open-End Credit Work?

Related imageOpen-End Credit is a form of loan in Philippines that is granted to a credit holder as a pre-approved loan. It allows the credit holder to purchase goods and pay for services from a merchant through a third party known as the credit issuer. The credit holder is given a credit line up to a certain limit from which they can pay the goods and services they are purchasing.

The credit issuer on the other hand will be responsible for paying the goods and services bought from the merchant. In this case, the credit issuer is holding on to a promise made by the credit holder to pay for the purchases on a future date.

A credit line is equivalent to the pre-approved loan that a credit issuer grants the credit holder. This credit line is usually up to a certain amount which is referred to as the credit limit. The credit holder may make purchases within the credit line.

There is no fixed payment that is needed to be paid by the credit holder. Payment is computed based on the outstanding balance that the credit holder currently has.

The payment requirement is only limited to a minimum amount due which is a percentage of the outstanding balance.

Image result for Open-End CreditThe use of the credit line allows the credit issuer to earn by charging a certain interest rate for the amount used and other finance charges when the credit holder defaults. Common payment terms that is granted by the credit issuer is a monthly basis where payment due needs to be paid at a certain due date.

There are two common types of Open-End Credit which is granted by the credit issuer. First is in the form of credit card where the credit holder receives a card with a magnetic strip containing information about the credit holder and the pre-approved credit line. This card is then used on a merchant’s terminal to inform the credit issuer of the purchase. Once the credit issuer approves, the transaction is deemed complete.

The second type is known as the Home Equity Line of Credit (HELOC).

It works in the same way as a credit card.

The Difference is that a HELOC is best used for large expenses such as home repairs or as a second mortgage. It also has the flexibility to be used on other ongoing expenses like tuition fees or medical fees.

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Credit, Finance

How Does Personal Loans in the Philippines Work?

There are times that we make decisions that require us to shell out cash. But we are not always liquid enough or financially solid enough to make large amount of purchase or spending. In times like these, we can opt in taking a personal loan for the need we would like to address.

Personal loans, like any other loans, need to be planned before taking one. Without having a proper objective on the use of the personal loan in Philippines, it can lead to debt mismanagement which can eventually hurt our pockets more rather than support the spending. Here are a few points that you may check before taking on a personal loan.

Image result for Personal LoansLoans create future expenses

When we take on a personal loan, like other loans, it has an effect of a future expense on our part. The money that is needed to be repaid also includes interest rates that are paid to the lender for borrowing the money.

Acquiring a personal loan without checking your need can cause you to overlook the future effect it has on our financials. That is why it is critical that we identify the purpose of the loan and strictly follow the plan.

Loans are borrowed money

All loans are borrowed money where the borrower needs to repay the lender back and return the money that was borrowed. Fees for borrowing the money is also needed to pay the lender for the use of the money.

The payment comes in the form of interest rate. Various lenders may differ in the interest rate offered and comparing lenders will be quite beneficial to the borrower.

Talk to the right lender

Image result for Personal LoansIt is very important that you get connected with the right lender. The right lender should be someone you are comfortable with. Someone who offers you a loan that brings an advantage over other lenders. Making sure that you take advantage of what lenders can offer to maximize the loan you are getting.

Personal loans can be beneficial to us when we need to address a certain objective. What matters and what is important is properly getting yourself ready in getting yourself in debt. It is a must and a responsibility to yourself and the lender to make sure that your debt is properly managed.

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Credit, Finance

How Does a Mortgage Loan Work?

A mortgage loan is always tied to financing a purchase of a property. This type of loan involves a large sum of money and the process may seem complex and overwhelming. It is important that we take a careful look on planning the loan before diving into getting one. It is also important that we consider the property that we are buying to support the loan that we will be taking for the purchase of the property. Like any other loan, having a well thought out plan will help you properly manage your debt despite its size.

  1. Getting the Loan

When a mortgage is applied for, you need to make sure that all documentation is in place. Since you are currently purchasing a property that comes from a borrowed money, the lender is granted a lien over the rights of the property. This means that any default made by the borrower will grant the lender the rights to take over the property and sell it to recover the unpaid balance of the loan including all interest fees and finance charges.

  1. Repaying the Loan

Related imageOnce the loan has been granted, repayment of the loan will be recognized on a specified period agreed by both the borrower and lender. Loan repayment becomes complex to understand as it involves the computation of the fees and corresponding interest rates. There are different types of interest rates that can be availed such as the fixed rate and variable rate. Never hesitate to ask if you find yourself in a place where you don’t understand how the fee was arrived. It is important that all fees and charges linked to the mortgage loan is thoroughly communicated to the borrower.

  1. Releasing the Property from Lien

Once your debt has been fully paid, the lender’s lien over the property is cancelled. The lender’s right over the property is now cancelled and can no act against the sale of the property.

Mortgages are complex as it involves terms and process that are usually not found on other types of loan. But with a little research, the knowledge of learning the process will greatly benefit your role as a borrower.

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How Much Do I Need to Borrow for a Payday Loan?

A payday loan is one of the easiest ways that we can resort to when we find ourselves going short on the current cash that we have.

Payday loans are short term loans that an employed individual can take, usually payable at the next payday. These types of loans are effective ways of helping us in filling the shortage difference between income and expenses.

But before we make any decision in getting a payday loan, like any other loan, careful planning needs to be made. Here are a few questions you need to answer before taking one:

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  1. Do I really need to make a loan or is there a substitute I can make?
  2. Will I have enough left when I pay (part or full) when my salary arrives?
  3. Will the loan help or provide more burden in the future?

When you are considering on taking a payday loan, it is important to consider if you there are alternatives that you can take. A payday loan has high interest rates due to its unsecured and short term nature. Sometimes taking on a payday loan will cause you more burden in the future because of the added interest (and other fees) on the principal amount.

Before making a payday loan, you will need to make sure you check all your options first. With high interest rates, making payday loans on a regular monthly basis to pay your bills can eventually grow your debt higher and higher every month which can eventually deplete your entire income.

With moneylending in Singapore, lenders who often provide this kind of loan are referred to as predatory lenders. A borrower gets deeper and deeper in debt as he continues to taking on loans on a regular basis.

Image result for payday loan interestHow much you borrow on a payday loan is very essential. If possible, do not make a bigger loan every month as your debt will keep increasing. This will continue to cause you more burden and more expenses to worry about.

Payday loans are great tools if you are not using it to supplement your income regularly. Otherwise, this will just be eating up a bit more of your income every time.

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