Lending Money In The Philippines

[Jollygoodfellow]

Filipinos do not hold financial obligations as particularly important in regards to their everyday hierarchy of obligations . And certainly not to the same degree as someone from a first world culture where "credit" is an important part of acquiring things .

Just on that point, is there a credit rating system in the Philippines similar to western countries where there are databases of bad payers or bankrupt people?

[retired]

Filipinos do not hold financial obligations as particularly important in regards to their everyday hierarchy of obligations . And certainly not to the same degree as someone from a first world culture where "credit" is an important part of acquiring things .

Just on that point, is there a credit rating system in the Philippines similar to western countries where there are databases of bad payers or bankrupt people?

Not privy to what info banks have or other institutions but to my knowledge "no" this is not really a credit baesed culture . Have known expats with A1 credit ratings in first world countries that the bank wounldn't finance a vechicle loan for . This is a cash based culture and "land" is generally required for a loan . I do stand to be corrected on this issue if things have changed and i am simply not aware .

[i am bob]

Why Tom! What a great time to insert this news article in response to your question on personal credit ratings in the PI...

http://business.inqu...d-credit-record

Five steps to fix a bad credit record

By Ma. Salve Duplito

INQUIRER.net

First Posted 22:31:00 07/13/2008

Filed Under: Economy, Business & Finance,Banking

THE WAY THE BANKING IS wired at the moment, there seems to be no real and lasting happy ending to a bad. Bankers admit that Filipinos who have made credit card mistakes credit history, bounced checks or have messed up their credit records one way or another will have to live with the hit on their name in banks? databases for virtually forever.

Marissa (not her real name) is a self-confessed bad creditor who has turned a new leaf. She thinks mistakes happen all the time, and not being able to make up for them is unfair. Now that prices are going through the roof, a responsibly used credit card] can make all the difference between eating and starving between paydays. Or at least being able to buy a child?s book or art supplies for school.

?I admit I was a bad borrower. I was young and I made mistakes. But instead of helping us, this bank charged me with very high interest. After that, my mom got sick and I needed to help the family, so the charges and the principal grew and grew,? she says.

Marissa eventually found a way to pay off her debt, chunk by painful chunk. It took a long time, yet even after her successful ?graduation,? she was denied every time she applied for a new credit card, and she couldn?t open a checking account. She didn?t try getting a car loan or personal loan anymore.

?I stopped trying after a while. I don?t know if there?s anything I can do to change the past,? Marissa says.

Karen, on the other hand, says her problems started on a foreign trip when her friend asked to ride on her credit card. ?I was a revolver, but I paid at least the minimum. When my friend couldn?t pay her purchases charged to my card, the very high interest kicked in and at one time my bill went up to P200,000. I eventually paid off everything?she paid but very late?the damage was done. I was already on the negative list,? Karen says.

As of now, banks rely on the Bankers Association of the Philippine?s (BAP) so-called negative list to identify bad borrowers. Once you?re on the roster, you?re there forever. Individual banks have their own hot lists, but the contents of these are closely guarded.

That can all change if a bill on creating a centralized Credit Information Bureau authored by Sen. Edgardo Angara and his son Rep. Juan Edgardo Angara is passed, signed into law and fully implemented. The idea is to have something similar to the Experian, TransUnion and Equifax services in the US, where banks can use a reliable, common database so that they can lend faster, require less collateral and charge lower interest. In the US, consumers can also access their own credit records for a fee, and check for errors.

Until the bill turns into law and is implemented, bankers say there is little those who have a hit on their name can do but fix their financial habits.

?[Filipinos] need to be aware that without putting an effort to maintain a good credit history, they will not be able to borrow from legitimate lending institutions and could find themselves open to unscrupulous lenders,? says Suresh Nanoo, senior vice-president at HSBC and head of the persona financial services division.

If you are one of those who find yourself in the deep end or you have a loved one who does, here are a few things that you can do to fix the past:

1. Admit your mistake. From a business standpoint, banks will make more money from you if you recover from that low point.

They don?t like advertising that they restructure debt because it?s prone to abuse, but banks admit that they give lighter payment terms if the customer has a ?genuine desire to settle??even if the period is protracted, says Nanoo. An official from another bank says you might even get brownie points if you call your bank and don?t wait for them to call you. Hiding from creditors has never done anybody any good.

2. Pay your debts. If you are given another chance to pay your arrears, make good on your commitments. The whole game plan is to rebuild your credit score, and that won?t do with another wave of credit card bingeing. Nanoo says over the years, Filipinos have been more conscious of their credit history. ?Even during difficult times, Filipinos would try to comply with their payables and would even seek bank?s assistance for flexible payment options,? he says.

3. Save regularly?in the same bank. As they say, Rome wasn?t built in a day. Rebuilding your credit score will take some time, but there?s no source the bank will trust more than their own record of your savings account. Sock away money on a regular basis?say P500 or P1,000 a month?into your bank account. The regularity, more than the amount, will show goodwill. Some banks will even give you a pre-approved credit card that can rebuild your record faster if the savings balance goes up high enough.

4. Ask for a written seal of good housekeeping. A handshake and a warm smile from a bank officer is well and good, but a written seal of good housekeeping is better. Keep one in your file and remind the bank to send this file to the BAP. Nanoo says Philippine banks are required to notify the BAP when debts are settled. While the negative record will not be deleted, now you have something to show when trying to apply for financial products.

5. Live within your means. With a written record under your wing, you may think its time too loosen up and spend a little. You didn?t bear those months of self-control to ruin your record again. Florentino T. Gonzalez III, vice president for credit and business analytics at Bank of the Philippine Islands recommends living within your means and borrowing only for the right reasons.

?Filipino borrowers? concern over their credit history varies depending on the persons social background, family background, educational attainment, personal habits and other traits, vices or a lack of it, among others,? says Gonzales.

Rich people are not necessarily good payers, he says. ?[They] wouldn?t care so much about their credit track record, unlike perhaps some of the downtrodden, like the poor farmer, who is very particular about upholding his credit standing, may turn out to be credit worthy,? Gonzales adds.

Life and money always go together, and credit records go awry often when relationships also do. ?Family troubles, impending breakup of marriage may indicate greater risk to compromise their credit history,? the banker says.

It?s hard to fight a bad credit record that you can?t see nor touch. But for now at least, deletion is not the only answer for people who want to change history. Good habits and sincere intent can soften even serious bankers.

Edited October 26, 2012 by I am bob
removed links and made legible

[Jake]

Filipinos do not hold financial obligations as particularly important in regards to their everyday hierarchy of obligations . And certainly not to the same degree as someone from a first world culture where "credit" is an important part of acquiring things .

Just on that point, is there a credit rating system in the Philippines similar to western countries where there are databases of bad payers or bankrupt people?

There is only a street level credit rating called tsismis (gossip) among the poor, where 5-6 loans are rampant.

I never dealt with any credit cards or local bank checks when I was there, but I would suspect if you have a

very bad credit in one region, simply go to another region to find a bank willing to give out loans or another

credit card to you. By the way, the law regarding fraudulent/bouncing checks is called estafa (Tagalog).

[Thomas]

I hear that Greg. I have also seen that money lenders not only take the vehicle and 'store' it but also use it on a daily basis as their own vehicle until the loan is paid. In some cases even renting it out. Not sure why that surprises me as land is also taken possession of when loaned against and the lender treats the land as his own, farms it, plants it, in some cases builds on it, and then expects the borrower to pay for 'improvements' if he takes the land back.

I don't know if it's a common demand in loan agreements, a law or just habbits,

but at loans, with land as security, many has said the loan giver has the RIGHT TO USE until the loan is (fully) paid back. The "KIND" ones let the owner use e g half if they has paid back half, and the "kind" ones let the owner get harvest sharing at his land, instead of employing some other...

So not so odd if they find it corect to have the right to use other things too.

So it seems it's common with such on top of the high interests...

[Jack Peterson]

This sounds more like large scale Pawn Brokering, To me, cars Land property etc: are offered as security not for the use of the lender, OK if the loan is not re payed. Then, it stands to reason, things are lost BUT only, to the value of the outstanding loan I am Sure, proper licensed Financial Institutions will not adopt the practice in the previous posts. use Mickey Mouse lenders, get problem treatment. IMHO

Maybe I need to burst this bubble :dance:

:tiphat:

[Dave Hounddriver]

I am Sure, proper licensed Financial Institutions will not adopt the practice in the previous posts. use Mickey Mouse lenders

While I am sure that some banks and financial institutions will loan money without the 'pawn shop' approach, I am also sure that most people living here (locals and foreigners) would have a hard time qualifying for a bank loan. I am additionally sure that proper licensed Financial institutions adopt the practice in previous posts and pay the BI about 30% of the gross profits when they do so. (Not banks but licensed money lenders and pawn brokers)

You can burst the bubble by showing me where I can get a loan against my car or property without adopting the practice in the previous posts. (Not buy and finance another car or property but get a loan on my current car or property). I am not making a serious request as I know I just do not qualify so I would, if I needed money, have to resort to the practices in previous posts.

[Thomas]

For Only 10% Monthly Interest

(My coloring). Quoted from an ad from a Pawn Shop specialiced in motorbikes :)

This sounds more like large scale Pawn Brokering, To me, cars Land property etc: are offered as security not for the use of the lender, OK if the loan is not re payed. Then, it stands to reason, things are lost BUT only, to the value of the outstanding loan I am Sure, proper licensed Financial Institutions will not adopt the practice in the previous posts. use Mickey Mouse lenders, get problem treatment. IMHO

Maybe I need to burst this bubble :dance:

:tiphat:

Yes, loans to BUY the thing/land (=loan taker use it)

are other than

loans with it as SECURITY (=often loan giver use it).

[MikeeW]

Kudos to member - retired- for his comments about the attitude toward money, debt and all that connects to. I hope members who want to consider borrowing or loaning money will become sensitized to the attitudes he describes. It has been my experience that there simply is no comparison between any other culture when it comes to personal finance.

I am tempted to go on with many stories, all within my own experience, related to money issues. Suffice to say, it is not a good plan to loan or borrow here. My experiences range from bank auto loans, "prenda" (a loan with harvest as the interest paid), pay advances, "utang" (credit) at the sari sari store, emergency loans for medical problems, loans for setting up a business, and the list goes on. It has amazed me the variety of ways people get screwed and screw each other with money as the lubricant.

In our family, we have a simple policy and it has worked for a long while. When someone wants to borrow money, my wife simply says "ask my husband". It has spared her the grief of having continual requests, once the word got out. We regularly do give money to family members in need, as loans. A couple of simple conditions, and they have always been met. The loan is interest free. Tell us when you will pay and pay it as you said. If not, don't ask again.

The only debt which s still owed to us is one of a relative who runs a long- standing sari sari. They had borrowed, paid, borrowed paid, borrowed and then didn't pay. Didn't pay. Didn't pay. This went on for a long while. This happened when we first lived here and we had not been burned yet. It became obvious the debt was not going to be paid. We figured this out when we were buying pig food from a merchant. We always pay cash, and as we discussed the terms, he inquired about my wife's relatives ( all conversations end up this way). This led to his discovery of her connection to the deadbeat relatives. He vented, telling us just how much he owed and to how many other merchants he was in debt.

We bought land and a house in a village close by several years ago. The deal was simple. We pay so much, but keep a certain amount held back until the title has been clearly presented to us. The family we bought from agreed and they took the larger payment and were quite happy. There were five siblings who shared the payment. Months became years and little progress on the process of getting the title. In fact, we even paid 50,000 pesos to the local captain to assist (that was a mistake as well).

This was 11 years ago. As of now, we have title to half the land. We do own half, clearly. This is because we processed a claim for part of the land which was actually not owned by the family ( had been a Highway right of way and we were able to get it from the government).

On one occasion, one of the siblings came to us and asked for their "share" of the amount we owed. They had a sick relative and needed the money. Sorry. If I give to one, then another and finally all five have the "share" where is the incentive?

Sorry for long story. Just wanted to point out that financial dealings he can be a complex and never- ending hassle.

There are many other ways of making investments and reaping the rewards. We operate a small bakery and this provides steady income to around fourteen people, bakers, helpers and delivery guys.

[Jack Peterson]

I am Sure, proper licensed Financial Institutions will not adopt the practice in the previous posts. use Mickey Mouse lenders

While I am sure that some banks and financial institutions will loan money without the 'pawn shop' approach, I am also sure that most people living here (locals and foreigners) would have a hard time qualifying for a bank loan. I am additionally sure that proper licensed Financial institutions adopt the practice in previous posts and pay the BI about 30% of the gross profits when they do so. (Not banks but licensed money lenders and pawn brokers)

You can burst the bubble by showing me where I can get a loan against my car or property without adopting the practice in the previous posts. (Not buy and finance another car or property but get a loan on my current car or property). I am not making a serious request as I know I just do not qualify so I would, if I needed money, have to resort to the practices in previous posts.

Then, Thank goodness, I don't need to borrow money, I would hate to wake up and find a Money Lender had moved in to my guest room, worse still, all our things moved in to it.

The bubble I refer too Dave, is the one I am obviously living in, as I still, would like to think, there is some decency left, even here, I understand what you have said and Mikee's post, has elaborated, as said before, we all live and learn more each day, Was it our forefathers who said, never a lender or a borrower be. ( can't remember the rest. Guess someone will complete it?)

:tiphat: