Personal debt in the Philippines used to come with a stigma. As a rule, borrowing money was something you only did as a last resort. And if you did borrow, you made sure no one but your creditor knew about it. This attitude often meant that otherwise deserving individuals suffered from a lack of financial flexibility, finding themselves unable to pursue greater things due to a lack of capital.
Thankfully, things are changing. More Filipinos are starting to view credit as a means of financial empowerment, not an automatic path to destitution. A combination of better education, frank conversations around finance, and the increase of high-quality, low interest personal loan options like Maya Personal Loan has made it much easier to use debt positively, causing a shift away from traditional attitudes.
This has been an especially helpful development for the Philippines’ growing communities of freelancers and entrepreneurs. A few years ago, many freelancers would struggle to acquire a secondhand laptop or pay for an advanced course with just their own savings. With a low-interest loan, however, these necessary expenses are far simpler to pay for, thus empowering self-employed professionals to take more contracts and book better-paying clients.
What’s even more remarkable is the positive cycle this borrowing trend has created. With many Filipinos finally taking on positive debts from legitimate lenders for the first time, the same demographic are finally able to develop their credit profiles, allowing them access to better loans and bigger opportunities.
Of course, not all debts are the same. While some will indeed raise your credit profile, others may have no effect at all. Others can even hurt your creditworthiness over time. Let’s go over some things to consider before you apply for a new loan:
1) Are You Borrowing from a Credible Lender?
Reputable lenders report your payment behavior to credit bureaus whereas informal lenders will do no such thing. If the loan isn’t officially tracked or doesn’t come with clear terms, it won’t support your credit growth and may even open you up to other risks later on.
2) Will You Be Able to Pay on Time, Every Time?
While there are plenty of other things that could help it along, on-time payments are the only real requirement for developing a positive credit record. Unfortunately, there are plenty of people who offer harmful advice, advocating juggling your debts by delaying payments. If you actually want to develop a good score, it’s best that you ignore these questionable tips, since even one missed due date can lower your score and impact future approvals.
3. Are the Loan Payment Amounts Aligned with Your Current Financial Situation?
You’ll want to choose a loan that fits comfortably within your income and cash flow. If you have an irregular income, this means you need to have sufficient savings to give you a buffer in case you fall short by your next payment date.
You also want to be sure you don’t have too many standing debts, either. Critically, many lenders will also assess your debt-to-income (DTI) ratio to evaluate risk before they approve your loan. If your monthly loan payments are already taking up a large part of your income, adding more debt on top of that could weaken your profile.
4) Are You Using the Loan to Create Value?
Borrowing to cover an emergency is a no-brainer. On the other hand, using a loan to boost your earning potential can be one of the best possible uses of credit. Compared to loans for more fleeting purposes, loans used for skill-building or business capital tend to be meaningful, encouraging consistent repayment and long-term benefits to both your general finances and credit profile.
5) What is The Real Value You’re Getting?
If you’re borrowing for the first time, you may be compelled to pay a high interest rate as well as an assortment of other fees. This means any credit score gains you make might come at a steep cost.
Fortunately, some digital banks can offer easy repayments thanks to their use of alternative credit scoring methods. Generally speaking, if you have a history of using a bank’s savings or digital wallet products, you have a good chance of scoring better terms on your loans, even if you’ve never formally borrowed before.
6) Do You Have a Shot at Qualifying for Your Target Loan
Every formal loan application triggers a credit inquiry, causing a temporary dip in your score. Multiple inquiries in a short time will compound, reducing your credit score further. When a lender sees that score, they may assume you’re financially stretched and deny you approval. Be intentional when you apply for loans and avoid sending applications on a whim to raise the odds of a successful approval.
Your Next Loan Might Lead to Better Financial Confidence
Taking all these tips together, it becomes clear that borrowing smart is all about doing your homework and staying consistent. Keeping a level head and committing fully to your payments isn’t exciting, but it literally pays off in the end. You might be surprised by how much that next loan helps not just your credit score but your confidence with other money matters as well.
