Top 6 Things to Remember Before Applying for an Unsecured Loan

Many people, especially first-time borrowers, are often hesitant to take out loans that require them to pledge their assets as collateral. For those who want a safer option, unsecured loans offer a practical solution. These are often easy loans to obtain since they don’t require any property or asset to guarantee repayment, which makes them more accessible and less risky. They can also be used for various purposes, whether it’s to consolidate debt, cover emergencies, or fund personal projects.

For instance, leading digital bank Maya offers both Maya Personal Loan and Maya Easy Credit. You can apply for these loan products through the Maya app, as long as you are a Filipino resident, 21 to 65 years old, and have an upgraded Maya account. For Maya Personal Loan, you also need to be actively using your Maya account to conduct transactions.

These unsecured loan products allow you to borrow up to Php 30,000 for Maya Easy Credit and up to Php 250,000 for Maya Personal Loan. With flexible terms, reasonable interest and charges, as well as a convenient repayment method, it’s no wonder that many Filipino borrowers now opt for these loans over more traditional offers.

However, just because unsecured loans don’t involve collateral doesn’t mean you can be careless about borrowing. Without proper planning, it’s still easy to fall into financial strain. Before applying for an unsecured loan, it’s important to do your research and make sure the repayment schedule fits your current financial situation. To help you make a well-informed decision, here are some key things to keep in mind before you submit that loan application.

1.Know Your Purpose for Borrowing

Before taking out an unsecured loan, it’s important to understand exactly why you’re borrowing. Is it to fund home repairs, consolidate other debts, or handle an unexpected expense? Having a clear reason helps you decide how much money you really need and how soon you’ll be able to pay it back. Without a specific goal, it’s easy to overborrow or spend the funds on things that don’t truly matter.

When you borrow with purpose, you’re more likely to use the money wisely. Treat your loan as a financial tool that helps you reach a specific goal. This mindset can keep you from falling into a cycle of unnecessary debt and ensures that every peso you borrow serves a meaningful purpose.

2.Check Your Credit Score and History

Since unsecured loans don’t require collateral, lenders rely on your credit score to assess how trustworthy you are as a borrower. A higher score usually shows that you’ve managed past debts responsibly, which can boost your chances of approval. So, before you apply, take a moment to review your credit report for any unpaid accounts or errors that could affect your standing.

If your credit score isn’t in the best shape, don’t panic. You can improve it over time by paying your bills on time, settling outstanding debts, and keeping your credit card balances low. A little effort before applying can go a long way in increasing your chances of getting approved.

3.Compare Offers From Different Lenders

Not all lenders are the same, so don’t rush into the first loan offer that you see. Different lenders, such as traditional banks and credit unions, each have their own interest rates, fees, and payment terms. By comparing several options, you can find one that best fits your needs and budget.

These days, digital banks and online lending platforms also provide competitive rates and faster approval processes, which can be a big help if you need funds quickly. However, always make sure the platform is legitimate and registered with the Bangko Sentral ng Pilipinas (BSP). Take time to understand their terms before committing, so you can enjoy both convenience and peace of mind when taking out your loan.

4.Understand the Interest Rate and Total Cost

It’s easy to focus only on the monthly payment, but you should also pay attention to the total cost of the loan. A smaller monthly payment might seem easier on your budget, but if the repayment term is longer, you could end up paying much more in interest over time.

Always ask your lender for a complete cost breakdown or use a loan calculator to estimate your overall payment. This helps you plan your budget more accurately and avoid surprises later on. Understanding the true cost of your loan keeps you in control of your finances and ensures that it truly works for your situation.

5.Review the Repayment Terms Carefully

Once you find a loan offer that suits you, take a closer look at the repayment terms before committing. Check how often payments are due, how long the repayment period lasts, and what happens if you miss one. Ideally, the schedule should match your income cycle so you won’t have to scramble for funds each month.

Missing or delaying payments doesn’t just result in penalties but can also hurt your credit score. So, before finalizing your loan, try to picture how it fits into your monthly budget. If it feels too tight, consider exploring other options or borrowing a smaller amount. Responsible borrowing means setting yourself up for smooth, stress-free repayments.

6.Borrow Only What You Can Comfortably Repay

Just because you can borrow a large amount doesn’t mean you should take all of it. Borrow only what you truly need and what fits comfortably within your budget. Remember, every peso you borrow will have to be repaid with interest. Taking out more than you need can lead to higher monthly payments and unnecessary financial strain.

A good rule of thumb is to keep your loan payments at a level you can manage, even if your income changes slightly. Take time to review your monthly expenses and leave room for emergencies or savings. The goal is to make the loan work for you, not against you, so you can enjoy its benefits without the stress of falling behind on payments.

Taking out an unsecured loan can be a smart way to manage your finances, as long as you approach it with care and preparation. By keeping the points above in mind, you’ll be better equipped to make informed choices and enjoy a smoother repayment journey. With the right mindset and proper planning, your loan can help you reach your financial goals rather than become a source of stress.