When taking a salary loan, there are specific commitments you must fulfill before you get approved. Another issue to worry about is the interest rate and additional fees that aren’t always displayed and often tend to be misleading.
For that reason, people are always skeptical when considering these types of loans, but sometimes you don’t have another choice.
A salary loan is money that a bank or other lending institution borrows to employed people who use it to manage financial emergencies.But, before you apply for a salary loan, let’s discuss interest rates and other related costs you might be facing along the way.
The interest rate usually determines how affordable your salary loan is. Even though the majority of lenders charge up to 10% annually, some lending institutions might provide you with lower interest rates. Usually, government branches and banks have lower rates, but they impose striker rules.
Additionally, you may choose between fixed and variable rates. With fixed rates, you pay the same amount until your loan expires. Even though they are safer, fixed loans tend to have a higher interest rate than variable ones.
After all, in some way, you are paying for that security
When it comes to variable interest rates, they can change in a matter of days. But, initially, they are lower than fixed ones. One of the biggest disadvantages of a variable interest rate is that you can never plan your monthly expenses.
For example, one month, your monthly installment will be lower, while the next one it might be higher. In that case, variable interest rates are highly unpredictable.
So, before you make a final decision, make sure to consider all the factors above, and see whether you can afford the fluctuations in the interest rates.
Every salary loan involves a certain fee and additional charges you will have to pay throughout the life of your loan. Depending on the lender, they might be higher or lower. But, let’s review the standard fees applicable to salary loans.
Disbursement Fee – you will have to pay approximately Php1,800 for each disbursement.DTS or documentary stamp tax – for every Php200 for the amount, you will be charged with Php1,50. However, this is subjected to changes and depends on different laws and regions.
Closure Handling Fee – you will be charged with 4% upfront
Returned Check Fee – if any check is returned and bounces back, the borrower will be charged with Php1,500. Usually, the check bounces back due to insufficient funds on borrowers account.
Attorney’s Fees & Other Judicial Expenses – in case of late payment, or if you breach the terms and conditions of the loan, then the lending institution might sue you. In that case, you will have to pay attorney’s, litigation, and judicial fees.
As you can see above, it’s relatively easy to get a salary loan, but it might be a bit challenging to repay it on time, especially with all the fees and interest rates. But, if you are a financially responsible person, you shouldn’t have any issues.