Should you avail of online loans for online shopping in the Philippines?

Ailene Amaro
Sep 7, 2020
Should you avail of online loans for online shopping in the Philippines?

The availability, diversity, and accessibility of loans have changed across the board. While they were once exclusive products reserved for the truly “credit-worthy,” nowadays, even people without bank accounts can avail of a quick cash loan. Loans are traditionally known as a financial supplement for larger purchases, such as a house, car, or high-end education. But with few limitations in the lending scene and quick turnaround time for approvals, it’s easier than ever to turn to loans for almost any financial concern.

Some people now depend on online loans for on-the-spot spending, including impulsive shopping trips, grocery runs, and more. In this pandemic-fueled time, when finances spark a sensitive issue, you may wonder whether you should avail of an online loan to do some online shopping.

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Fast and easy online loans for shopping

In the industry of all-digital loans, two loan types are available to curb your shopping needs.

Quick loans

Quick loans are the juggernaut of the local money lending industry because they are easily available to a wide demographic market. While traditional loans may require a substantial credit score, years of employment and other higher qualifications, most quick loans only require applicants to send in a valid government ID. You can borrow anywhere from P1,000 to P30,000 or more, but higher-value loans are usually reserved for borrowers with an established track record of non-delinquency. Interest rates vary from 8%-20%, while the repayment tenure can range from a week to a year.

The main point of attraction of quick loans is that they’re as fast as they sound. The application process is quick and easy — most money lenders allow you to go through the entire process on your smartphone. Moreover, the approval period is anywhere from 15 minutes to a day, with a claim process that accommodates people without bank accounts. You have options, including cash apps and remittance centers, making the process highly accessible and hassle-free.  

Online shopping loans

Some money lenders have partnered up with select, popular third-party merchants to offer online shopping loans. While quick loans allow you to get cash to pay for purchases immediately, online shopping loans are a little different — they offer you the opportunity to pay for things through layaway of up to a year. Essentially, think of it as the pay-by-monthly-installments scheme that tech and furniture stores often provide. This time, however, you can do so for any purchase, regardless of price.

It’s a wonderful way to purchase something you like without creating a visible dent in your finances. Even a P1,000 item can be a little heavy for some, so it eases the overall effect on your monthly budget. With 5-month layaway on a P1,000 purchase, you only have to pay P200 a month. Some money lenders offer this loan interest-free as long as you make repayments on time. Others may charge a small interest rate, but the upper spending limit may be higher.

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Credit cards: an alternative to online loans

Online loans may seem like the answer to all immediate cash-related concerns. But if you find yourself wanting to apply for them specifically for online shopping, you may be better off with a more practical alternative. Credit cards are a more convenient and even easier option for any online or offline shopping needs. All you need to do is input your card information or swipe or tap to purchase, and you can repay it in full a month later or pay the minimum with interest until the debt is completely settled.

Credit cards are much better for online shopping because the interest rate is usually smaller at 2-4% per month. Consequently, you will end up shelling out less in extra cash if you can pay it off in full within a short period. If you make the full repayment every month, you won’t have to pay anything in interest. Moreover, most credit cards offer the pay-by-installments scheme with a wide range of retailers, so you don’t have to apply for an online shopping loan to benefit from layaway spending.

It’s a more practical solution to online shopping if you’re already an existing credit card user, are able to manage your credit limit, and can commit to paying off your credit debt as soon as possible.

Online loans are sometimes better than credit cards

Here’s the catch with credit cards: they’re difficult to apply for, not accessible to everyone, and can be a dangerous tool for the financially-irresponsible. Most credit limits are higher than the upper online loan limit, and you can spend them without any prior thought. As a result, it’s much easier to fall into the temptation of spending with the tap-and-go mechanic behind credit cards.

Online loans: a word of warning

Online loans are quick, easy, and convenient, but remember — they’re still loans. Even the smallest P1,000 loan can end up proliferating in value and put you in a cycle of neverending debt when you don’t make repayments on time. It’s also easy to make multiple loans across various money lenders, which can be difficult to manage. Make sure that you aren’t borrowing more than you can afford, and aren’t putting yourself in a difficult position to fulfill online shopping woes — even for necessities. Look into ways by which you can make your existing funds stretch and only take the plunge into online loans when you’re fully prepared.

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