First thing is, when borrowing money, you have to make sure that you understand these
basic elements of borrowing.
You should start with the purpose. Why is there a need to borrow money? To purchase something? For additional cash or funds? Sometimes, you have to disclose to creditors what is the purpose of your loan – that is why you need to identify this right away.
However, the desired amount of your loan should still be subject to the approval of the creditor, and loan fees are, most of the time, being deducted from the loan amount.
You might want to know at this point how can you build good credit – that’s a good question! Here are the possible ways you can consider to start building a good credit score:
Apply for a credit card. This is one of the best ways to start building your good credit score. With this, you can practice purchasing items using a credit card and paying them on time. This will help you to be responsible for handling your finances. By having a credit card, approval of future credit or loans can be a lot easier and faster.
Avoid late payments. This should be your best practice – to be consistent in paying your monthly dues. Another way to get rid of late payments is paying your monthly dues earlier or twice per month. This shows that you are a responsible borrower.
Stay within your credit limit. Purchasing or maxing out your credit limit is such a bad habit and not a good sign for lenders. When you keep on doing this, this will make a negative impact on your credit score.
Avoid applying for multiple credit cards or loans all at once. Multiple applications and refusals can make a not-so-good effect on your credit score for this will be seen as an unusual activity by the lenders. Before applying from one credit to another one, make sure you can pay.
If you think you have a good credit score at this point, make sure you maintain that. Another basic of borrowing is knowing which financial institutions can help you.
Here are some institutions that are monitored by the Bangko Sentral ng Pilipinas:
Universal and commercial banks – commercial banks are owned by private and offer basic services such as business, personal, and mortgage loans. Also, they accept deposits and allow the opening of savings and checking accounts. While Universal banks offer the same types of services as commercial banks, on top of being allowed to do other transactions like investing in equities and underwriting.
Thrift banking systems – this is where private development banks, stock savings, mortgage banks, loan savings, and microfinance thrift banks belong. These banks are a good option if you are borrowing money for short-term and long-term financing. They offer their services usually to agricultural and housing
businesses and those who run small and medium enterprises.
Rural and cooperative banks – they operate in rural communities and provide people in the same area basic access to financial services. They assist farmers mostly.
Consumer finance companies – these are the alternative institutions that consumers can reach out for cash and product loans. They have fewer requirements and welcomes clients who are not traditionally
entertained by banks because of their banking history.