The online lending industry has grown rapidly in the Philippines over the last few years. With easy access to loans through websites and mobile apps, many Filipinos have turned to online lenders to meet their financial needs. However, as this industry continues to expand, it’s important for borrowers to understand the legit online loans and regulatory landscape around them.
Overview of Online Lending in the Philippines
Online lending platforms provide a convenient way for Filipinos to access small, short-term loans. Also known as payday loans or cash advances, these loans typically range from ₱1,000 to ₱35,000 and must be repaid in 30 days or less. Instead of visiting a bank or traditional lender, borrowers can complete the entire loan application process through a lender’s website or mobile app in a matter of minutes.
Some of the most popular online lending companies in the Philippines include:
- Cash-Express
- Cashalo
- Loan Ranger
- Moneycat
- Robocash
The main benefits of online loans for Filipino consumers include:
- Quick and easy access – Receive loan proceeds in as little as 24 hours without paperwork
- Convenience – Apply anytime, anywhere through mobile apps
- No collateral needed – Unsecured loans so no asset required as security
However, these loans also come with higher interest rates and can lead borrowers into deeper debt through repeat borrowing. Understanding the laws and regulations is key.
Rules and Regulations for Online Lending Companies
In 2018, the Securities and Exchange Commission (SEC) established rules and regulations specific to a type of online lender known as peer-to-peer (P2P) lending platforms. Under SEC Memorandum Circular No. 14, P2P platforms must register with the SEC and meet certain standards regarding IT security, investor funds protection, and more.
However, many prominent online lenders don’t fall under SEC jurisdiction. Cash Express and other direct lenders are instead covered under Republic Act No. 9474, known as the Lending Company Regulation Act of 2007 (LCRA). The LCRA and its implementing rules and regulations set standards for lending companies around registration, capitalization, investments, interest rates, and lending operations.
For instance, direct lending companies must have at least ₱25 million in paid-up capital. They also cannot charge effective interest rates higher than 50% per year. Borrowers have the right to prepay their loan balances anytime without penalty and can also present complaints to regulators about any lending company abuses or violations.
Other Relevant Laws and Banning “5-6” Schemes
Under Republic Act No. 7394 or the Consumer Act of the Philippines, lenders are prohibited from certain actions such as harassment or humiliating debtors. The Truth in Lending Act also promotes transparency for lending and credit transactions.
Importantly, in 2020 the government banned “5-6” lending schemes under Republic Act No. 11814. These informal lenders charge 20% interest each day, adding up to exorbitant rates. Any online lenders using 5-6 models can now face fines and even imprisonment.
What to Watch Out For As a Borrower
While plenty of legitimate lenders exist, borrowers should also beware of unscrupulous or illegal lending practices:
- Extremely high annualized interest rates
- Harassment for repayment
- Asking for login access to bank accounts or e-wallets
- Requiring upfront fees just to receive the loan
Always review the lender’s terms and conditions carefully before accepting a loan. Reach out to regulators like the SEC if in doubt or if experiencing any lending abuses.
Frequently Asked Questions (FAQs)
What is the maximum legal interest rate for online lending companies in the Philippines?
Under the Lending Company Regulation Act of 2007 (LCRA), the maximum effective interest rate lending companies can charge is 50% annually, according to SEC Guidelines.
Can I be charged extra fees on top of interest for an online loan?
Yes, lenders can charge additional fees for processing, releasing of funds or other services. However, these fees must written in the loan’s terms and conditions provided to borrowers transparently. Excessive fees may be considered a violation.
How long do I have to repay my online loan?
Most online loans give borrowers between 14 to 30 days to repay in full. Longer-term installment loans are also available from some lenders. Always understand the repayment schedule and due dates before taking out a loan.
What happens if I default on my online loan?
If unable to pay on time, borrowers typically have a grace period where they can still repay the loan without yet being considered in default. But after 30 to 90 days past due, lenders can report borrowers to credit bureaus or even pursue legal collection on the debt. Avoid defaulting if at all possible.