Understanding Different Loan Products and Types

When it comes to managing finances or making big purchases, loans often play a key role in helping individuals and businesses achieve their goals. Small businesses in the Philippines often face challenges such as limited access to capital, managing cash flow gaps, funding business growth, and dealing with urgent or unexpected expenses. 

According to Business World, banks lent only 4.55% of their total loan portfolio to micro, small, and medium enterprises (MSMEs) in 2023, well below the 10% minimum quota set by law. Specifically, loans to micro and small enterprises accounted for just 1.86% of banks’ total lending, highlighting the persistent difficulty small businesses face in securing funding. 

In this blog, we’ll break down the various loan products offered in the Philippines, from short-term solutions to long-term funding options. We’ll explain how each one works and how to identify the best fit for your business or financial situation.

Overview of Loan Products

Loan products are financial tools that allow individuals, businesses, or organizations to borrow money for a specific purpose. In exchange, the borrower agrees to repay the loan over a set period, often with interest. There are various loan products available, each tailored to different needs, making it easier for people to access funds for things like buying a home, funding a business, or managing personal expenses. These loans typically come with varying interest rates, terms, and conditions depending on the lender and the type of loan.

General Benefits of Taking Loans

1. Access to Immediate Funds: Loans provide a quick way to get the money you need without having to wait for savings or other sources of income to accumulate.
2. Flexible Usage: Depending on the loan type, funds can be used for a variety of purposes, allowing borrowers to manage personal, business, or emergency needs.
3. Building Credit History: Responsible loan repayment can help improve your credit score, making it easier to qualify for future loans with better terms and interest rates.
4. Manage Large Purchases: Loans allow you to make big purchases, like buying a home or a car, without needing to have the full amount upfront. This spreads the cost over time, making it more manageable.
5. Lower Interest Rates for Secured Loans: Secured loans, such as home loans or car loans, often come with lower interest rates because they are backed by collateral. This can make borrowing more affordable.
6. Tax Benefits: In some cases, such as with home loans, borrowers may be able to take advantage of tax deductions on interest payments, which can help reduce overall expenses.
7. Helps Build a Business: For entrepreneurs, business loans provide the necessary capital to start or expand a business, allowing them to grow and generate profits that may not have been possible otherwise.

Also read: How to Identify and Avoid Illegal Loan Apps in the Philippines: A Guide for Borrowers

Types of Loan Products Available in the Philippines

Filipinos can access a wide range of loans tailored to different needs, from personal emergencies to business expansion. Here’s a concise guide to the most common loan types:

1. Personal Loan

A personal loan is a flexible, unsecured loan offered by banks, credit institutions, and digital lenders that can be used for a variety of non-business purposes. Since it's unsecured, borrowers don’t need to pledge any assets as collateral. Approval depends largely on your credit history, income level, and employment stability.

This type of loan is ideal for covering short- to medium-term personal expenses such as:

• Medical emergencies or hospital bills
• Tuition and educational fees
• Home renovation or appliance purchases
• Travel and life events (weddings, relocation, etc.)
• Debt consolidation to manage multiple high-interest loans

Because it's a multi-purpose loan, it gives borrowers greater flexibility, whether you're an employed professional facing a temporary cash crunch, a freelancer handling medical bills, or even an OFW supporting family expenses.

While personal loans are not business-specific, many self-employed individuals or startup founders use them to bridge short-term cash flow needs if business loans are not yet accessible due to documentation limitations.

Who is eligible?

• Filipino citizens (some banks accept permanent resident foreigners)
• Age: 21–65 years old (varies by bank)
• Employed, self-employed, or OFW with sufficient income

Terms:

• Loan amount: ₱20,000 up to ₱2,000,000
• Repayment: 12–36 months
• Interest: 1.2% to 2% monthly add-on rate (actual effective rates may vary)

Documentary Requirements:

• Valid government-issued ID
• Proof of income (latest payslips, ITR, Certificate of Employment, or audited financial statements for self-employed)
• Proof of billing/residence
• Filled-out application form

2. Business Loan

A business loan provides funding to support various operational and growth-related needs. This includes working capital, equipment purchase, inventory financing, business expansion, and bridge funding during cash flow gaps. These loans are offered by banks, government agencies (like DTI and SB Corp), and private financial institutions, including NBFIs like n90.

Common Types of Business Loans:

• Term Loan: A fixed amount disbursed upfront, ideal for long-term investments like renovations, expansion, or equipment. Paid over 1 to 25 years.
• Credit Line: A revolving credit facility that lets you borrow as needed for short-term working capital. You pay interest only on what you use.
• Secured vs. Unsecured Loans: Secured loans require collateral (like property or equipment); unsecured loans rely on creditworthiness and financials.
• Startup Loans: Special programs for early-stage businesses, often requiring alternative documentation and business plans.
• Microfinance Loans: Small loans catered to micro-entrepreneurs, usually with lower documentation requirements and community-based lending.

Who is eligible?

• Registered businesses: Sole proprietorships, partnerships, or corporations
• Must have at least 1–2 years of operating history for most loans
• Startups may qualify under special lending criteria, depending on the lender

Terms:

• Amount: ₱100,000 up to ₱100 million (varies by lender and loan type)
• Repayment: 1–25 years (term loans); ongoing for credit lines
• Interest: 7% per annum (microloans) up to 3% per month (some business loans)

Documentary Requirements:

• Valid business registration documents (DTI for sole proprietors; SEC for partnerships/corporations)
• Mayor’s Permit or business permit
• Financial statements and ITR
• Valid government-issued IDs of business owners
• Bank statements (for some lenders)

3. OFW Loan

An OFW loan is a financial loan product specifically designed to address the unique needs of Overseas Filipino Workers (OFWs). Whether it’s to cover the cost of deployment, support family members back home, or invest in business ventures, this loan offers flexible terms to help meet the financial demands of working abroad.

OFWs play a crucial role in the Philippine economy, sending home billions in remittances annually. Financial institutions recognize this by offering tailored loans that support the various life events and financial obligations that come with being an OFW.

Who is eligible?

• Active Overseas Filipino Workers (OFWs) with valid employment contracts
• Must have a consistent history of remittances or income from overseas employment
• Both employed and self-employed OFWs may qualify, depending on their income and financial stability

Terms:

• Loan amount: ₱50,000–₱2,000,000 (depending on the financial institution and your capacity to repay)
• Repayment period: 12–36 months, with flexible terms that can be customized based on your income from abroad
• Interest rates: 1%–3% per month (rates may vary depending on the lender and loan amount)
• Collateral: Typically, no collateral is required, but financial institutions may ask for a co-borrower or additional documents to assess creditworthiness

Documentary Requirements:

• Passport
• Philippine Overseas Employment Administration (POEA) contract
• Proof of remittance or income (e.g., bank statements showing remittance history)
• Proof of billing or residence in the Philippines

This loan is perfect for OFWs needing immediate cash access for personal or family-related financial emergencies. With flexible repayment terms and accessible requirements, an OFW loan can help you manage life abroad and your responsibilities back home.

4. Salary Loan

A salary loan is a short-term loan that allows employed individuals to borrow money against their upcoming salary. It is typically offered by the Social Security System (SSS), the Government Service Insurance System (GSIS), or through your employer. This loan can quickly cover immediate financial needs, such as medical expenses or urgent bills.

Salary loans are popular among Filipino employees because they offer fast approval and relatively easy eligibility. The loan is directly tied to the borrower’s regular income, and repayment is typically deducted from the borrower’s paycheck, making it an ideal option for those seeking hassle-free repayment methods.

Who is eligible?

• Regular employees or members of SSS/GSIS
• Must be actively employed with at least 1–2 years of service
• Employees who have sufficient contributions in the case of SSS loans or have a stable income for GSIS loans
• Some employers may also offer salary loans directly to their employees as part of their benefits

Terms:

• Loan amount: Generally up to 1–2 months’ salary, but may vary depending on the lender
• Repayment period: 1–2 years, depending on the loan amount and lender terms
• Interest rate: 10%–12% per annum (rates vary depending on the institution offering the loan)
• Eligibility criteria: Approval depends on employment status, length of employment, and contribution history with SSS/GSIS

Documentary Requirements:

• Valid ID
• Recent payslips (usually the last 3 months)
• SSS/GSIS proof (for government loans)
• Completed application form

Also read: SSS Salary Loan Application Online Guide in the Philippines

5. Microfinance Loan

Microfinance loans are small-scale financial products offered primarily to micro-entrepreneurs. These loans are designed to provide capital to individuals or businesses that may not qualify for traditional bank loans due to a lack of formal documentation or credit history. They are commonly provided by rural banks, microfinance institutions, and non-governmental organizations (NGOs).

The loan amounts are generally smaller and are intended to support micro-businesses in underserved areas. These loans are crucial for small entrepreneurs looking to scale their operations, purchase raw materials, or address cash flow issues.

Who is eligible?

• Micro-entrepreneurs, especially those running small businesses in rural or underserved areas
• Those who may not have access to traditional financial services but are seeking to fund business operations
• Individuals who are committed to growing their businesses and contributing to local economies

Terms:

• Loan amount: Up to ₱15 million for SMEs
• Repayment period: 1–5 years, depending on the loan size and purpose
• Interest rates: Around 7% per annum, though this may vary based on the lending institution
• Collateral: Microfinance loans may or may not require collateral. However, the collateral requirements are often more relaxed compared to traditional loans

Documentary Requirements:

• Valid government-issued ID
• Business permit or registration (if applicable)
• Proof of income (e.g., sales receipts, business financial records)
• Completed application form

Microfinance loans are instrumental in helping small entrepreneurs overcome financial hurdles and continue operating, especially in rural or developing regions.

6. Auto Loans

An auto loan is a secured loan that allows you to borrow money specifically for purchasing a vehicle. Whether you're looking for a new or used car, an auto loan offers financing with flexible repayment terms. The vehicle itself serves as collateral, which means the lender can repossess the car if the borrower defaults on the loan.

Auto loans are a common option for individuals who want to purchase a car but cannot afford to pay the full amount upfront. They typically come with lower interest rates than unsecured loans because the car serves as security.

Who is eligible?

• Filipino citizens or eligible foreign residents
• Age: 21–65 years at loan maturity (some banks up to 70)
• Stable employment or business (usually at least 2 years)
• Minimum monthly income (often ₱40,000 or higher)

Terms:

• Loan amount: Minimum ₱100,000, up to 80% of the car value
• Repayment period: 12–60 months
• Down payment: Typically 20–30% of the vehicle value
• Interest rates: Vary by bank and vehicle type (usually lower than unsecured loans)

Documentary Requirements:

• Duly accomplished application form
• Valid government-issued IDs (at least one or two)
• Proof of income (latest payslips, ITR, Certificate of Employment, or audited financial statements for self-employed)
• Vehicle quotation from dealer
• Proof of billing/residence
• For self-employed: business registration, bank statements
• For OFWs: employment contract, proof of remittance

Auto loans provide an accessible means for individuals to purchase cars with manageable payment terms. This loan option is ideal for those who need reliable transportation but do not have the full purchase price on hand.

7. Student Loans

A student loan is a financial product designed to help students and their families cover educational expenses, including tuition fees, books, and living costs. With the rising cost of education, student loans are a crucial resource for many Filipino families looking to support their children’s academic journey.

Student loans often come with deferred payment options, allowing students to complete their studies before they begin repaying the loan. Some programs even offer subsidized interest rates, which makes them more affordable for low-income families.

Who is eligible?

• Students enrolled in accredited educational institutions
• May require a co-borrower (typically a parent or guardian)
• Some student loan programs are aimed at low-income families or students with financial need

Terms:

• Loan amount: Based on school fees and living expenses
• Repayment: Varies—some loans are deferred until after graduation, while others may require payments during school
• Interest rates: Varies (government-backed loans may have subsidized rates)

Documentary Requirements:

• School enrollment/registration form
• Valid IDs of student and co-borrower
• Proof of income of co-borrower
• School billing statement

Student loans are an essential tool for enabling access to higher education. With reasonable interest rates and deferred repayment, they provide financial relief for families struggling to pay for school fees upfront.

8. Mortgage Loans

A mortgage loan is a long-term secured loan used to finance the purchase or refinancing of real estate. The property being purchased serves as collateral, which means the lender can take ownership of the property if the borrower defaults on the loan. Mortgage loans are typically the largest loans individuals take out and are often spread over 15 to 30 years.

These loans are ideal for individuals looking to buy a home or refinance an existing mortgage. Given their long-term nature, mortgage loans typically offer lower interest rates than unsecured loans.

Who is eligible?

• Filipino citizens or eligible foreign residents
• Individuals with stable income from employment or business
• Age: Between 21–65 years old (must not exceed 70 years old at loan maturity)

Terms

• Loan amount: Up to 80% of the property value
• Repayment period: 15–30 years
• Interest rates: Fixed or variable, depending on the lender and loan agreement

Documentary Requirements:

• Duly accomplished application form
• Valid government-issued IDs
• Proof of income (e.g., payslips, ITR, business financials for self-employed)
• Property documents (e.g., title, tax declaration, contract to sell)
• Marriage contract (if applicable)

Mortgage loans are perfect for individuals who want to own a home but need financing to cover the full purchase price. With flexible repayment terms and relatively low interest rates, these loans provide affordable options for homebuyers.

9. Home Equity Loans

A home equity loan is a type of secured loan product that allows homeowners to borrow money against the equity in their property. The equity is calculated by subtracting any outstanding mortgage balance from the property's market value. This type of loan is commonly used for large expenses such as home renovations, debt consolidation, or funding major life events.

Since the loan is secured by the property, interest rates tend to be lower compared to unsecured loans. However, failure to repay the loan could result in the foreclosure of the home, making it essential for borrowers to carefully assess their repayment capacity before taking out this loan.

Who is eligible?

• Homeowners with sufficient equity in their property
• Individuals with stable income and good credit history
• The borrower must be of legal age (usually between 21–65 years old)
• Must have the capacity to repay the loan, with some lenders requiring a minimum income threshold

Terms:

• Loan amount: A percentage of the home’s equity
• Repayment period: 1–15 years, depending on the loan amount and lender terms
• Interest rates: Vary by lender, often lower than unsecured loans due to the collateral (property)
• Collateral: The home itself serves as collateral, which means it can be seized if the loan is not repaid

Documentary Requirements:

• Valid government-issued IDs
• Proof of income (e.g., payslips, ITR, business financials for self-employed)
• Property title and tax declaration
• Proof of billing/residence
• Existing mortgage statement (if applicable)

10. Credit-Builder Loans

A credit-builder loan is a financial product designed to help individuals build or improve their credit score. Unlike traditional loans, where the borrower receives the loan upfront, the loan amount in a credit-builder loan is typically held in a bank account while the borrower makes regular payments. Once the loan is paid off, the funds are released to the borrower, and the timely repayment history positively impacts the credit score.

This type of loan is ideal for individuals with little or no credit history or those who need to rebuild their credit score. It helps establish a positive credit history, leading to better loan terms and approval for larger loans in the future.

Who is eligible?

• Individuals with little to no credit history
• Those looking to improve their credit score
• Must meet the lender's basic requirements (e.g., age, income level)

Terms:

• Loan amount: Small, fixed amounts (usually between ₱5,000–₱50,000, depending on the lender)
• Repayment period: 6–24 months, depending on the lender and loan terms
• Interest rates: Low to moderate, depending on the lender
• Collateral: Generally, no collateral required, but some institutions may ask for a co-signer

Documentary Requirements:

• Valid government-issued ID
• Proof of income (e.g., payslips, ITR, or financial statements for self-employed individuals)
• Completed application form

11. Debt Consolidation Loans

A debt consolidation loan is a type of loan product used to combine multiple debts into a single loan. The goal is to make managing your debt easier by consolidating everything into one monthly payment, often with a lower interest rate or more favorable repayment terms.

This loan can be used to pay off credit card balances, personal loans, and other high-interest debts, effectively reducing the number of payments and interest rates. Debt consolidation loans are especially useful for individuals struggling to keep track of multiple debts and those looking for a more manageable way to pay them off.

Who is eligible?

• Individuals with existing debts (credit card debt, personal loans, etc.)
• Must have stable income and good credit standing
• Lenders may require proof that the applicant has the capacity to repay the consolidated debt

Terms

• Loan amount: Based on the total amount of debts to be consolidated
• Repayment period: 1–5 years, depending on the lender and the debt consolidation amount
• Interest rates: Typically lower than the original debts, ranging from 6% to 20% per annum, depending on the loan terms and creditworthiness
• Collateral: Can be either secured or unsecured depending on the lender and borrower’s financial situation.

Documentary Requirements:

• Valid government-issued ID
• Proof of income (e.g., payslips, ITR, business financials for self-employed)
• List of debts to be consolidated (e.g., credit card statements, loan agreements)
• Completed application form

12. Payday Loans

A payday loan is a short-term, unsecured loan that provides quick access to cash to cover urgent expenses until the borrower’s next payday. These loans are usually small amounts and are typically repaid in a lump sum on the borrower’s next payday.

Payday loans are ideal for individuals who need immediate funds to cover emergency expenses but cannot access traditional credit options. However, they come with high interest rates, so it’s important only to borrow what you can afford to repay quickly.

Who is eligible?

• Employed individuals with regular income
• Must meet the lender’s minimum age and residency requirements (usually 18 years or older)
• Must provide proof of income (e.g., payslips or employment details)

Terms:

• Loan amount: Small, typically between ₱1,000–₱20,000 or based on the borrower’s credit limit
• Repayment period: Due on the next payday (usually 14–30 days)
• Interest rates: High, often ranging from 10% to 30% or more, depending on the lender
• Collateral: No collateral required

Documentary Requirements:

• Valid government-issued ID
• Latest payslip or proof of employment
• Bank account details (for direct deposit of loan funds)
• Completed application form

These are some of the most common loan products available in the Philippines. Each loan type is designed to meet different financial needs. However, there are few factors to consider with various loan types. 

Factors to Consider with Various Loan Products

When choosing a loan in the Philippines, it’s crucial to weigh several factors to find the best fit for your financial needs and situation. Here are the key considerations:

1. Purpose of the Loan: Match the loan type to your need-personal loans for emergencies or multi-purpose use, auto loans for buying a car, mortgage loans for property, and so on.

2. Secured vs. Unsecured Loans

• Secured loans (e.g., auto, mortgage, home equity) require collateral but often have lower interest rates.
• Unsecured loans (e.g., personal, payday, student) do not require collateral but usually come with higher rates and stricter eligibility.

3. Interest Rates and Fees

• Compare annual percentage rates (APR) across lenders. Personal loans can reach up to 36% APR, while mortgages and car loans are typically lower (as low as 3–10% for home loans, 9–11% for car loans).
• Watch for additional fees: processing, late payment, and early repayment penalties.

4. Loan Terms (Repayment Period)

• Longer terms mean smaller monthly payments but higher total interest paid.
• Shorter terms mean higher monthly payments but less total interest.
• Choose a term that balances affordability and total cost.

5. Loan Amount: Minimum and maximum amounts vary by loan type and lender. Make sure the amount suits your need and repayment capacity.

6. Eligibility and Creditworthiness

• Lenders check your income, employment status, and credit score. A good credit score can get you better rates and higher approval chances.
• Some loans (like payday or salary loans) have minimal requirements but higher costs.

7. Repayment Method: Some loans deduct payments automatically from your salary or bank account (salary loans), while others require manual payments.

8. Collateral Requirements: For secured loans, be prepared to pledge an asset (car, house, etc.). Failure to pay can result in losing the collateral.

9. Processing Time: Some loans (e.g., payday, online personal loans) offer instant approval, while others (like mortgages) may take weeks.

10. Total Cost of Borrowing: Always calculate the total repayment amount-including interest and all fees-to understand the real cost of the loan.

Tip: Only borrow what you can afford to repay, and always compare offers from multiple lenders before making a decision

Final Words!

Access to the right financing can make or break a business, especially in the fast-moving Philippine economy. While government loan products continue to play an important role in supporting MSMEs through lower rates and structured repayment options, they often come with lengthy approval processes and strict requirements.

For businesses that need faster access to capital, larger loan amounts, or more flexible terms, alternative funding solutions can offer a smarter path forward. That’s where n90 Asia comes in.

We provide SMEs with:

• Bridge Loans for urgent working capital
• Small Business Loans for growth, inventory, or expansion
• Invoice Factoring to get funds tied up in receivables

With quick approvals, transparent fees, and loan limits up to ₱25 million, n90 Asia empowers you to move quickly and make bold business decisions—without the red tape.

Contact us today and learn how n90 Asia can help you fund your next big move.

FAQs

1. What are the best government loan programs for small businesses in the Philippines?

The best government loan programs for small businesses in the Philippines include the Pondo sa Pagbabago at Pag-Asenso (P3) for micro-entrepreneurs, the RISE UP Loan Program for recovery and growth, and the DTI CARES Program designed to help businesses recover from COVID-19. These programs offer lower interest rates, flexible terms, and no collateral requirements, making them ideal for small business owners looking for affordable financing.

2. Can I get a business loan in the Philippines with no collateral?

Yes, several government loan programs and private lenders offer unsecured business loans. Programs like the P3 and RISE UP Loans from the Department of Trade and Industry (DTI) provide financing options with no collateral required. Additionally, private lenders like N90 Asia offer quick, collateral-free business loans with simple requirements, making it easier for entrepreneurs to access the capital they need.

3. How long does it take to get approved for a small business loan?

The approval process for a small business loan can vary depending on the type of loan and the lender. Government-backed loans may take several weeks due to documentation and processing requirements. On the other hand, private lenders and online platforms often offer faster approval times, with some loans being approved in as little as 24 to 48 hours. Be sure to check with your chosen lender for their specific timelines.