How to identify good vs bad loans

MANILA, Philippines —

In a country like the Philippines, loans can be availed of from many sources, from both legitimate and not-so-legitimate ones. Loans may be bad if you not only take them from “suspicious” sources but also in amounts and in terms that you are not capable of paying back.According to the Bangko Sentral ng Pilipinas , over 34 million Filipinos still remain unbanked in 2022. This is why many turn to informal loans that come with more flexible terms and practically no paperwork.

Other than the ones with not-so-ideal sources of funds, another bad type of loan is the one that you take out just to pay off another loan. This creates a cycle of debts that costs you even more money in the long run due to ballooning interest payments on top of the fact that this type of loan can be difficult to escape from.

Another bucket list item that can be easier to achieve through formal avenues is a home loan, as it gives you long-term payment schedules that can fit your family’s budget.

Source: Loan Digest (loandigest.net)

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