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Why I was denied with my Bank Loan Application in the Philippines

loan application denied

Everything You Need to Know About a Bank Loan Application in the Philippines

What's it like to apply for a loan in banking institutions in the Philippines? Among the most common of loans are Personal Loans, Home Loans and Car Loans. Plus, some variations like OFW Loans, Employee Loans and Business Loans, to name just a few.


Do you usually get rejected with your bank loan applications? Complied with all the basic requirements, but your loan application is still denied? Here's what you need to know. Let's talk about loans and what could be your leverage.


For the most of us, we have a general mind-set that loan approvals are all about completing the BASIC REQUIREMENTS set by the banks. We never really stop to think what the factors are that affect these requirements that help to avoid getting rejected on our next or existing loan application.


The required paperwork and proof of credibility to pay that qualifies an individual to avail of a loan varies depending on what one bank offers versus another, and what these banks set as collateral strategy to keep the funds they make available for credit secure.


Well, we can summarize these usual requirements mandated by the banks prior to review and approval based on information gathered from three (03) of the major and reputable banks in the Philippines. We visited the respective websites of BPI, BDO and Security Bank and listed down common denominators in their loan offerings, and how to take a closer look at them so we can go beyond the surface and examine how we can have a better approach with our loan applications and in the event get higher chances of getting approved.


Depending on what type of loan you are applying for, there may be one or a few others that can be included as part of the prerequisites, but these four essentials remain primary and never amiss.


Proof of Identification. This is for the bank to qualify you as an individual to the eligibility of a particular loan. The documents that may be required under this usually includes government issued photo I.D.s, Citizenship, the like. Valid identification determines if you are of legal age and have sufficient residential tenure in the country that will be issuing the loan, because, every financial institution is bound by the laws of the country, this being specific to the lending sector.


Proof of Address. For purposes of billing, more often than not, and also utilized as secondary proof of identification. The acceptable proof of address documents may include but not limited to, are utility bills, financial statements, credit card statements, and the like.


Proof of Income. Perhaps, the most important bit of information and paperwork required every individual applying for a loan from the bank. This document ascertains the applicant's capability to pay back the debt which may be granted him or her. Proof of income comes in the form of pay slips, Certificate of Employment and copy of Income Tax Return for employees. For self-employed individuals, usually business owners are required to furnish copies of their business permits and financial statements. Moreover, overseas workers would need to submit like proof of remittances, Certificate of Employment and Income slips.


Contact Information. Valid contact numbers are typically consisting of both a mobile phone number and a landline phone, e.g. home phone or work phone numbers. This is required by the loaner for purposes of collections, payment reminders and at times to aid in the bank's background checks for the individual applying for the loan.


Now, these fundamental requirements may seem simple and easy to provide. Yet loan applications are still declined for some reason, and that's what needs to be asked. Let's factor in all these four requirements and analyze what could cause for a loan to be rejected. What do these four have in common? Our Proof of Identification, Proof of Address, Proof of Income and Contact Information, all contain personal information that is unique to each individual.

In the years that passed, before 2008, the Philippines unlike Western countries, for example the United States of America did not have a centralized credit bureau agency. Reputable credit reporting agencies like Experian, Equifax and Trans Union. Via the Credit Information Systems Act (CISA) of the Philippines, the Credit Information Corporation (CIC) was established. This is an office run and controlled by the government and it provides credit information. This agency was tasked to establish a system in credit reporting to be utilized by every financial institution and lending companies in the country. The information collated is derived from credit records across banks, insurance companies, lending firms and every entity in the business of financing. It aims to deliver fair assessments for creditors toward individual loans and credit applications in general.


In a Manila Times report in 2016, CIC headed by Jaime Garchitorena, President and CEO, have officially recognized 3 additional credit bureaus to help Transunion Information Solutions Inc., in assessing credit reports. Transunion Information Solutions Inc. was first accredited by the CIC in May of the same year. The three other credit bureaus were namely, CRIF Philippines and Compuscan Philippines, which are both owned by foreign investors, and CIBI Information Inc., which is locally owned. They were all entered into a Subscription Agreement to aid CIC as Special Accessing Entities (SAEs).


What is a Credit Bureau and how does this affect a borrower? A credit bureau collects and files credit information for every individual and sets up a credit rating score per person's credit history. The US credit rating system, for example, has a standard scoring system, where 300, is considered as a bad score and 850 is the best. The Philippines have yet to establish or make known to borrowers what our standard scoring is, which is only a matter of time.


So, as you can see, you may be capable of paying the loan you applied for at the time of your application, but your credit history plays a big role in the decision of the creditors to provide you the loan. Because, nowadays, lending companies such as banks are highly dependent on credit information made available to them.


It is important to note that the capacity to pay and the credibility of the payer are not synonymous to each other, instead part and parcel. The latter consist more of both and it is paramount that a borrower has not only the ability to pay but also has a good reputation with credit.


Loan applications are more than just what meets the eye. It is beyond the person's source of income. Loans are either approved or declined based on your track record as a payer and how well it shows on your paper trail as a debtor.


The presence of a credit bureau is essential in maintaining a fair and risk-free environment for both the creditor and the debtor. It also stabilizes the lending business in the country. If you want to find out your credit score, click on the link and get an assessment via the pioneering SAE in the Philippines:


Moreover, below are links to loan calculators from BPI, BDO and Security Bank:


The next time you apply for a loan from a bank, consider the pointers that have been discussed here. Remember the old adage? "Credit is good, but we need cash."

Yes, it is okay to apply for a loan, but it is important that we protect the business of our lenders by making sure we do not keep a slack on the payments. In this way, their business grows with us, and stays with us until the next time we need another loan.