Getting a loan for your dream car or dream home might be a daunting task, especially for freelancers and remote workers in the Philippines.
The stringent eyes of these financial institutions might be hard to handle. But worry not; securing yourself one might be easier than you think.
The Banks Want Assurance
Just like any lender, the primary concern of a banking or financial institution is whether you can pay your obligations on time. The issue with remote workers and freelancers are the seasonal flow of income.
With a varying inflow of cash, how can you prove that you have the ability to pay? Luckily, banks have recognized our emerging industry as a valid source of income. Many freelancers have been approved for real estate loans.
The question is what should we prepare for in applying for one?
For the Purpose of this Article, we will discuss the requirements to get a Home Loan because they are quite similar to Car Loans.
Also, it is relatively harder to get. If you can get approved in one, most likely, you can get approved for a Car Loan (assuming you still have enough credit standing after getting approval from a Home Loan).
File your Income Tax Return
Yes, the dreaded Income Tax Return. This tax return summarizes the income one person generates within a year. Philippine Taxation can be alien to most. But then, if you follow this guide, even a lazy man can file his own taxes.
Moreover, as an industry standard, an income of P30000 per month (depending on the loan amount) will open doors to the world of loan financing. Most banks have loan calculators on their websites.
Find the time to research for the lowest rates and email them for the maximum you can loan based on your income.
Maintain a Bank Account
It is best if you are getting a loan from a bank that you have a long-standing relationship with. For what it’s worth, the bank managers can vouch for your “ability to pay” with the continuous flow of income into your bank account.
But if not, if applying to other banks, most would require you to have 12 Months of Bank Statement issued by your bank branch.
This is based on the presumption that if you are really earning this much money, you should have a cash reserve stashed on a certain bank. Or at the very least, the flow of income should be reflected in your bank statement.
Pay your Credit Cards on Time
I can’t stress this enough. More than your ability to earn, Banks also watch out for your pattern of payment.
Even if you theoretically “can pay” because of your income figure, in their eyes, it does not necessarily mean that “you will pay” on time. Indicators for this are late payments in your credit cards and loan obligations.
After your credit investigation, even one such incident can lead to your loan being rejected. But if there were times of financial negligence in our youth or just difficult financial times back then, it is best to tell them upfront.
What is important is that you prove to them that now you changed already. And you have a better financial standing compared to before.
Show Other Supporting Documents
For Remote Workers, if you use another company or website platform to connect with your clients, a summary of past invoices can be a good supplementary document to prove your cash flow.
You can usually request it from your company (or better yet, your website platform might have it in your work profile). Likewise, freelancers can also pass their own list of invoices from clients they worked with.
Additionally, trade references of clients and suppliers can be passed. Trade references are businesses, which the borrower is engaged with regularly.
The banks will put a financial value on this list and may give them a good grasp on your financial capability.
With all these tips, the main point is to establish that you are a low-risk borrower.
The banks are in the business of borrowing and lending for interest. Out of all these applicants, are you credible enough to be trusted? Are you worthy to be invested on?
With this, I hope you get that elusive home and car you’ve been wanting. Cheers!