No matter how hard you try to make ends meet, there are times when cashflow becomes limited and if you have no one to turn to, lending firms are going to extend a helping hand by assisting you with your financial needs. Most creditors are considered as a breath of fresh air to people who are in need of instant cash. Once approved, the money becomes available within 24 hours and will be repaid on installment basis. 

Although creditors provide financial assistance, borrowers are often in confusion upon finding out that there are finance charges incurred on top of the amount borrowed. This is why creditors or lenders have to educate debtors or borrowers on the terms and conditions. 

The Republic Act No. 3765 provides detailed information of this policy:

Section 4. Any creditor shall furnish to each person to whom credit is extended, prior to the consummation of the transaction, a clear statement in writing setting forth, to the extent applicable and in accordance with rules and regulations prescribed by the Board, the following information:

(1) the cash price or delivered price of the property or service to be acquired;

(2) the amounts, if any, to be credited as down payment and/or trade-in;

(3) the difference between the amounts set forth under clauses (1) and (2);

(4) the charges, individually itemized, which are paid or to be paid by such person in connection with the transaction but which are not incident to the extension of credit;

(5) the total amount to be financed;

(6) the finance charge expressed in terms of pesos and centavos; and

(7) the percentage that the finance bears to the total amount to be financed expressed as a simple annual rate on the outstanding unpaid balance of the obligation.

Section 5. The Board shall prescribe such rules and regulations as may be necessary or proper in carrying out the provisions of this Act. Any rule or regulation prescribed hereunder may contain such classifications and differentiations as in the judgment of the Board are necessary or proper to effectuate the purposes of this Act or to prevent circumvention or evasion, or to facilitate the enforcement of this Act, or any rule or regulation issued thereunder.

Section 6. (a) Any creditor who in connection with any credit transaction fails to disclose to any person any information in violation of this Act or any regulation issued thereunder shall be liable to such person in the amount of P100 or in an amount equal to twice the finance charged required by such creditor in connection with such transaction, whichever is the greater, except that such liability shall not exceed P2,000 on any credit transaction. Action to recover such penalty may be brought by such person within one year from the date of the occurrence of the violation, in any court of competent jurisdiction. In any action under this subsection in which any person is entitled to a recovery, the creditor shall be liable for reasonable attorney's fees and court costs as determined by the court.

(b) Except as specified in subsection (a) of this section, nothing contained in this Act or any regulation contained in this Act or any regulation thereunder shall affect the validity or enforceability of any contract or transactions.

(c) Any person who willfully violates any provision of this Act or any regulation issued thereunder shall be fined by not less than P1,00 or more than P5,000 or imprisonment for not less than 6 months, nor more than one year or both.

(d) No punishment or penalty provided by this Act shall apply to the Philippine Government or any agency or any political subdivision thereof.

(e) A final judgment hereafter rendered in any criminal proceeding under this Act to the effect that a defendant has willfully violated this Act shall be prima facie evidence against such defendant in an action or proceeding brought by any other party against such defendant under this Act as to all matters respecting which said judgment would be an estoppel as between the parties thereto. 

When you are faced with financial difficulties and you have already exhausted all of your financial resources, the next step you are going to take is to turn to lending companies. When it comes to taking out a loan, the process can be long, tedious and stressful. You do not get the money right off the bat as you have to secure essential documents. Once you have complied with the requirements, you have to wait for the final verdict and the effort will pay off if your loan application has been approved. However, you need to start from scratch if your loan application has been declined. While it is not easy to get the approval of legitimate lending company, resorting to loan sharks (5-6) that leave you with no choice but to agree to excessive interest rates is not going to be a good option either.

Although micro financing has already extended a “helping hand” to people who are in need of instant cash, the thought of shouldering 20% interest is way too much. Due to the fact that not all businesses or small entrepreneurs earn reasonable income, a huge chunk of their money is intended for paying the loan’s interest. Even if the borrowers have the right to file charges due to unconscionable interest rates, they still decide to accept the situation.  One of the requirements for getting an approval for your bank loan applications is by building your credibility. It might seem like a simple step but it will not be difficult for banks to approve your loan application if you have the ability to pay them. What better way to start building your credibility than opening your own savings account.

It also pays off to be keen on selecting the lending company you should put your trust in. Just because you need extra spending money does not necessarily mean you should continue to tread upon an unfamiliar territory without arming yourself with information. You can drown yourself in a cesspool of debt if you just allow yourself to be tricked into believing that these financial trolls are indeed your “savior” in times of need. As for lending companies, RA 9474 or Lending Company Regulation Act of 2007 provides information on the minimum requirements and standards they need to comply with.

“SEC. 6. Citizenship Requirements. - Upon the effectivity of this Act, at least a majority of the voting capital stock shall be owned by citizens of the Philippines.

The percentage of foreign-owned voting stock in any lending company existing prior to the effectivity of this Act, if such percentage is in excess of forty-nine percent (49%) of the voting stock, shall not be increased but may be reduced and, once reduced, shall not be increased thereafter beyond forty-nine percent (49%) of the voting stock of the lending company. The percentage of foreign-owned voting stocks in any lending company shall be determined by the citizenship of the individual stockholders. In the case of corporations owning shares in a lending company, the citizenship of the individual owners of voting stock in such corporations shall be the basis in the computation of the percentage.

No foreign national may be allowed to own stock unless the country of which he is a national accords reciprocal rights to Filipinos.

SEC. 7. Amount and Charges on Loans. - A lending company may grant loans in such amounts and reasonable interest rates and charges as may be agreed upon between the lending company and the debtor: Provided, That the agreement shall be in compliance with the provisions of Republic Act No. 3765, otherwise known as the "Truth in Lending Act" and Republic Act 7394, otherwise known as the "Consumer Act of the Philippines": Provided, further, That the Monetary Board, in consultation with the SEC and the industry, may prescribe such interest rate as may be warranted by prevailing economic and social conditions.

SEC. 8. Maintenance of Books of Accounts and Records. - Every lending company shall maintain books of accounts and records as may be required by the SEC and prescribed by the Bureau of Internal Revenue and other government agencies. In case a lending company engages in other businesses, it shall maintain separate books of accounts for these businesses.

The Manual of Accounts prescribed by the BSP for lending investors shall continue to be adopted by lending companies for uniform recording and reporting of their operations, until a new Manual of Accounts shall have been prescribed by the SEC.

It shall issue the appropriate instruments and documents to the parties concerned to evidence its lending and borrowing transactions.”