Getting the right loan in times of emergency

Two major earthquakes, the strongest we’ve felt in years, rocked the country recently — a magnitude 6.1 quake in Zambales, followed by a magnitude 6.5 quake in Eastern Samar less than 24 hours apart from each other — both of which caused major damage on buildings and other structures and death.

These two recent quakes served as a wake-up call for many of us. They nudged us to heed experts’ warnings seriously, especially since earthquakes are inevitable in the Philippines as the country sits on the Pacific Ring of Fire, which accounts for 90 percent of the world’s quakes.

While the “when” is uncertain, the need to be prepared at all times is essential. Aside from our “go bags” and evacuation plans, there are available financial tools that can help us in case we need emergency funds:

• Government loans. If you live in an area that has been declared under a state of calamity, you are immediately entitled to apply for a loan from the government without interest, either from the Government Services Insurance System (GSIS), Pag-IBIG Fund, or Social Security System (SSS).

If you are a GSIS member in active service, you are eligible to avail of an emergency loan which can be processed two ways: via the GSIS Wireless Automated Processing System found in select GSIS servicing offices, and by filling up an application form in any GSIS office. This loan is payable in three years or 36 monthly installments with a compassionate interest rate.

Meanwhile, if you are a Pag-IBIG member who has made at least 24 monthly contributions and at least five monthly savings in the last six months, you are eligible to apply for a calamity loan, which must be filed within 90 days upon the declaration of state of calamity in your area. You may borrow up to 80 percent of your total accumulated value, payable in 24 months with a grace period of three months, and a calamity interest rate that is more affordable.

SSS, on the other hand, decides and announces a calamity relief package for members to apply for in case of a disaster. The package may include offers such as Direct House Repair and Improvement Loan with a reduced interest rate, early renewal of salary loans, and advanced SSS pensions for retirement, disability, and survivorship.

• Credit card cash advance facility. Another option is to avail of the cash advance feature of your credit card, which is the fastest option in times of emergencies. You just need to go to any ATM and follow the directions to avail of a cash advance. In BPI and BPI Family Savings Bank, the minimum amount is P500, while the maximum amount can go anywhere from 30 to 100 percent of the total credit limit, depending on the type of credit card you have. A transaction fee, depending on the cash advance amount will be charged.

• Personal loans. For major repairs requiring a bigger amount that cannot be covered by a cash advance or a government loan, another option is to apply for a personal loan. A personal loan of as much as three times one’s gross monthly income, up to P1 million, may be applied for, subject to credit evaluation. This is payable within 12 to 36 months, depending on the borrower’s preference. The evaluation process usually takes five to seven working days, while the crediting of loan proceeds may take one to three working days upon signing of the loan documents.

• Construction loans. For much more significant amounts, one can consider a construction loan to reconstruct one’s home, using the property as a collateral.  A construction loan has the benefit of a grace period on payment of principal until the completion of the construction. Only the corresponding interest on outstanding loan amount will have to be paid monthly during the construction period. This way, one can better manage cash flow requirements.    

To know more about these various bank loan facilities, it is good to inquire with your trusted financial advisor so you are better prepared.  Whichever financial facility you decide to avail of in case of emergencies, it is important that you only borrow the amount that you really need and ensure timely payments of your loan amortization.

It is advisable to set aside not more than 20 to 30 percent of your monthly take home pay for payment of your loan obligations.  Maintaining good credit standing allows you to continue to have access to financial loans whenever the need arises.  After all, emergencies can happen anytime.