While OFW loans provide the needed financial boost for overseas Filipino workers’ daily expenditures and emergencies, not all OFW loan applications get approved.
Many evitable mistakes in the application process lead to delay or denial of the loan. Knowing and avoiding these mistakes will make the application process effective, and you will likely get the loan you need more smoothly.
5 Avoidable Mistakes When Applying for OFW Loans
Here’s an informed look at some of the best mistakes one can avoid while applying for OFW loans.
1. Poor Documentation
One of the significant mistakes OFWs commit when applying for a loan needs to be completed or corrected documentation. Many lenders require documentation to support and confirm their employment status, identification, income, and even remittance history. These are all primary documents, without which the processing will likely be rejected or delayed until one provides the complete proof.
Therefore, to avoid the delay or denial of the loan, it’s crucial to check with your lender in advance the documents they need for the OFW loan approval.
2. Not minding the Eligibility Criteria for the OFW Loans
Not all OFWs are automatically qualified for OFW loans. Money lending institutions have specified criteria for eligibility, such as minimum monthly income, employment status, and work contract length.
Therefore, the number one responsibility on your list should be determining your loan eligibility. If you do not meet the specified qualification criteria, equate that to a decline in your application.
3. Lack of Understanding of Interest Rates and Hidden Charges
The interest rate is one of the most important things you should know. The interest rate charges shouldn’t be a surprise to you. Therefore, you should be different from those applicants who get so delighted to get approved that they don’t even ask about interest rates and hidden charges over the loan.
Usually, if you need to be made aware of how much the loan would cost, you might be in for terrible financial shocks later. Therefore, keep this in mind when enquiring from your lender how much the interest rate on the loan is, how much the processing fee is, and how much the fines are. Awareness of these fees will put you in a better position to decide and avoid costly debt.
4. Borrowing more than you can afford to pay back
The most common mistake that OFW borrowers commit is to borrow more substantial amounts than what a proper, realistic repayment plan could afford. Usually, overborrowing can lead to skipped payments, which further balloons into a debt cycle.
Therefore, before applying for that OFW loan, estimate how much you can repay each month without compromising other critical financial responsibilities. You are supposed to calculate your budget before applying for a loan. This way, you will have borrowed within your means, maintained financial stability, and built good credit history records.
5. Failure to Compare Loan Options
With many lenders offering OFW loans, comparing the loan offers from different providers is essential. By comparing the loan packages, terms, and prevailing rates in reputed organizations, give yourself ample notice through research in advance. That way, you can find the most suitable loan that fits your income and save money by avoiding unfavorable terms.
However, this is only sometimes the case, as some borrowers will settle with what is offered by one lender, and they will not look elsewhere for more attractive interest rates and terms of settlement.
Final Words
Applying for OFW loans is one of the most practical ways to meet your financial obligations comfortably. However, we should approach the application process with eyes wide open to avoid the common pitfalls discussed above.
This way, you will secure tremendous success for the approval of the loan and a responsible way of handling your finances abroad