Q U I Z # 1 12.

Its main goal is to provide loans and grants to low and

middle-income countries. WB
A. Choose 4 of the bank categories and write 3 distinct 13. The monitor member's economic and financial policies
descriptions: are called "surveillance." IMF
14. The goal is to achieve a stable, healthy, versatile, and
1. Commercial Bank sustainable Asia and the Pacific. ADB
▪ Capital Bank 15. Its funds are accumulated mainly from member
▪ Liquidity Bank countries' payment of quotas.
▪ Lending and Borrowing 16. It serves as the bank of last resort. BSP
2. Universal Bank 17. It has a significant interest in environmental
▪ Whole Sale sustainability. BIS
▪ Retail 18. It was created at the 1944 Bretton Woods Conference,
▪ Investment the largest funding source among developing countries.
3. Cooperative Bank ADB
▪ Own by members of the corporation 19. It acts as a bank for central banks. BIS
▪ To provide loan to each other 20. Its main purpose is to reduce poverty by providing loans
▪ They save money collectively and grants to member countries. ADB
4. Thrift Bank
▪ Accessibility of thrift banks to people in the 21. It combines the three primary banking services under one
community roof. UNIVERSAL BANK
▪ Localize 22. The primary operations are lending and borrowing.
▪ Create Frugality – careful management of COMMERCIAL BANK
resources/money 23. Its purpose was to change customer behavior to frugality.
5. Rural Bank THRIFT BANK
▪ Promotes comprehensive development in 24. The purpose of providing financial and credit services its
attaining equitable distribution of opportunities, members with shared risks and benefits. COOPERATIVE BANK
income and wealth 25. It mobilized financial resources and control and extended
▪ Sustaining increased in the production of products credits to farmer's cottage industries. RURAL BANKS
and services for benefit of all and the country itself. 26. The expectation was that these banks would start offering
▪ Expand productivity and the quality of life for the various products and services to individual customers with a
people of the community. minimum opening amount. THRIFT BANK
27. The aim is not to provide services and make a profit to its
B. What is the Mandate of BSP that should benefit bank members. COOPERATIVE BANK
depositors, borrowers, and others? 28. A locally or privately managed financial banking institution
- The BSP extends discounts, loans and advances to that takes deposits and withdrawal functions. ALL OF THE
banking institutions in order to influence the volume of credit ABOVE
consistent with objective of price stability and maintenance of 29. This bank is formed to support government initiatives. BSP
financial stability. 30. Republic Act No: 7353 is the creation RURAL BANK of Bank.

C. Write 1 description of an Expansionary Policy of BSP. 31/32. Bangko Sentral ng Pilipinas provides Philippine
- Expansionary policy increases the supply of banknotes and coins to prevent COUNTERFEIT
money and credit to generate economic growth. A central 33/34. Acronym “ATM” means AUTOMATED TELLER
bank may deploy an expansionist monetary policy to reduce MACHINE
unemployment and boost growth during hard economic 35/36. Used as a non-cash payment for purchases where the
times. payment is on a later date. CREDIT CARD
37/38. The BSP policy is “slows down money supply”
Q U I Z # 2 CONTRACTIONARY POLICY
39/40. The conversion of P20.00 banknotes to coin according
MULTIPLE CHOICE ITEMS: to BSP is due to OVERUSED
1. Subterranean Underground River in Puerto Princesa,
Palawan P500.00 banknotes WHAT IS THE 3 CORE FUNCTIONS OF BANGKO SENTRAL NG
2. Diosdado P. Macapagal P200.00 banknotes PILIPINAS?
3. Leyte Landing P50.00 banknotes • Official depositor
4. Apolinario Mabini P5.00 coin • Official issuer of the money
5. Jose Rizal P1.00 coin • Custodial of the money reserve
6. Mayon Volcano in Albay P100.00 banknotes • Determinations of foreign exchange
7. Andres Bonifacio P10.00 coin • Lenders of last resort
8. EDSA People Power I P500.00 banknotes
9. Philippine Tarsier P200.00 banknotes LIST 3 DESCRIPTIONS OF EXPNASIONARY POLICY
10. Manuel l. Quezon P20.00 coin • Reducing cause of borrowing.
• Expanding the money supply faster than usual or
11. It provides traditional banking services. BIS lowering short term interest rates.
 • Increase the money supply in liquidity in the
market. GENERAL BANKING LAW

Q U I Z # 3
Republic Act No. 8791 an act providing for the
regulation of the organization and operations of banks,
1. A borrower can repay a loan based on the debt versus
income. CAPACITY quasi-banks, trust entities and for other purposes.
2. It focuses on the credit history of the borrower.
CHARACTER 1. Safeguard: It sets the rules for banks to keep your
3. The component of the loans is where the lender money safe and make sure everything runs
computes the cost of the loan. INTEREST smoothly. Imagine it like a life jacket for your bank
4. It refers to the borrower's financial management of its account.
equity and investment. CAPITAL
2. Boost: It helps the economy grow by making sure
5. It examines the overall financial stability of the
banks have enough money to lend to businesses
borrower's current and future wealth. CAPITAL
6. It assesses the specific purpose of the loan. CONDITION and people. Think of it like fertilizer for the
7. It measures the borrower's ability to repay the loan. financial garden.
CAPACITY 3. Fair Play: It protects you from unfair treatment by
8. Another term is the amount the lender lent to the banks and gives you basic rights as a
borrowers for a specific purpose. LOAN customer. Picture it like a referee ensuring
9. It contributes to a lender's decision to approve a loan everyone plays by the rules.
based on the borrower's financial resources available.
CAPITAL
Functions
10. A good indicator of a borrower's confidence that a loan
can be disapproved is based on its willingness to pay any 1. Bank Organizer: It puts different types of banks in
obligations. CHARACTER their own categories, like big supermarkets
11. In CHARACTER includes evaluating whether the (universal banks) and friendly neighborhood
borrower can repay the loans on time. stores (rural banks). This makes sure everyone
12. The approval assessment on the borrower's liquidity is knows what each bank can do and keeps things
an excellent representation to complete the processing orderly.
of a loan. CAPITAL
2. Money Watchdog: It gives the Bangko Sentral, like
13. It represents the primary security of the loan in the long
a superhero, the power to watch over all the
run. COLLATERAL
14. The term used on the obligation must be repaid in a banks and make sure they follow the rules. This
stipulated period. REPAYMENT keeps your money safe and the whole system fair.
15. It represents a borrower's opportunity to cover low 3. Fairness Coach: It sets the ground rules for banks,
incoming funds. CAPITAL like how much money they need to have and how
16. The 5 C's of credit evaluation is used to measure a they should treat customers. This stops any unfair
borrowers. CREDIT WORTHINESS play and protects you from getting tricked.

Activity 1(Individual)
UNIVERSAL BANKS
▪ (With Puzzle)
▪ What happened to the reserve requirement when you (All needs in one place banking, investing, insurance)
have expansionary policy?

When implementing an expansionary monetary policy, the

reserve requirement typically decreases. To boost the
economy, central banks loosen the grip on banks' money.
They lower the reserve requirement, freeing up more funds
for loans and spending. This injects extra fuel into the
economic engine, driving growth.

GROUP ACTIVITY 1:
• What does the new 1000-peso bill call? POLYMER
BANKNOTE
• What is the feature of new 1000?
• What is ADB?
• What is the goal of WB? • Refers to those banks that offers a wide range of
• What is the difference between deposit slip and financial services
withdrawal slip?
• Includes not only services related to savings and
• Bonus question: what is BSP role of payment and
Settlement system? loans but also investments
• Combination of the aspects of commercial and
investment banking.
3 Main services of Universal Banks
Retail banking
• Its services members of the public and small and
medium-size businesses. It focuses on looking
after customers’ money as well as offering loans
and mortgages.
• Retail banking includes the following services:
savings accounts, checking accounts (UK: current
accounts), overdrafts, personal loans, and
mortgages.
• It also includes the provision of credit/debit cards,
travelers’ checks, safe deposit boxes, and
certificates of deposit.
Wholesale banking
• It involves borrowing and lending money on a very
large scale. Retail banks deal with relatively small
amounts per customer. Wholesale banks, on the
other hand, deal with massive amounts.
• Wholesale banks’ customers include pension
funds, giant companies, governments, and other
financial institutions.
Investment banking
• It focusses on services for major investors and
companies. They specialize, for example, in the
investment requirements of pension funds.
• Investment banks do not take deposits. In the UK,
Ireland, and some other Commonwealth
countries, people call them merchant banks.
• The main activities of investment banks are asset
management, M&A, raising capital, securities
trading, and securities underwriting. M&A stands
for Mergers and Acquisitions.
Services Offer:
• Deposit Account
• Loans and Credit
• Asset and Wealth Management
• Investment Advisory
• Payment Processing
• Securities Transaction
• Financial Analysis
COMMERCIAL BANKS
(Your everyday bank for basic stuff like checking,
loans, mortgages)
A commercial bank is a financial institution
that provides services like loans, certificates of
deposits, savings bank accounts bank overdrafts, etc. to
its customers. These institutions make money by
lending loans to individuals and earning interest on
loans. Various types of loans given by a commercial
bank are business loans, car loans, house loans,
personal loans, and education loans.
• It refers to a financial institution that accepts
deposits
• Offers checking account services
• Make various loans
• Offers basic financial products like certificates of
deposit (CDs)
• Savings accounts to individuals and small
businesses.
Services Offers:
• Deposit Accounts
• Credit Cards
• Loan Services
• Treasury Management
• Insurance
• Wealth Management
THRIFT BANKS
(Smaller, community-focused with niche product from
students, retirees, low-income)
Thrift banks are primarily engaged in
mobilizing the small savings of the people. They
encourage the habit of thrift and savings, and provide
loans at reasonable interest rates.
It has motivated the low-income groups and
school children to save their money in the bank. The
low interest rates of the bank have saved the poor
borrowers from the loan sharks.
1. These banks are financial institutions that relieve
the monopoly stress and offer their account
holders facilities like savings accounts, mortgage
loans, etc. The purpose is to accept deposits and
provide mortgage loans to their customers.
2. The interest on the savings deposited by the
customers in the bank is high. In contrast, the
customers’ curiosity about the mortgage loan is
relatively lower than commercial banks and credit
unions.
3. They formed these thrift banks to offer their
customers mortgage loan facilities, enabling them
to make savings from time to time. It also focuses
on relieving the mortgage and lending market
from a monopoly of domestic or foreign banking
institutions.
4. These banks also offer mortgages at lower costs
and savings accounts that pay a higher rate of
interest in comparison to national and
international banking institutions. These banks
 operate in the best interest of the local people.
For this reason, they offer savings accounts and
mortgage loans that could benefit the locals.
3 types of thrift banks
1. Savings Bank- These banks generate funds from
selling savings to customers and investing
in mortgage loans.
2. Private Development Bank- These banks are
formed to support government policies.
3. Stock Savings and Loan Associations- A locally or
privately managed financial banking institution
that takes long-term deposits to provide
amortized home loans.
COOPERATIVE BANKS
(Member-owned, profits reinvested back into the
community)
A cooperative bank is one which is organized,
owned and controlled by cooperative organizations, for
the purpose of providing financial and credit services to
cooperatives and their members. Its members are
either regular or associate. Only cooperative
organizations that hold common shares may be regular
members.
Non-cooperative organizations or
associations, individual members of the bank's
member-primary cooperatives, local government units,
government agencies and government-owned and
controlled financial institutions holding preferred
shares may be associate members.
• Community-focused: They cater to the specific
financial needs of a particular community or
group, like farmers, teachers, or small businesses.
• Financial services: They offer basic banking
services like savings accounts, current accounts,
loans, and insurance.
• Affordable loans: They often provide loans at
lower interest rates than traditional banks,
particularly for housing, education, and business
needs within their community.
• Democratic governance: Members own and
control the bank, with voting rights to elect a
board and influence decisions.
• Shared profits: Profits are either reinvested in the
community or distributed as dividends to
members.
• Local focus: They prioritize supporting local
businesses and economic development, fostering
a sense of shared prosperity.
RURAL BANKS
(Serves rural areas and farmers, offers specialized
agricultural loans and microfinance)
A rural bank is a private banking institution
that serves rural areas that mobilizes financial
resources and manages and provides loans to people
who want to have a business but struggle in the capital,
especially in the Rural Areas.
• Rural banks accept deposits in rural
communities, helping people save and access
financial services.
• They loan out these deposits, primarily supporting
farmers, fishers, small businesses, and local
entrepreneurs.
• Many rural banks act as hubs for sending and
receiving money, especially for overseas workers
supporting families back home.
• Through microfinance programs, they empower
individuals with small loans to start or grow their
businesses.
• Beyond just transactions, some offer financial
education, insurance, and investment options to
build financial literacy and wealth.
• They actively participate in community
development, backing local
businesses, infrastructure projects, and social
initiatives.
BANGKO SENTRAL NG PILIPINAS
Mandate
• Maintain price stability by keeping inflation low
and stable. This helps to create a predictable and
healthy economic environment for businesses and
individuals.
• Promote a balanced and sustainable growth of the
economy and employment. This involves
managing the money supply and interest rates to
support economic growth without causing
inflation.
• Ensure the liquidity, solvency, and efficiency of the
financial system. This involves overseeing the
operation of banks and other financial institutions
to make sure they are sound and can withstand
financial shocks.
Functions
• Monetary policy formulation and
implementation: The BSP sets interest rates and
manages the money supply to achieve its inflation
target.
• Bank supervision: The BSP oversees the operation
of banks and other financial institutions to ensure
 they are complying with regulations and are
financially sound.
• Currency issuance and management: The BSP
prints and distributes Philippine peso banknotes
and coins, and manages the country's foreign
exchange reserves.
• Research and analysis: The BSP conduct research
on economic and financial issues to inform its
policy decisions.
• Financial education and consumer protection: The
BSP promotes financial literacy and consumer
protection to help Filipinos make informed
financial decisions.
Responsibilities
• Submit an annual report to the President and
Congress. This report outlines the BSP's activities
and achievements for the previous year.
• Be audited by the Commission on Audit. The
Commission on Audit is an independent
government agency that audits the financial
statements of government agencies.
• Cooperate with other government agencies. The
BSP works with other government agencies, such
as the Department of Finance and the Securities
and Exchange Commission, to achieve common
goals.
ELI M. REMOLONA, JR.
Governor of the Bangko Sentral ng Pilipinas
FELIPE M. MEDALLA
Former Governor of the Bangko Sentral ng Pilipinas
What is the meaning of BSP as lenders of last resort?
The Bangko Sentral ng Pilipinas (BSP) serves
as the lender of last resort in the Philippines. As the
central bank of the country, the BSP provides
emergency financial assistance to commercial banks,
particularly during times of financial crisis. This
assistance can take the form of liquidity provision,
where the BSP offers loans to financial institutions or
the financial market against collateral. Additionally, the
BSP may also engage in bank bailouts, which involve
recapitalizing commercial banks and providing risk-
capital support that does not need to be repaid. The
role of the BSP as the lender of last resort is crucial in
maintaining financial stability and restoring confidence
in the banking system during times of crisis.
Is stock market under BSP?
The Bangko Sentral ng Pilipinas (BSP) does
not directly regulate the stock market in the
Philippines. While the BSP plays a crucial role in the
country's financial system, its primary focus is on
monetary policy and maintaining banking system
stability.
The regulation and supervision of the
Philippine stock market is primarily handled by the
Securities and Exchange Commission (SEC). The SEC is
responsible for ensuring fair and orderly trading,
protecting investors, and promoting development of
the capital market.
However, while not the direct regulator, the
BSP does have some indirect influence on the stock
market through its monetary policy decisions. Changes
in interest rates, foreign exchange policies, and other
macroeconomic factors can impact the performance of
the stock market. Additionally, the BSP plays a role in
promoting financial inclusion, which can lead to
increased participation in the stock market over time.
• BSP: Central bank responsible for monetary policy
and banking system stability. Indirectly
influences the stock market through its decisions.
• SEC: Regulator and supervisor of the stock
market. Directly oversees trading activities and
investor protection.
What are reserve requirements?
• Reserve requirements are the amount of funds
that a bank holds in reserve to ensure that it is able
to meet liabilities in case of sudden withdrawals.
• Reserve requirements are a tool used by the
central bank to increase or decrease the money
supply in the economy and influence interest
rates.
• Reserve requirements are currently set at zero as
a response to the COVID-19 pandemic.
What Does a Lower Reserve Requirement Mean?
A lower reserve requirement means the
Federal Reserve is pursuing an expansionary monetary
policy. The lower reserve requirement means banks do
not need to keep as much cash on hand. This gives
them more money for consumer and business loans.
What Does a Higher Reserve Requirement Mean?
A higher reserve requirement means the
Federal Reserve is pursuing a contractionary monetary
policy. If banks have a higher reserve requirement,
there will be less money available to lend to consumers
and businesses. However, this money will then provide
the banks with a level of protection against possible
bank failure should there be an economic downturn or
a run on the bank.
How important is reserve requirements?
• Safety net: They force banks to keep some cash on
hand, preventing meltdowns if everyone wants
their money back at once.
• Economic control: They allow the central bank to
adjust the amount of money flowing
around, fighting inflation and boom-bust cycles.
• Careful lending: They nudge banks to lend
responsibly, reducing risky investments that could
hurt everyone.
But there's a flip side:
• Less lending: Less money for businesses and
people to borrow, potentially slowing down
growth.
• Higher interest rates: Banks may charge more on
loans to cover the "locked-up" money.
• Paperwork pain: Banks have to track and report
on their reserves, adding extra work.
Important of Debit Card, Credit Card, ATM and Checks
Debit Card:
• Immediate access to funds: Directly linked to your
bank account, allowing you to spend as much as
you have available (no borrowing involved).
• Convenient and widely accepted: Used for
purchases both online and in-stores, often with
contactless payment options.
• Lower risk of overspending: Helps you stay within
budget as you're not using credit.
• No additional fees: Generally free to use for daily
transactions, although some ATM withdrawals
might incur fees.
Credit Card:
• Building credit: Responsible credit card use helps
build a positive credit history, which can be
beneficial for future loans and mortgages.
• Purchases protection: Often offer purchase
protection and extended warranties on items you
buy.
• Rewards and benefits: Many cards offer reward
points, cashback, or travel miles for your
spending.
• Emergency backup: Useful for unexpected
expenses or online purchases where debit cards
might not be accepted.
Automated Teller Machine (ATM):
• 24/7 cash access: Get cash
anytime, anywhere, within network ATMs.
• Convenient cash deposits: Some ATMs allow
depositing checks or cash into your account.
• Emergency cash flow: Provides access to your
money even if you lose your wallet or cards.
• Alternative to carrying large amounts of
cash: Safer and more convenient than carrying
large sums.
Checks:
• Formal payment option: Preferred for certain
transactions like rent payments or paying
contractors.
• Record of payment: Provides a paper trail for both
parties involved in the transaction.
• Delayed payment: Gives you time to ensure
sufficient funds before the check clears.
• Convenient for large payments: Less cumbersome
than carrying or transferring large amounts of
cash.
Number of points and value of coins in the market
1. Cryptocurrency:
• Number of coins: This varies greatly depending on
the specific cryptocurrency. As of December 17,
2023:
o Bitcoin (BTC): 21 million+ in circulation
o Ethereum (ETH): 122 million+ in
circulation
o Binance Coin (BNB): 200 million+ in
circulation
o Many other cryptos exist with varying
circulation amounts.
• Value in PHP: Again, this is dynamic and subject to
market fluctuations. As of today:
o Bitcoin: ≈ ₱863,000 per coin
o Ethereum: ≈ ₱63,000 per coin
o Binance Coin: ≈ ₱14,600 per coin
o Prices for other cryptos vary
extensively.
2. Loyalty Programs:
• Number of points: Difficult to gauge accurately as
it depends on individual program membership
and activity. However, popular programs like SM
Advantage Card and BPI Rewards see millions of
transactions and point awards yearly.
• Value in PHP: Points earn different values based
on redemption options. For example, 1 SM
Advantage Card point = ₱1 discount, while 1 BPI
Rewards point may equate to different voucher
values or travel miles.
3. Game Points:
• Number of points: Extremely variable depending
on the specific game and its player base. Popular
mobile games like Mobile Legends: Bang Bang and
Call of Duty: Mobile likely have billions of in-game
currency units in circulation.
• Value in PHP: Similar to loyalty programs, game
points have varying values based on their use
within the game ecosystem. For instance, Mobile
Legends Diamonds can purchase heroes, skins,
and other digital items. Pricing structures differ
across games.
4. Other Points Systems:
• Number of points: Examples include Grab Points
and Lazada Bonus Points. Both platforms have
millions of users earning and utilizing points
through their services.
• Value in PHP: Similar to game points, these points
have value within their respective ecosystems.
Grab Points can provide discounts on rides,
deliveries, and other Grab services, while Lazada
Bonus Points offer discounts on future purchases
or other Lazada rewards.
Value of bills circulated in the market
As of October 2023 (the latest data available), the total
value of bills circulated in the Philippines is estimated
to be roughly ₱2.3 trillion. This comprises both
banknotes and coins:
• Banknotes: Approximately 4.4 billion pieces
of banknotes with a total value of ₱2.25
trillion.
• Coins: Around 36 billion pieces of coins in
circulation, amounting to roughly ₱49.7
billion.
Here's some additional information about Philippine
currency:
• Breakdown of banknotes: The smallest legal
tender in wide circulation is the ₱20 bill,
while the largest is the ₱1000 polymer
banknote. Other common denominations
include ₱50, ₱100, ₱500, and ₱1000.
• Issuing authority: The Bangko Sentral ng
Pilipinas (BSP) is the central bank of the
Philippines and is responsible for issuing legal
tender currency.
• Regular updates: The BSP regularly updates
the design of Philippine banknotes and coins
to improve security and prevent
counterfeiting.
Asian Development Bank (ADB)
• The Asian Development Bank's (ADB) primary
mission is to promote economic growth and
cooperation in the Asia-Pacific Region.
• The majority of the ADB’s members are in the
Asia-Pacific region.
• The ADB provides assistance to its developing
member countries in the region.
• It also provides financing to certain private sector
projects as well as public-private partnerships
through grants, loans, technical assistance, and
equity investments to promote development.
• The ADB is controlled by member countries, with
the U.S. and Japan having the largest stake.
What is Asian Development Bank do?
ADB assists its members, and partners, by
providing loans, technical assistance, grants, and equity
investments to promote social and economic
development.
What is the aim of Asian Development Bank?
The Asian Development Bank (ADB)
envisions a prosperous, inclusive, resilient, and
sustainable Asia and the Pacific, while sustaining its
efforts to eradicate extreme poverty in the region.
Functions:
• Lending: Provides loans and grants to
governments, private companies, and civil society
organizations for development projects.
• Technical Assistance: Offers expertise and
resources to help countries
design, implement, and manage development
programs.
• Knowledge Sharing: Conducts
research, generates knowledge, and promotes
innovation to address development challenges.
• Policy Dialogue: Engages with
governments, businesses, and civil society to
formulate and implement effective development
policies.
Goals:
• A prosperous, inclusive, resilient, and sustainable
Asia and the Pacific.
• Eradicating extreme poverty.
• Building a prosperous inclusive Asia, while
sustaining efforts to eradicate extreme poverty.
Purposes:

• Poverty Reduction: Aims to eradicate extreme
poverty in Asia and the Pacific by 2030.
• Inclusive Growth: Promotes economic growth
that benefits all people, creating opportunities for
everyone.
• Sustainable Development: Supports
environmentally friendly and resilient
development that meets the needs of present and
future generations.
• Regional Cooperation: Fosters collaboration and
partnerships among Asian countries to address
shared challenges and achieve common goals.
Importance:
• The ADB is a key driver of economic growth and
development in Asia.
• It helps reduce poverty, improve living standards,
and create jobs.
• The ADB promotes regional cooperation and helps
countries address common challenges like climate
change and natural disasters.
• It plays a vital role in building a more sustainable
and equitable future for Asia.
International Monetary Fund (IMF)
The International Monetary Fund (IMF) is an
international organization that promotes
global economic growth and financial stability,
encourages international trade, and reduces poverty.
• The IMF's mission is to promote global economic
growth and financial stability, encourage
international trade, and reduce poverty around
the world.
• The IMF was originally created in 1945 as part of
the Bretton Woods agreement, which attempted
to encourage international financial cooperation
by introducing a system of convertible currencies
at fixed exchange rates.
• The IMF collects massive amounts of data on
national economies, international trade, and the
global economy in aggregate and provides
economic forecasts.
• One of the IMF's most important functions is to
make loans to countries that are experiencing
economic distress to prevent or mitigate financial
crises.
What is the function of the International Monetary
Fund IMF?
The IMF has three critical missions: furthering
international monetary cooperation, encouraging the
expansion of trade and economic growth, and
discouraging policies that would harm prosperity. To
fulfill these missions, IMF member countries work
collaboratively with each other and with other
international bodies.
Goals:
• To maintain a stable and open international
monetary system.
• To promote balanced and sustainable economic
growth.
• To reduce poverty and improve living standards
around the world.
Purposes:
• Promoting International Monetary
Cooperation: Fosters collaboration among
member countries on international monetary
matters.
• Ensuring Financial Stability: Promotes stable
exchange rates, orderly international
payments, and sustainable economic growth.
• Reducing Poverty: Supports developing countries
in their efforts to achieve sustainable
development and reduce poverty.
Importance:
• The IMF plays a critical role in preventing and
mitigating global financial crises.
• It promotes economic stability and growth,
benefiting all member countries.
• The IMF helps developing countries build stronger
economies and reduce poverty.
• Its actions impact global trade, investment, and
economic development.
World Bank (WB)
The World Bank is an international
organization dedicated to providing financing, advice,
and research to developing nations to aid their
economic advancement. The bank predominantly acts
as an organization that attempts to fight poverty by
offering developmental assistance to middle- and low-
income countries.
• The World Bank is an international organization
that provides financing, advice, and research to
developing nations to help advance their
economies.
• The World Bank and International Monetary Fund
(IMF)—founded simultaneously under the
Bretton Woods Agreement—both seek to serve
international governments.
• The World Bank has expanded to become known
as the World Bank Group with five cooperative
organizations, sometimes known as the World
Banks.
• The World Bank Group offers a multitude of
proprietary financial assistance, products, and
solutions for international governments, as well as
a range of research-based thought leadership for
the global economy at large.
• The World Bank's Human Capital Project seeks to
help nations invest in and develop their human
capital to produce a better society and economy.
What is the role of the World Bank?
The World Bank is an international
development organization owned by 187 countries. Its
role is to reduce poverty by lending money to the
governments of its poorer members to improve their
economies and to improve the standard of living of
their people.
What is the World Bank explained?
The World Bank is a vital source of financial
and technical assistance to developing countries
around the world. We are not a bank in the ordinary
sense but a unique partnership to reduce poverty and
support development. The World Bank Group
comprises five institutions managed by their member
countries.
What are the main functions of the World Bank?
Its role is to reduce poverty by lending
money to the governments of its poorer members to
improve their economies and to improve the standard
of living of their people. The Bank is also one of the
world's largest research centers in development.
Goals:
• To end extreme poverty and boost shared
prosperity in a sustainable manner.
• To promote gender equality and empower
women.
• To invest in climate action and build climate
resilience.
• To promote good governance and institutions.
Purposes:
• Ending Extreme Poverty: Aims to eradicate
extreme poverty by 2030, ensuring everyone has
access to basic necessities and a chance to
improve their lives.
• Promoting Shared Prosperity: Strives to create
economic growth that benefits all people, not just
a select few, building a more equitable world.
• Sustainable Development: Supports
environmental protection, climate change
mitigation, and responsible resource
management for a sustainable future.
• Good Governance: Encourages transparent and
accountable governments, promoting effective
institutions and rule of law for positive
development outcomes.
Importance:
• The WB plays a vital role in reducing poverty and
improving living standards in developing
countries.
• It supports infrastructure development,
healthcare, education, and other critical sectors,
driving economic growth and social progress.
• The WB promotes sustainable development
practices, protecting the environment and
ensuring long-term benefits for future
generations.
• It fosters cooperation and partnerships among
countries, tackling global challenges like climate
change and poverty collectively.
Bank for International Settlements (BIS)
The Bank for International Settlements (BIS)
is an international financial institution offering banking
services for national central banks and a forum for
discussing monetary and regulatory policies. The BIS,
which is owned by 63 national central banks, also
provides independent economic analysis.
• BIS serves as a forum for monetary policy
discussions and facilitates financial transactions
for central banks.
• It is governed by a board elected by the 63 central
banks with ownership stakes, with permanent
seats reserved for the U.S., U.K., Germany, France,
Italy, and Belgium.
• BIS shares offices with, and provides a secretariat
for, independently governed international
committees and associations focused on
economic co-operation.
• BIS is the rare international financial organization
with for-profit operations.
What is the role of the BIS bank?

As the bankers' bank, the BIS serves the Different types of features of the Philippine Currency
financial needs of member central banks. It provides
gold and foreign exchange transactions for them and Coins
holds central bank reserves. The BIS is also a banker and
fund manager for other international financial 1 – Peso coin
institutions.
• Value 1.00 Philippine peso
What is the responsibility of the bank for the • Mass 6g
International Settlements? • Diameter 24.00 mm
• Thickness 2.05 mm
It serves as a bank for member central banks, • Edge Round/Segmented (Plain and Reeded
and its role is to foster international monetary and sections)
financial stability and financial corporation. • Composition Nickel-plated steel
• Years of minting 1861–present
Goals:
Obverse – Jose Rizal
• To contribute to a stable and resilient Reverse – Waling-Waling
international monetary and financial system.
• To promote cooperation among central banks in 5 – Peso coin
pursuit of sound monetary and financial policies. • Value 5.00 Philippine pesos
• To provide high-quality research and analysis on • Mass 7.4 g
monetary and financial issues. • Diameter 25 mm
• To assist central banks in developing countries in • Thickness 2.20 mm
strengthening their institutional capacity. • Edge Plain (original version: 2017–2019)
• Plain/Nonagonal (9-sided shape): 2019–present)
Purposes: • Composition Nickel-plated steel
• Years of minting 1975–1982
• Promoting Central Bank Cooperation: Fosters 1991–present
dialogue and collaboration among central
banks, enabling them to address global challenges Obverse – Andres Bonifacio
collectively. Reverse – Tayabak
• Enhancing Financial Stability: Conducts research
and analysis to identify and mitigate financial 10 – Peso coin
risks, contributing to a more stable global financial • Value 10.00 Philippine pesos
system. • Mass 8.0 g
• Supporting Sound Banking Practices: Promotes • Diameter 27 mm
best practices and standards for central bank • Thickness 2.05 mm
operations, contributing to efficient and effective • Edge Round/Segmented (Plain and Reeded
financial systems. sections) (Bi-metallic version)
• Reeded with edge inscription of "BANGKO
Importance: SENTRAL NG PILIPINAS" in italics
• Composition Bi-metallic (Cupronickel ring with
• The BIS plays a vital role in preventing and an aluminum-bronze center plug) (2000–2017)
mitigating global financial crises. • Nickel-plated steel (2017–present)
• It enhances financial stability by promoting sound • Years of minting 2000–present
banking practices and collaborative solutions.
• The BIS serves as a neutral platform for central Obverse – Apolinario Mabini
banks to share knowledge and expertise, Reverse – Medinilla magnifica (Kapa-kapa)
advancing global financial cooperation.
20 – Peso coin
• Its research and analysis inform central bank
policies, impacting economic stability and well- • Value 20.00 Philippine pesos
being worldwide. • Mass 11.50 g
• Diameter 30 mm
• Thickness 2.2 mm
• Edge Plain with edge inscription of "BSP" in italics 500 – Peso banknotes
at six angles • Value ₱500
• Composition Bi-metallic (Bronze-plated steel • Width 160 mm
ring with a Nickel-plated steel center plug) • Height 66 mm
• Years of minting 2019–present • Security features Security fibers,
watermark, see-through registration device,
Obverse – Manuel L. Quezon concealed value, security thread, optically variable
Reverse – Scyphiphora hydrophylacea (Nilad) ink, tactile marks, rolling bar effect
• Material used 80% cotton
Banknotes • 20% abacá fiber
• Years of printing 1903–1953; 1944–1945;
50 – Peso banknotes 1953–1959; 1987–present
• Value ₱50
• Width 160 mm Obverse – Corazon Aquino, Benigno Aquino Jr.
• Height 66 mm Reverse – Subterranean River National Park, blue-
• Security features Security fibers, naped parrot (Tanygnathus lucionensis), Southern
watermark, see-through registration device, Philippines cloth design
concealed value, security thread, tactile marks
• Material used 80% cotton, 20% abaca fiber 1000 – Polymer banknotes
• Years of printing 1852–present
The obverse side features two of the country’s national
Obverse – Sergio Osmenia symbols: the Philippine Eagle (Pithecophaga jefferyi) as
Reverse – Taal Lake, Giant Trevally (Maliputo) (Caranx its focal point, and the Sampaguita (Jasminum sambac).
ignobilis), Batangas weave design The Philippine Eagle exemplifies the Filipino’s
uniqueness, strength, power, love for freedom, as well
100 – Peso banknotes as a sharp vision for the country’s future. Meanwhile,
Value ₱100 the Sampaguita symbolizes purity, simplicity, humility,
Width 160 mm and strength.
Height 66 mm
Security features Security fibers, watermark, see- The reverse side retains images of the Tubbataha Reefs
through registration device, concealed value, security Natural Park, declared as a UNESCO World Heritage
thread, tactile marks Site, and the South Sea Pearl.
Material used 80% cotton, 20% abaca fiber
Years of printing 1903–1959, 1961–present THE BANKS DEPOSITS SLIP, WITHDRAWAL SLIP, ATM,
CREDIT CARD, AND CHECKS
Obverse – Manuel A. Roxas
Reverse – Mayon Volcano, whale shark (butanding) Deposit Slip
(Rhincodon typus), Bicol weave design
A deposit slip is a document used to record a
200 – Peso banknotes deposit into a bank account. It is used to provide the
• Value ₱200 bank with information about the deposit, such as the
• Width 160 mm depositor's account number, the amount of the
• Height 66 mm deposit, and the type of deposit. Deposit slips can be
• Security features Security fibers, used to deposit cash, checks, or other types of funds.
watermark, see-through registration device,
concealed value, security thread, tactile marks Types of Deposits
• Material used 80% cotton, 20% abaca fiber
There are three main types of deposits:
• Years of printing 1903–1928; 1949-1959;
2002–present • Cash deposits are deposits of physical cash.
• Check deposits are deposits of checks.
Obverse – Diosdado Macapagal • Money order deposits are deposits of money
Reverse – Chocolate Hills, Bohol, Philippine tarsier orders.
(Tarsius syrichta), Visayas weave design
Limits on Deposits

There are limits on the amount of money that
you can deposit into your account at once. These limits
vary from bank to bank. You can find out the limits for
your bank by contacting your bank or checking your
bank's website.
Pros and cons of using deposit slips
Pros:
• Deposit slips can be used to deposit
cash, checks, and other types of funds.
• Deposit slips are a secure way to deposit money
into a bank account.
• Deposit slips are easy to use and fill out.
Cons:
• Deposit slips can be lost or stolen.
• Deposit slips can be used to make fraudulent
deposits.
• Deposit slips can be time-consuming to fill out.
Overall, deposit slips are a convenient and secure way
to deposit money into a bank account. However, there
are a few potential drawbacks to using deposit slips.
Withdrawal Slip
A withdrawal slip is a document used to
record a withdrawal from a bank account. It is used to
provide the bank with information about the
withdrawal, such as the depositor's account number,
the amount of the withdrawal, and the type of
withdrawal. Withdrawal slips can be used to withdraw
cash, checks, or other types of funds.
Types of withdrawals
There are three main types of withdrawals:
• Cash withdrawals are withdrawals of physical
cash.
• Check withdrawals are withdrawals of checks.
• Money order withdrawals are withdrawals of
money orders.
Limits on withdrawals
There are limits on the amount of money that
you can withdraw from your account at once. These
limits vary from bank to bank. You can find out the
limits for your bank by contacting your bank or
checking your bank's website.
Pros and cons of using withdrawal slips
Pros:
• Withdrawal slips are a convenient way to
withdraw money from your bank account.
• Withdrawal slips can be used to withdraw
cash, checks, and other types of funds.
• Withdrawal slips are a secure way to withdraw
money from your bank account.
Cons:
• Withdrawal slips can be lost or stolen.
• Withdrawal slips can be used to make fraudulent
withdrawals.
• It can be time-consuming to fill out withdrawal
slips.
Overall, withdrawal slips are a convenient and secure
way to withdraw money from your bank account.
However, there are a few potential drawbacks to using
withdrawal slips.
AUTOMATED TELLER MACHINE (ATM)
An ATM, or automated teller machine, is an
electronic telecommunications device that enables
customers to perform financial transactions, such as
cash withdrawals, deposits, funds transfers, balance
inquiries or account information inquiries, without the
need for direct interaction with bank staff. ATMs are
typically located at banks and other businesses, and
they are accessible 24 hours a day, 7 days a week..
What are the fees for using an ATM?
The fees for using an ATM vary depending on
the bank. Some banks charge a fee for every ATM
transaction, while others charge a fee only if you use an
ATM that is not affiliated with your bank. You can find
out the fees for using your bank's ATMs by contacting
your bank or checking your bank's website.
What are the limits on ATM withdrawals?
The limits on ATM withdrawals vary
depending on the bank and the type of account you
have. You can find out the limits for your bank by
contacting your bank or checking your bank's website.
Pros and cons of using an ATM
Pros:
• ATMs are convenient and easy to use.
• ATMs are accessible 24 hours a day, 7 days a
week.
• ATMs can be used to perform a variety of
transactions.
• ATMs are relatively secure.
Cons:
• ATMs can be expensive to use if you use one that
is not affiliated with your bank.
• ATMs can have withdrawal limits.
• ATMs can be unavailable during power outages or
other emergencies.
Overall, ATMs are a convenient and secure way to
manage your finances. However, there are a few
potential drawbacks to using ATMs. It is important to
be aware of the fees and limits associated with using
ATMs before you use one.
Credit Card
A credit card is a payment card that allows
the cardholder to borrow money from a bank or
financial institution. The cardholder is then responsible
for repaying the borrowed money, plus interest, on a
monthly basis. Credit cards are a convenient way to
make purchases, but they can also be a source of debt
if they are not used responsibly.
What are the different types of credit cards?
There are many different types of credit
cards available, each with its own features and
benefits. Some of the most common types of credit
cards include:
• Rewards credit cards: These cards offer
rewards, such as cash back, travel points, or
merchandise, for making purchases.
• Balance transfer credit cards: These cards offer a
low introductory interest rate on balance
transfers from other credit cards.
• Low-interest credit cards: These cards offer a low
interest rate on purchases.
• Secured credit cards: These cards require a
security deposit, which is typically equal to the
credit limit. Secured credit cards are a good option
for people with poor credit.
What are the interest rates for credit cards?
The interest rate for a credit card is the
amount of interest you will be charged on your unpaid
balance. Interest rates for credit cards vary depending
on the type of card, your credit score, and the issuer.
What are the fees for credit cards?
There are a variety of fees associated with
credit cards, including:
• Annual fees: Some credit cards charge an annual
fee.
• Late payment fees: You will be charged a late
payment fee if you do not make your credit card
payment by the due date.
• Over-the-limit fees: You will be charged an over-
the-limit fee if you exceed your credit limit.
• Balance transfer fees: You may be charged a
balance transfer fee if you transfer a balance from
another credit card to your new card.
• Foreign transaction fees: You will be charged a
foreign transaction fee if you use your credit card
to make a purchase in a foreign currency.
Pros and cons of using a credit card
Pros:
• Convenience: Credit cards are a convenient way
to make purchases.
• Flexibility: Credit cards can be used to make
purchases almost anywhere.
• Rewards: Many credit cards offer rewards, such as
cash back, travel points, or merchandise.
• Credit building: Using a credit card responsibly can
help you build your credit score.
Cons:
• Debt: Credit cards can be a source of debt if they
are not used responsibly.
• Interest charges: Credit cards can have high
interest rates, which can make it expensive to
carry a balance.
• Fees: Credit cards can come with a variety of
fees, such as annual fees, late payment fees, and
over-the-limit fees.
• Damage to credit score: Using a credit card
irresponsibly can damage your credit score.
Overall, credit cards can be a useful financial tool when
used responsibly
Checks
A check is a written order to a bank to pay a
specific amount of money to the holder of the check.
Checks are a common form of payment, and they can
be used to pay for goods and services, to transfer funds
between accounts, and to withdraw cash from a bank
account.
Pros and cons of using checks
Pros:
• Checks are a convenient way to make payments.
• Checks can be used to pay for goods and
services, to transfer funds between accounts, and
to withdraw cash from a bank account.
• Checks are relatively secure.

Cons:
• Checks can be lost or stolen.
• Checks can be used for fraudulent transactions.
• Checks can be time-consuming to write.
Overall, checks are a safe and convenient way to make
payments. However, there are a few potential
drawbacks to using checks. It is important to be aware
of the fees and security risks associated with using
checks before you use them.
Loans
A loan is a sum of money that is borrowed from a lender with
the agreement that the borrower will repay the money plus
interest over a period of time. Loans can be used for a variety
of purposes, such as buying a house, car, or other assets,
consolidating debt, or financing a business venture.
Characteristics of loans
• Time to maturity: This refers to the length of time that
the borrower has to repay the loan. Loans can be
classified as short-term, intermediate-term, or long-
term. Revolving credit and perpetual debt have no fixed
maturity date.
• Repayment Schedule: This refers to the frequency and
amount of the borrower's payments. Payments are
typically made on a monthly or semi-annual basis. With
amortizing loans, a portion of each payment goes
towards paying down the principal, while the rest goes
towards paying interest. With interest-only loans, the
borrower only pays interest, and the entire principal
balance is due at the end of the loan term.
• Interest: This is the cost of borrowing money. The
interest rate is the percentage of the principal amount
that the borrower is charged each year. Interest rates
can be fixed or variable.
• Security: This refers to the assets that the borrower
pledges as collateral for the loan. If the borrower
defaults on the loan, the lender can seize the collateral.
Secured loans typically have lower interest rates than
unsecured loans.
Components of a loans
1. Principal
• The principal is the amount of money that is
borrowed. It is the fundamental amount that the
borrower receives from the lender and agrees to
repay over the loan term. The principal is the basis
for calculating interest payments, which are a
percentage of the outstanding principal balance.
2. Loan Term
• The loan term refers to the length of time the
borrower has to repay the loan in full. It is typically
expressed in months or years. The loan term
determines the duration of the repayment
schedule and influences the overall cost of the
loan, including the total interest paid.
3. Interest Rate
• The interest rate is the percentage of the principal
amount that the borrower is charged for the use of
the money. It is expressed as an annual percentage
rate (APR). The interest rate is a key factor in
determining the overall cost of the loan, as it
affects the amount of interest that the borrower
will pay over the loan term.
4. Loan Payments
• Loan payments are the regular installments that
the borrower must make to repay the loan
principal and interest. The frequency of loan
payments is typically monthly, but it can also be
semi-monthly or quarterly, depending on the loan
agreement.
• Loan payments are structured in a way that a
portion of each payment goes towards reducing
the principal balance, while the remaining portion
covers the interest accrued on the outstanding
principal. Over time, as the principal balance
decreases, the interest component of the
payments also reduces.
The loan processes
The loan process is the series of steps that a borrower and
lender go through to obtain and repay a loan. The process can
vary depending on the type of loan and the lender, but it
typically involves the following steps:
1. Pre-approval
• The borrower may choose to get pre-approved for
a loan before they start shopping for homes. This
will give them an idea of how much they can afford
to borrow and what their interest rate will be. To
get pre-approved, the borrower will need to
provide the lender with some basic information
about their finances, such as their income, debt,
and credit score.
2. Application
• The borrower will then need to complete a loan
application. This application will ask for more
detailed information about the borrower's
finances, such as their employment history, assets,
and liabilities. The lender will use this information
to assess the borrower's creditworthiness and
determine whether or not to approve the loan.
3. Appraisal
• If the loan is for a property, such as a home or car,
the lender will order an appraisal. An appraisal is
an unbiased estimate of the property's value. The
lender will use the appraisal to make sure that the
loan amount is not more than the property's value.
4. Underwriting
• Underwriting is the process of reviewing the
borrower's application and all of the supporting
documentation to make sure that the borrower is
qualified for the loan. The underwriter will also
consider the borrower's credit score, debt-to-
income ratio, and other factors.
5. Approval
• If the loan is approved, the lender will send the
borrower a loan commitment letter. This letter will
outline the terms of the loan, such as the principal
amount, interest rate, and repayment schedule.
6. Closing
• The closing is the final step in the loan process. At
closing, the borrower will sign all of the necessary
paperwork and receive the funds for the loan.
Types of loans
Short-term loans
 • Used for short-term needs, such as inventory
purchases or cash flow shortages
• Typically have a maturity of less than one year
• Examples: special commitment loans, trade
credit, seasonal lines of credit, permanent working
capital loans
Intermediate-term loans
• Used to finance the purchase of equipment or for
consumer loans
• Typically have a maturity of between one and five
years
• Examples: term loans, consumer loans
Long-term loans
• Used to finance the purchase of real estate or for
large capital expenditures
• Typically have a maturity of ten years or more
• Examples: mortgage loans, bonds
Loan features
Secured vs. Unsecured Loans
• Secured loans: These loans are backed by
collateral, which is an asset that the lender can
seize if the borrower defaults on the loan. This
makes them less risky for the lender, so they
typically have lower interest rates than unsecured
loans. Examples of secured loans include mortgage
loans, car loans, and home equity loans.
• Unsecured loans: These loans are not backed by
collateral, so they are riskier for the lender. This
means that they typically have higher interest rates
than secured loans. Examples of unsecured loans
include personal loans, student loans, and credit
card loans.
Amortizing vs. Non-Amortizing Loans
• Amortizing loans: These loans have a fixed monthly
payment that is applied to both the principal and
interest. This means that the borrower's principal
balance decreases with each payment, and the
loan is eventually paid off in full. Examples of
amortizing loans include mortgage loans, car loans,
and student loans.
• Non-amortizing loans: These loans do not have a
fixed monthly payment, and the borrower only
pays interest on the outstanding principal balance.
This means that the borrower's principal balance
does not decrease with each payment, and the
loan is not paid off in full until the end of the loan
term. Examples of non-amortizing loans include
lines of credit and balloon loans.
Fixed-Rate vs. Variable-Rate Loans
• Fixed-rate loans: These loans have an interest rate
that remains the same for the life of the loan. This
means that the borrower's monthly payments will
always be the same, regardless of changes in
market interest rates. Examples of fixed-rate loans
include mortgage loans and car loans.
• Variable-rate loans: These loans have an interest
rate that can fluctuate based on market
conditions. This means that the borrower's
monthly payments can increase or decrease,
depending on how interest rates change. Examples
of variable-rate loans include adjustable-rate
mortgages (ARMs) and credit card loans.
Revolving vs. Term Loans
• Revolving loans: These loans have a line of credit
that the borrower can draw upon and repay as
needed. This means that the borrower does not
have to take out a new loan each time they need
money. Examples of revolving loans include credit
card loans and lines of credit.
• Term loans: These loans have a fixed amount of
money that the borrower receives upfront. The
borrower then repays the loan in a series of fixed
payments over a predetermined period of time.
Examples of term loans include mortgage loans,
car loans, and personal loans.
IMPORTANT FACTORS LENDERS LOOK AT TO APPROVE YOUR
APPLICATION
Credit Score
Your credit score is a numerical representation of your
creditworthiness, which is your ability to repay debt. Lenders
use credit scores to assess the risk of lending you money. A
higher credit score indicates that you are a low-risk borrower
and are more likely to repay your loan. A lower credit score
indicates that you are a higher-risk borrower and may have
difficulty repaying your loan.
Income and Employment History
Your income and employment history demonstrate your
ability to generate income and make consistent payments on
your loan. Lenders want to see that you have a stable income
and a good job history. This makes them more confident that
you will be able to afford the loan payments.
Debt-to-Income Ratio (DTI)
Your DTI is a measure of your monthly debt obligations
relative to your monthly income. Lenders typically have a
maximum DTI ratio that they will approve. For example, a
lender may have a maximum DTI of 43%. This means that your
total monthly debt payments, including your proposed loan
payment, should not exceed 43% of your gross monthly
income.
Collateral
Collateral is an asset that the lender can seize if you default on
your loan. This asset can be used to repay the loan if you are
unable to make your payments. Providing collateral can make
your loan application more attractive to lenders and may
result in a lower interest rate.
Down Payment
A down payment is a portion of the total loan amount that you
pay upfront. The higher the down payment, the lower the loan
amount you will need to borrow. This can make your loan
application more attractive to lenders and may result in a
lower interest rate.
In addition to these factors, lenders may also consider other
factors such as your age, marital status, and the purpose of
the loan. However, the factors listed above are typically the
most important factors that lenders consider when making
loan decisions.
Relationship between interest rates and loans
Interest rates and loans have an inverse relationship. This
means that when interest rates are low, loans are more
affordable, and when interest rates are high, loans are more
expensive.
Here's how it works:
• Low interest rates: When interest rates are low, the cost
of borrowing money is low. This makes it easier for
borrowers to afford loans, and it can lead to increased
borrowing activity. Lenders are also more willing to lend
money when interest rates are low, because they know
that borrowers are more likely to be able to repay their
loans.
• High interest rates: When interest rates are high, the
cost of borrowing money is high. This makes it more
difficult for borrowers to afford loans, and it can lead to
decreased borrowing activity. Lenders are also less
willing to lend money when interest rates are high,
because they are more concerned about the risk of
borrowers defaulting on their loans.
The impact of interest rates on loans can be seen in a number
of ways:
• Loan amounts: When interest rates are low, borrowers
are able to borrow more money for the same monthly
payment. This can be helpful for borrowers who are
looking to buy a home or car, or for businesses that are
looking to finance their operations.
• Loan terms: When interest rates are low, borrowers may
be able to qualify for longer loan terms. This can lower
their monthly payments, but it will mean that they will
pay more interest over the life of the loan.
• Loan eligibility: When interest rates are high, lenders
may have stricter eligibility requirements for loans. This
can make it more difficult for borrowers with poor credit
scores or low incomes to qualify for loans.
In addition to the direct impact on borrowers, changes in
interest rates can also have a ripple effect on the economy.
For example, when interest rates are low, businesses and
consumers may spend more money, which can boost
economic growth. Conversely, when interest rates are high,
businesses and consumers may spend less money, which can
slow economic growth.
What Is a Loan Shark?
A loan shark is a slang term for predatory lenders who give
informal loans at extremely high interest rates, often to
people with little credit or collateral. Because these loan
terms may not be legally enforceable, loan sharks have
sometimes resorted to intimidation or violence in order to
ensure repayment.
Source/s of loans
There are numerous sources from which individuals and
businesses can obtain loans to meet their financial needs.
These sources can be broadly categorized into traditional and
non-traditional lenders.
Traditional Lenders
1. Banks: Commercial banks are the most common
source of loans for individuals and businesses.
They offer a wide range of loan products, including
personal loans, student loans, auto loans, home
equity loans, and commercial loans.
2. Credit Unions: Credit unions are member-owned
financial cooperatives that offer loans to their
members typically at lower interest rates than
banks. They often have more flexible underwriting
criteria, making them a good option for borrowers
with less-than-perfect credit.
3. Government Agencies: Government agencies,
such as the Small Business Administration (SBA),
offer loans to businesses at below-market interest
rates. They also provide loan guarantees to reduce
the risk for private lenders.
Non-Traditional Lenders
1. Online Lenders: Online lenders are increasingly
popular, especially for personal loans and small
business loans. They often have faster approval
processes and less stringent credit requirements
than traditional lenders.
2. Peer-to-Peer (P2P) Lending Platforms: P2P lending
platforms connect borrowers directly with
investors who are willing to lend them money. P2P
loans can be a good option for borrowers with
poor credit or those who need money quickly.
3. Alternative Financing Sources: Alternative
financing sources, such as invoice factoring and
equipment financing, can provide businesses with
access to capital that may not be available from
traditional lenders.
Considerations When Choosing a Loan Source
When choosing a loan source, it is important to consider the
following factors:
• Interest rate: The interest rate is the percentage of the
loan amount that the borrower will pay to the lender
over the life of the loan. It is important to compare
interest rates from different lenders to get the best deal.
• Fees: Lenders may charge a variety of fees, such as
origination fees, application fees, and late fees. It is
important to be aware of these fees and factor them into
the overall cost of the loan.
• Terms and conditions: The terms and conditions of the
loan spell out the details of the loan, such as the
repayment term, prepayment penalties, and collateral
requirements. It is important to read and understand the
terms and conditions carefully before signing any loan
documents.
• Lender reputation: It is important to choose a lender
with a good reputation. You can check online reviews
and ratings to get an idea of a lender's reputation.
By carefully considering these factors, borrowers can make an
informed decision about the best source of financing for their
needs.
Types of loans
Personal Loan
A personal loan, whether from banks or from online lending
companies, is used for a wide variety of purposes, whether
that’s for debt consolidation, school fees, utility bills, medical
crises, or even shopping. It’s an unsecured loan, which means
it’s a loan not protected by a guarantor or collateralized by a
lien on specific assets in case you fail to meet the terms of
payment for any reason. This is approved based purely on your
credit score, with various interest rates and payment terms.
Home Loan
Purchasing a house is a huge financial commitment, so getting
a home or mortgage loan can help you take that first step in
making that commitment. This involves going through a
relatively strict qualification process at your preferred
financial institution, with the lender having rights to the
property as collateral while the loan is being paid for.
Car Loan
Not everybody can afford a one-time payment of a brand-new
car. To make it easier to own one, an auto or car loan is offered
by financial institutions to make owning a car more affordable
for potential buyers. Also called car financing, borrowers go
through a credit investigation and, when approved, allow car
buyers to provide the down payment and pay in installments
that lasts for three to five years with interest.
Travel Loan
People consumed by wanderlust but don’t have the financial
means to satisfy their urge can take advantage of travel loans
to cover their vacation expenses. A travel loan is a type of
personal loan that helps borrowers finance their trips,
particularly the expenses involved such as airfare,
accommodations, tours, transfers, and other travel costs.
Gadget Loan
A gadget loan is another type of personal loan that involves
the purchase of electronic gadgets such as cameras, laptops,
smartphones, and gaming consoles. Lenders grant loans to
borrowers and have them pay in installments with interest.
Appliance Loan
You can also purchase appliances through a personal loan if
the need arises. Called an appliance loan, it’s similar to a
gadget loan, with a lender offering a cash loan that you can
pay in installments plus interest, for use in the purchase of any
type of home appliance, and often times, furniture.
Business Loan
Intended to be used for business purposes, a business loan is
generally applied for to fund startups, operational costs,
purchase supplies, or expand the business among other
things. As with all loans, it involves the creation of debt, which
the borrower pays with added interest.
Credit Cards
This is one of the common ways people can loan from a
banking institution. After going through a credit investigation
that involves a background check largely focused on your
occupation and source of income, a credit card is issued and
used as payment for cash with a set limit. Interest rates are
high for these short-term loans and are usually paid for the
next month.
Secured Loans
These loans require the borrower to pledge collateral for the
money being borrowed. In case the borrower is unable to
repay the loan, the bank reserves the right to utilize the
pledged collateral to recover the pending payment. The
interest rate for such loans is much lower as compared to
unsecured loans.
Unsecured Loans
Unsecured loans are those that do not require any collateral
for loan disbursement. The bank analyses the past relationship
with the borrower, the credit score, and other factors to
determine whether the loan should be given or not. The
interest rate for such loans can be higher as there is no way to
recover the loan amount if the borrower defaults.
Pros and Cons of Secured Loans
Pros
• Higher loan amounts – Since secured loans require you
to pledge collateral, lenders are more confident that you
can pay them back, giving you access to higher loan
amounts.
• Lower interest rates – For the same reason as the higher
loan amounts, you can get access to lower interest rates
thanks to your collateral.
• Longer installment terms – Secured loans allow you to
pay back over longer periods of time. This means you can
spread the loan amount across several months or even
years, making it feel less of a burden as you pay for it
monthly.
• No need for an excellent credit score – Again, it’s all
because of collateral. Lenders will still check your credit
score, but it’s not the end-all-be-all since you’ve already
proven you can pay it back.
Cons
• More interest with long-term payments – Extending
your repayment for months or years may seem like the
easy thing to do, but imagine the interest piling up every
month. Make sure you think about that before you make
a final decision on your installment terms.
• Could affect your credit score – The high loan amounts
and long installment terms mean that this can be a
serious commitment to make. Apply for secured loans
only if you’re sure that you can handle the repayment.
• Lenders could seize your collateral – Not only could your
credit score dip if you fail to repay the loan, but the
lender could also seize your collateral to pay for the loan.
Pros and Cons of Unsecured Loans
Pros
• Fast and simple application process – The entire
application process – including disbursement – is
generally faster and more straight-forward compared to
secured loans. Just like our Quick Loan, you can get
approved quickly and conveniently from your Tonik App.
• Can be used for multiple purposes – While some secured
loans (like our instant Big Loan) offer flexibility, most can
only be used for specific purposes such as purchasing a
house or vehicle. Most unsecured loans, though, can be
used for a wide variety of reasons such as investing in a
business or paying for emergencies.
• No need to worry about collateral – Since you won’t
have to pledge collateral in order to get an unsecured
loan, you won’t have to worry about anything getting
seized by the lender!
Cons
• Strict eligibility criteria – You can apply for unsecured
loans with less hassle than a secured loan, but that
doesn’t mean lenders would approve anyone who
applies. They set eligibility requirements for age,
employment status, and citizenship just to name a few.
For example, you have to be an employed Filipino citizen
aged 23-58 for our Quick Loan.
• Higher interest rates and lower loan amounts –
Remember the lower interest rates and higher loan
amounts for secured loans because of collateral? For
unsecured loans, it’s the opposite. Since you’re not
pledging collateral to borrow funds, there’s higher risk
for lenders – thus, higher interest rates and lower loan
amounts!
Consumer loans are designed to meet the personal financial
needs of individuals, allowing them to purchase assets,
consolidate debt, or cover unexpected expenses. These loans
typically have lower loan amounts and shorter loan terms
compared to commercial loans.
Types of Consumer Loans
• Personal Loans: These versatile loans can be used for
various purposes, such as debt consolidation, home
repairs, or covering unexpected expenses.
• Auto Loans: These loans are specifically intended to
finance the purchase of a new or used car.
• Home Equity Loans: These loans allow homeowners to
leverage the equity they have built up in their homes to
access additional funds.
• Mortgage Loans: These loans are used to finance the
purchase of a residential property.
Features of Consumer Loans
• Loan Amount: Consumer loans typically have lower loan
amounts compared to commercial loans, ranging from a
few thousand pesos to several million pesos.
• Loan Term: Consumer loans typically have shorter loan
terms, often ranging from a few months to several years.
• Interest Rates: Interest rates for consumer loans vary
depending on the borrower's creditworthiness, the type
of loan, and the lending institution.
• Security: Consumer loans can be either secured or
unsecured. Secured loans require collateral, while
unsecured loans do not.
• Eligibility: Consumer loans are available to individuals
with good credit standing and a steady source of income.
Commercial Loans
Commercial loans are designed to meet the
financial needs of businesses, providing them with the funds
necessary for expansion, equipment acquisition, or other
business endeavors. These loans typically have higher loan
amounts and longer loan terms compared to consumer loans.
Types of Commercial Loans
• Term Loans: These loans provide a fixed amount of
money that is repaid over a predetermined period
of time, typically with regular installments. They
are suitable for businesses with specific capital
requirements for growth or expansion projects.
• Lines of Credit: These revolving lines of credit allow
businesses to access funds as needed, up to a
predetermined limit. They are ideal for businesses
with fluctuating cash flow requirements, such as
seasonal businesses or those with inventory
fluctuations.
• Equipment Financing: These loans are specifically
tailored to finance the purchase of equipment,
such as machinery, tools, or vehicles, for business
operations. They are often structured to align with
the depreciation schedule of the equipment being
financed.
• Commercial Real Estate Loans: These loans are
used to finance the acquisition, construction, or
renovation of commercial properties, such as
office buildings, warehouses, or retail spaces. They
typically involve larger loan amounts and longer
loan terms.
Features of Commercial Loans
• Loan Amount: Commercial loans typically have
higher loan amounts compared to consumer loans,
ranging from hundreds of thousands of pesos to
millions of pesos or more.
• Loan Term: Commercial loans typically have longer
loan terms, often ranging from several years to
decades.
• Interest Rates: Interest rates for commercial loans
vary depending on the borrower's
creditworthiness, the type of loan, the industry,
and the lending institution.
 • Security: Commercial loans are often secured by
business assets, such as real estate, equipment, or
inventory.
• Eligibility: Commercial loans are available to
businesses with established financial records, a
strong track record of success, and a clear business
plan.
The 5c’s of credit
Character
Character is one of the most important Cs of credit. Lenders
want to make sure that they are lending money to people who
are honest and trustworthy. This is because lenders want to
be confident that borrowers will repay their loans.
There are a number of things that lenders will look at to assess
a borrower's character. These things include:
• Credit history: A borrower's credit history is a
record of their past credit behavior. Lenders will
look at this history to see how the borrower has
handled credit in the past. This includes things like
payment history, credit utilization, and types of
credit.
• Employment history: A borrower's employment
history shows lenders how stable their income is.
Lenders want to see that borrowers have a steady
job and that they are not likely to lose their job in
the near future.
• Criminal record: A borrower's criminal record can
give lenders an idea of their character. Lenders are
more likely to approve loan applications from
borrowers with no criminal record.
Capacity
Capacity is another important C of credit. Lenders want to
make sure that borrowers have the ability to repay their loans.
This means that borrowers need to have enough income to
cover their monthly payments, including their loan payments.
There are a number of things that lenders will look at to assess
a borrower's capacity. These things include:
• Income: A borrower's income is the amount of
money they earn before taxes. Lenders will look at
a borrower's income to see if it is enough to cover
their monthly expenses, including their loan
payments.
• Expenses: A borrower's expenses are the amount
of money they spend each month. Lenders will
look at a borrower's expenses to see if they are
living within their means. This will help them to
assess the borrower's ability to make their monthly
loan payments.
• Debt-to-income ratio (DTI): A borrower's DTI is a
measure of how much debt they have compared
to their income. Lenders will look at a borrower's
DTI to see if it is too high. A high DTI can make it
difficult for borrowers to repay their loans.
Capital
Capital is a measure of a borrower's financial resources.
Lenders want to make sure that borrowers have enough
financial resources to weather a financial storm. This means
that borrowers need to have enough savings and assets to
cover their expenses in case they lose their job or have
another financial setback.
There are a number of things that lenders will look at to assess
a borrower's capital. These things include:
• Net worth: A borrower's net worth is the difference
between their assets and their liabilities. Lenders will
look at a borrower's net worth to see if they have
enough financial resources to cover their debts.
• Liquidity: A borrower's liquidity is the amount of cash or
assets that they can easily access. Lenders will look at a
borrower's liquidity to see if they have enough cash to
cover their expenses in case, they lose their job or have
another financial setback.
Collateral
Collateral is an asset that a borrower pledges to the lender as
security for the loan. If the borrower defaults on the loan, the
lender can seize the collateral to repay the loan.
Collateral can be a valuable tool for borrowers. This is because
collateral can make lenders more likely to approve loan
applications and can also lower interest rates. However, it is
important to remember that collateral can also be a risk for
borrowers. This is because if the borrower defaults on the
loan, they could lose their collateral.
Conditions
Conditions are the terms and conditions of the loan. These
conditions can include the interest rate, the repayment term,
the amount of the loan, and the purpose of the loan. Lenders
will typically look at the conditions of the loan to make sure
that they are reasonable and that the borrower will be able to
repay the loan.
Interest rate: The interest rate is the percentage of the loan
amount that the borrower will pay to the lender over the life
of the loan. Lenders will typically look at the borrower's credit
score to determine the interest rate. Borrowers with good
credit scores will typically get lower interest rates than
borrowers with bad credit scores.
Repayment term: The repayment term is the length of time
that the borrower has to repay the loan. Lenders will typically
offer a variety of repayment terms, such as 30 years, 20 years,
or 15 years. The longer the repayment term, the lower the
monthly payments will be. However, the longer the
repayment term, the more interest the borrower will pay over
the life of the loan.
Amount of the loan: The amount of the loan is the amount of
money that the borrower is borrowing. Lenders will typically
look at the borrower's income, expenses, and debt-to-income
ratio to determine the amount of the loan that they are willing
to approve.
Purpose of the loan: The purpose of the loan is the reason why
the borrower is taking out the loan. Lenders will typically look
at the purpose of the loan to make sure that it is a good use of
credit. For example, lenders are more likely to approve loans
for home purchases or education than for vacations or
gambling.
Importance of the Five Cs of Credit
The Five Cs of Credit are an important tool that lenders use to
evaluate loan applications. Lenders use these Cs to assess the
risk of lending money to a borrower. By considering all five Cs,
lenders can make more informed decisions about which loan
applications to approve.
Borrowers can improve their chances of getting a loan by:
• Building a good credit history: This can be done by
paying bills on time and keeping credit balances
low.
• Maintaining a stable income: This can be done by
staying employed and avoiding major changes in
income.
• Reducing debt: This can be done by paying off
credit cards and other loans.
• Saving money: This can be done by creating a
budget and sticking to it.
• Being honest with lenders: This means providing
accurate information on loan applications.
By following these tips, borrowers can improve their chances
of getting a loan and getting a favorable interest rate.
Which of the 5 Cs is the most important?
Each of the five Cs has its own value, and each should be
considered important. Some lenders may carry more weight
for categories than others based on prevailing circumstances.
Character and capacity are often most important for
determining whether a lender will extend credit. Banks
utilizing debt-to-income (DTI) ratios, household income limits,
credit score minimums, or other metrics will usually look at
these two categories. Though the size of a down payment or
collateral will help improve loan terms, these two are often
not the primary factors in how a lender determines whether
to expend credit.
Republic act no. 3765
An act to require the disclosure of finance charges in
connection with extensions of credit.
Section 1. This Act shall be known as the "Truth in Lending
Act."
Section 2. Declaration of Policy. It is hereby declared to be the
policy of the State to protect its citizens from a lack of
awareness of the true cost of credit to the user by assuring a
full disclosure of such cost with a view of preventing the
uninformed use of credit to the detriment of the national
economy.
Section 3. As used in this Act, the term
(1) "Board" means the Monetary Board of the Central Bank of
the Philippines.
(2) "Credit" means any loan, mortgage, deed of trust, advance,
or discount; any conditional sales contract; any contract to
sell, or sale or contract of sale of property or services, either
for present or future delivery, under which part or all of the
price is payable subsequent to the making of such sale or
contract; any rental-purchase contract; any contract or
arrangement for the hire, bailment, or leasing of property; any
option, demand, lien, pledge, or other claim against, or for the
delivery of, property or money; any purchase, or other
acquisition of, or any credit upon the security of, any
obligation of claim arising out of any of the foregoing; and any
transaction or series of transactions having a similar purpose
or effect.
(3) "Finance charge" includes interest, fees, service charges,
discounts, and such other charges incident to the extension of
credit as the Board may be regulation prescribe.
(4) "Creditor" means any person engaged in the business of
extending credit (including any person who as a regular
business practice make loans or sells or rents property or
services on a time, credit, or installment basis, either as
principal or as agent) who requires as an incident to the
extension of credit, the payment of a finance charge. (5)
"Person" means any individual, corporation, partnership,
association, or other organized group of persons, or the legal
successor or representative of the foregoing, and includes the
Philippine Government or any agency thereof, or any other
government, or of any of its political subdivisions, or any
agency of the foregoing.
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.
Section 7. This Act shall become effective upon approval.
Approved: June 22, 1963
Variable interest rate vs fixed interest rate
• A variable interest rate loan is a loan where the
interest charged on the outstanding balance
fluctuates based on an underlying benchmark or
index that periodically changes.
• A fixed interest rate loan is a loan where the
interest rate on the loan remains the same for the
life of the loan.
• A variable rate loan benefits borrowers in a
declining interest rate market because their loan
payments will decrease as well.
• However, when interest rates rise, borrowers who
hold a variable rate loan will find the amount due
on their loan payments also increases.
• A popular type of variable rate loan is a 5/1
adjustable-rate mortgage (ARM), which maintains
a fixed interest rate for the first five years of the
loan and then adjusts the interest rate after the
five years are up.
Variable Interest Rate Loans
A variable interest rate loan is a loan in which
the interest rate charged on the outstanding balance
varies as market interest rates change. The interest
charged on a variable interest rate loan is linked to an
underlying benchmark or index, such as the federal
funds rate.
As a result, your payments will vary as well (as long as
your payments are blended with principal and interest).
You can find variable interest rates in mortgages, credit
cards, personal loans, derivatives, and corporate
bonds.
Pros
• Loan repayments decrease when interest rates
fall.
• Loans typically get better upfront perks like low
introductory rates for an initial loan period.
• The interest rate for a variable loan is generally
lower than a fixed loan, especially when the loan
is incurred.
Cons
• Loan repayments increase when interest rates
rise.
• Loans may become more expensive than fixed
rate loans should interest rates rise quickly.
• Borrowers face greater risk if overcapitalized or
already at repayment capacity.
• Borrowers may not be able to plan or forecast
future cashflow due to changing rates.
Fixed Interest Rate Loans
Fixed interest rate loans are loans in which
the interest rate charged on the loan will remain fixed
for that loan's entire term, no matter what market
interest rates do. This will result in your payments being
the same over the entire term. Whether a fixed-rate
loan is better for you will depend on the interest rate
environment when the loan is taken out and on the
duration of the loan.
When a loan is fixed for its entire term, it remains at the
then-prevailing market interest rate, plus or minus a
spread that is unique to the borrower. Generally
speaking, if interest rates are relatively low, but are
about to increase, then it will be better to lock in your
loan at that fixed rate.
Depending on the terms of your agreement, your
interest rate on the new loan will stay the same, even
if interest rates climb to higher levels. On the other
hand, if interest rates are on the decline, then it would
be better to have a variable rate loan. As interest rates
fall, so will the interest rate on your loan.
Pros
• Borrowers know exactly what their monthly
payment will be regardless of market rate
changes.
• Fixed rates do not rise during periods of rising
interest rates.
• Borrowers can self-select their own time frames
for many loans ranging from 6-month to 10-year
non-mortgage loans.
Cons
• Loans are less flexible under fixed rate agreement
terms.
• Fixed rates do not fall during periods of declining
interest rates.
• Fixed term fees may incur additional fees should
the borrower want to change terms or exit the
loan early.
• Fixed rate loans have historically been more
expensive over their life than variable rates.
Truth and lending transparency law
The Truth in Lending Act (TILA) is a federal
law enacted in 1968 to help protect consumers in their
dealings with lenders and creditors. The TILA has been
implemented by the Federal Reserve Board through a
series of regulations.
• The Truth in Lending Act (TILA) protects
consumers in their dealings with lenders and
creditors.
• The regulations found in the TILA apply to most
kinds of consumer credit, from mortgages to
credit cards.
• Lenders are required to clearly disclose
information and certain details about their
financial products and services to consumers by
law.
• Regulation Z prohibits creditors from
compensating loan originators for anything other
than the credit extended and for steering clients
to unfavorable options for the sake of higher
compensation.
• Consumers are able to make better-informed
decisions and, within limits, terminate
unfavorable agreements, as a result of TILA
regulations.
What is the Truth of Lending Act transparency?
It requires lenders to provide you with loan
cost information so that you can comparison shop for
certain types of loans. For loans covered under TILA,
you have a right of rescission, which allows you three
days to reconsider your decision and back out of the
loan process without losing any money.
What is the importance of the Truth Lending Act?
It protects borrowers from unfair lending
practices. It requires lenders to disclose information
about all charges and fees associated with a loan.
Truth and lending transparency law
It is the policy of the State to protect its
citizens from a lack of awareness of the true cost of
credit to the user by assuring a full disclosure of such
cost with a view of preventing the uninformed use of
credit to the detriment of the national economy.
DEFINITION OF TERMS
(1) "Board" means the Monetary Board of the Central
Bank of the Philippines
(2) "Credit" means any loan, mortgage, deed of trust,
advance, or discount; any conditional sales contract;
any contract to sell, or sale or contract of sale of
property or services, either for present or future
delivery, under which part or all of the price is payable
subsequent to the making of such sale or contract; any
rental-purchase contract; any contract or arrangement
for the hire, bailment, or leasing of property; any
option, demand, lien, pledge, or other claim against, or
for the delivery of, property or money; any purchase,
or other acquisition of, or any credit upon the security
of, any obligation of claim arising out of any of the
foregoing; and any transaction or series of transactions
having a similar purpose or effect
(3) "Finance charge" includes interest, fees, service
charges, discounts, and such other charges incident to
the extension of credit as the Board may be regulation
prescribe
(4) "Creditor" means any person engaged in the
business of extending credit (including any person who
as a regular business practice make loans or sells or
rents property or services on a time, credit, or
installment basis, either as principal or as agent) who
requires as an incident to the extension of credit, the
payment of a finance charge
(5) "Person" means any individual, corporation,
partnership, association, or other organized group of
persons, or the legal successor or representative of the
foregoing, and includes the Philippine Government or
any agency thereof, or any other government, or of any
of its political subdivisions, or any agency of the
foregoing
As such, 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:
 • Valuable item: The main need for a pawn shop
(1) the cash price or delivered price of the property or loan is a valuable item. For example, jewelry,
service to be acquired; electronics, guns, or vehicles might serve as
collateral. If you and the pawn shop can agree on
(2) the amounts, if any, to be credited as down the value and loan amount, it can secure a pawn
payment and/or trade-in; shop loan.
• Government ID: Most lenders will require you to
(3) the difference between the amounts set forth under show a valid government ID so they can verify you
clauses (1) and (2); are legally able to take out the loan.

(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;
Keep in mind that unlike a conventional installment
loan, a pawn shop loan doesn’t require a specific
credit score or a cosigner. As long as you can provide a
valuable item and a government ID, you could walk
out with cash in the same visit.

Beware of pawn shop loan fees and interest rates

(6) the finance charge expressed in terms of pesos and
centavos; and
If you decide to take out a pawn shop loan, be sure
you fully understand what you’re signing up for. Every
(7) the percentage that the finance bears to the total
state has its own laws and maximums around what
amount to be financed expressed as a simple annual
pawn shops can charge, but no matter where you live,
rate on the outstanding unpaid balance of the
a pawn shop loan is still likely one of your most
obligation
expensive options to borrow money.
IMPORTANT NOTICE: The disclosure statement in
Most pawn shop loans charge a monthly interest
writing is a required attachment to the credit
rate. If you can’t pay your loan back on time, it might
transaction contract. The borrower has a right to
roll into the next month, adding another month of
demand a copy of the disclosure statement.
interest. As interest adds up, your loan might end up
costing more than the item you pawned to begin with.
Pawnshop

What is a pawn shop loan?

A pawn shop loan is a secured, short-term

loan you can get from a pawn shop. These loans don’t
require a credit check or have any specific
requirements other than the item you leave as
collateral for the loan.

What is the purpose of a pawnshop?

A pawn shop (also called a pawnshop or

pawnbroker) is a shop or business who loans money to
people who bring in valuable items which they leave
with the pawnbroker. Examples of items that a person
may leave are jewelry, gold, watches, cameras, musical
instruments, televisions or computers.

Pawn shop loan requirements

One benefit of pawn shop loans is how easy

they typically are to get. In many cases, you only need
a valuable item and a government ID.

Here are common requirements for pawn shop loans: