Borrowers are advised to exercise prudence in securing online loans and be aware about unfair debt collection practices of financing and lending companies.

Jesher Radaza, supervising administrative officer at Securities and Exchange Commission-Cagayan de Oro Extension Office, said they do not need to provide collateral property to secure a loan which is convenient if they do not have a property or anything valuable to use as collateral.

“The annual percentage rates (APR) can be manipulated so be careful when comparing the APR. Instead, look at the total amount you will pay on the loan, including interest, fees, and principal, over the life of the loan. That’s a better measure of the loan’s ultimate cost,” he said in a webinar.

Radaza urged borrowers to determine if they are allowed to pay the loan off early, or is there a penalty or fee for doing so.

“Depending on which kind of personal loan you get –from a bank, via peer-to-peer lending, or by some other means– some lenders will be more favorably disposed to paying off the loan early than others. If an early payoff is important to you (and it should be), read the fine print closely to make sure that no penalty is involved,” he said.

Radaza said borrowers can ask lenders how the interest is being computed, particularly if they hope to pay off the loan early.

“Payday loans are a form of short-term personal loans that financial gurus and government agencies advise consumers to avoid. The interest rates are very high and the terms often force people into rolling over the loan for additional terms,” he said.

Radaza said most payday loans are unsecured and charge borrowers with high levels of interest.

“This means that you do not have to give the lender any collateral,” he added. “Payday loans are typically based on how much you earn, and you usually have to provide a pay slip when applying for one.”

Radaza said there is also a need to ensure that any upfront fees that they are paying are fair and in line with market levels.

“There are many providers out there with varying terms, so don’t feel like you have to take the first loan that you are approved for,” he said.

Radaza said a personal loan is a simple product, thus should be simple to understand.

“If it’s not, that’s a red flag,” he said.

Radaza also reminded borrowers about the commission’s rules on the prohibition of unfair debt collection practices.

He said such practices include, among others, the use or threat of use of violence or other criminal means to harm the physical person, reputation, or property of any person; the use of obscenities, insults, or profane language; and publication of the names and other personal information of the borrowers.