Lending Money In The Philippines

[i am bob]

Some things to consider when talking about 5-6 loans as a source of income...

• A person can just walk away from a loan in the Philippines and there is nothing you can do about it.
  
• There is no written contract for a 5-6 loan so there is no legal recourse.
  
• As a foreigner, do you really think the Philippine government is going to give you the proper Visa to operate a 5-6 loan business?
  

:mocking:

[Thomas]

Thomas, It seems as if you have done your homework and well know what you are doing. Best of luck to

you and be sure to let us know how it works as many here would like some additional income.

Well. I have spend much time researching, but I will NOT try 5-6 loans. This is just a bit of all I have researched :) so I aim at doing something ELSE, but perhaps have some harvest sharing aside if/when I have any money for that.

Some things to consider when talking about 5-6 loans as a source of income...

• A person can just walk away from a loan in the Philippines and there is nothing you can do about it.
  
• There is no written contract for a 5-6 loan so there is no legal recourse.
  
• As a foreigner, do you really think the Philippine government is going to give you the proper Visa to operate a 5-6 loan business?
  

:mocking:

Yes. I don't find any restrictions against it in the list of "Prohibited and Restricted Ownership Businesses for Foreigners", but I believe you are right, I believe I read somewhere else 5-6 isn't an allowed business.

(I didn't plan to do it anyway. But I asume harvest sharing can be allowed because they can be done as a partnership agreements).

"No written contracts". Well. Perhaps they prefer not to have paperwork on 5-6 if they are illegal :)

BUT there can be paperwork done when estate is security for a loan. (Praxis seem to be the loan giver have the using right until the loan is paid back. With that kanos seem to kind of have the possibility to "ow" land :) BUT in such agreements the loan taker can get the land back later by CHOSE to pay back the loan, if the land value goes up.)

Less needed to, in pawnshop types of loans, because then they loan giver have the value in possesion. i have no idea how they do with cars, motorbikes, boats and such.

Not sure, but I have been told by a daughter to a barangar tresurer, the barangar office can both confirm in start of agreements about loans with land as security, and be "court" if such loans are not paid back.

[Thomas]

Found an interesting information about this.

Quote from (another forum):

A foreigner can loan money on real estate and can also foreclose, but he can not bid in the foreclosure sale since he can’t own the property

You must structure the loan so that you can do an extrajudicial foreclosure.

In this type of foreclosure, you simply file a foreclosure statement with the Register of Deeds and with the office of the municipal sheriff.

Not an official information, but other confirmed a lawyer had said same, so I guess it's corect.

Edited October 15, 2012 by I am bob
Removed name of other forum - as per forum rules

[GregZ]

Less needed to, in pawnshop types of loans, because then they loan giver have the value in possesion. i have no idea how they do with cars, motorbikes, boats and such.

?no idea how they do? You mean the rates they charge in the Philippines at the pawn shop? From what I have exposure to here in Cebu, they loan only 60% of the value, take possession of the item and charge 60% interest (5% per month). Some require the interest payment each month, but may vary. I only have first hand information from 1 source.

[Thomas]

Less needed to, in pawnshop types of loans, because then they loan giver have the value in possesion. i have no idea how they do with cars, motorbikes, boats and such.

?no idea how they do? You mean the rates they charge in the Philippines at the pawn shop? From what I have exposure to here in Cebu, they loan only 60% of the value, take possession of the item and charge 60% interest (5% per month). Some require the interest payment each month, but may vary. I only have first hand information from 1 source.

No, I ment how to do to get such big things as cars and such to become security easiest.

Yes, many loan givers demand pay each month/week/day, which make the yearly interest almost double, because then the amount is loaned only half the time almost in average.

Are pawn shops loans a whole year normaly?

[GregZ]

No, I ment how to do to get such big things as cars and such to become security easiest. Yes, many loan givers demand pay each month/week/day, which make the yearly interest almost double, because then the amount is loaned only half the time almost in average. Are pawn shops loans a whole year normaly?

My exposure to pawn here in Cebu City is pawning a large boom truck and a couple of passenger vehicles. All 3 the pawn shop took physical possession of the vehicle. The length I believe is totally up to the borrower as they had it set up as a monthly interest only payment arrangement that could end any time with full repayment of principle.

The boom truck was needed for work AND after a couple months there it appeared that the pawn shop was making permanent plans for it, so they found the money and got it out of there. The passenger vehicles were there a couple months, the payments stopped being made and the pawn shop put them up for sale when the loan amount got to be around 100% of what they could sell it for. Remember they started at 60% so with a 60% interest rate it would take around a year to get to 100%. Maybe a shorter time with penalties and compounded interest from the missed payments.

[Thomas]

All 3 the pawn shop took physical possession of the vehicle.

Signing some not dated selling papers too or what?

-

I see.

[GregZ]

All 3 the pawn shop took physical possession of the vehicle.

Signing some not dated selling papers too or what?

-

I see.

I'll see if I can find out specifics, but give me a few days. That particular uncle I would ask is pretty busy and I only see him every now and then.

[Dave Hounddriver]

I hear that Greg. I have also seen that money lenders not only take the vehicle and 'store' it but also use it on a daily basis as their own vehicle until the loan is paid. In some cases even renting it out. Not sure why that surprises me as land is also taken possession of when loaned against and the lender treats the land as his own, farms it, plants it, in some cases builds on it, and then expects the borrower to pay for 'improvements' if he takes the land back.

[retired]

Despite not having posted for quite a while i would like to offer my view as an expat married to a Fillipino for 10 yrs and having experienced financial issues with Fillipinos . The only way i have been able to deal with the loan , borrow issue in this culture is to just except the fact that Filipinos do not hold financial obligations as particulary important in regards to their everyday hierarchy of obligations . And certainly not to the same degree as someone from a first world culture where "credit" is an important part of acquiring things .

Too me it's just another "difference" between cultures . The sooner one learns that the better off one is . My wife no longer tells me if she makes small "loans" to family members or friends because she knows i would not approve in most cases . There are exceptions of course, primarily with family members but i have seen to many lost friendships over relatively small amounts of money . I am not talking about large investments in business operations but primarily personal loans not exceeding a few thousand pesos . But the same mindset applie regardless of the amount .

Maybe it's just me but from my perspective the worst concept this culture ever adopted is " saving face" . What does saving face mean ? And how does one " save face " when losing friendships and future business contacts all because they can't just say " can't make my payment at present" or something to that effect . I could go on and on in terms of specific examples but the point is Filipinos simply do not have the same sense of responsibility regarding money that they have regarding other issues .

Used to get myelf in trouble when i would ask "why" of a Filipino that said they " were proud to be Filipino" untill i just quit asking , because i never heard a logical reply . Even my wife says the Flipino problems are due to "attitude" . Ever heard a Filipino speak about honor ? Probably not as unlike some Asian cultures it is not considered that important of an attribute . Won't get into the ramifications of doing business with Filipinos as a foreigner except that as a foreigner you basically have no rights , regardless. If you doubt that , research whether or not a foreigner has "ever" won a case that goes to the highest court's in the Philippines . The deck is stacked against you in this culture so unless you are just big on risk would not seem to be a good idea to "loan" in this culture .

Just an opinion