Knowing the Difference between a Salary Loan and a Personal Loan

Getting a loan could be a great way to remedy your immediate financial need. If you are not in an immediate need to remedy a financial need, you can also use a loan to start a small business or use the money to increase your income indirectly by using it in investments or learning opportunities.

There are many types of loans that you can get, but the most common type in the Philippines are the personal loans and salary loans. It is wise to read and understand what one must do to acquire a loan.

How can you distinguish a salary loan from a personal loan? Here are some features to watch out for.

Characteristics of Salary Loans

Salary loans, as the name implies, is heavily dependent on your income. This is typically applied for by employees either through their employers or at government offices where employees give monthly contributions to such as the Home Development Mutual Fund (HDMF), and Social Security System (SSS).

The processing time for a salary loan can take from 7 working days up to 1 month. If you need to have the cash on-hand immediately, being able to get a quick loan that’s not a salary loan might be a better plan.

The interest rate per annum for a salary loan is usually at 10%. Many take advantage of this low interest for a loan so they can save money on it.

Here’s a fast and easy guide to SSS salary loan application.

Characteristics of Personal Loans

A personal loan is usually lent by a bank or lending institution and has a shorter processing time of 5 – 7 working days. This type of loan is ideal if you have an immediate need for money since you can get the money through cash, check, or direct debit in your account.

However, the processing time can also depend on your credit history. The bank or lending institution can take it against you if you have any delinquent accounts at other financial institutions or postpaid companies. This can be their sole basis for granting you a loan since there is still no central credit bureau that exists in the country. Other proofs of capacity to pay back include proofs of billing, your most recent pay slip, and other proofs of assets.

Which one should I get?

Get the one which suits your needs based on the following criteria:

Time frame – Personal loans are faster to process. A salary loan can be used best with for not immediate needs.
Interest – Salary loans have a lower interest rate so you can save on the monthly amortization.
Convenience – If you plan to visit the office of the company where are getting a loan, getting a personal loan would be more convenient than visiting a government office. If you are not in immediate need of cash, you can apply online for a salary loan through the government office’s portal.


Final Thoughts

A loan could help big on your financial needs. The key is to find the right kind of loan that suits your needs and your budget.


Author Bio:

Daniel Zoleta is from, a financial comparison website aiming to help Filipinos save money through diligent comparisons of financial products.

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