Get out of this debt trap!

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ILLUSTRATION BY ALBERT G. RODRIGUEZ

Filipinos took on more debt in 2021.

What’s worse is that in true Filipino style, these types of debt carry massive, hidden, compound interest at 3% per day. Some online lenders harass those who are unable to pay; they are selling borrower information and their physical addresses on their websites are fake. Those who wish to restructure their loans have no way of officially contacting these companies.

The screenshots of the cell phone messages from the debt collectors are incredibly crude. “(Expletive) ninyong dalawa, mga magnanakaw. Bayaran ninyo ang pinagsabwatan ninyong pera kung ayaw ninyo can bumulagta na lang sa mga pamilya and mga kaibigan ninyo. Nakatimbre na kayo. Nandito ang littrato and other information regarding (expletive) kayo. Take advantage of your work experience. Tatrabahuhin ko kayo; hindi ko kayo titigilan tandaan niyo yan ”, we read. The rough translation is something you would expect to hear from gangsters, not financial institutions: “You two are @ # $% # thieves. Pay off your debt if you don’t want your family or friends to fall. You are in the results list. We have your photos and your personal information, you @ #[email protected]%%. You’ll pay with your life, I’ll make sure. I won’t let this go, remember that.

FinTech, presented as the savior who will democratize finance, has a very dark side.

Some borrowers may have abused their money, causing them to go into debt. Others have struggled with health-related financial issues over the past two years. Whatever the cause of the indebtedness, however, all borrowers have rights. Their information should be protected and they should not have to deal with this kind of harassment.

In fact, the Securities and Exchange Commission (SEC) recently banned the registration of new online lending platforms due to the wave of complaints it has received from borrowers. Circular No.18, 2019 series states that unfair debt collection practices such as threats, obscenities, disclosure of private information and even making contact at unreasonable hours will be penalized. The penalty of up to 100,000P could be increased to make it a more deterrent, but it’s already a good start. Circular 19 now requires all online lending agencies and platforms to register with the SEC.

Suppression of wear and tear

An interest rate cap is also being developed. Kelvin Lee, commissioner of the SEC, told me in a text message that the SEC and the Bangko Sentral ng Pilipinas (BSP) were in the process of finalizing the board circular. This one should be released in mid-January.

To date, the BSP already prescribes a maximum monthly interest rate of 2% on credit card loans or 24% per annum.

“The main objective of the SEC is the protection of consumers, therefore the strict regulations for online loans. If they are found to be in violation, we will have them removed by Google or Apple (app stores) and shut down those companies. But we notice that some of these entities are not registered at all, ”said Lee.

This means that borrowers themselves need to get rid of the culture of utang (debt) by 2022. No personal finance advice carries more weight than being wise in choosing your lender, d ” learn to compare and calculate effective interest rates and adopt financial literacy.

For example, a person who borrows 3,000 pesos may get a net amount of 2,800 pesos. He or she then pays P3,500 in four days. This translates into interest of 2,281.25% per annum. No amount of investment can help you earn that much. And because the interest rate is so high, you end up borrowing again to refinance that loan. After all, you can transfer the money straight to your GCash in five minutes.

This is how financial burrows are created. Even the 5-6 common lenders were not so convenient and so deadly.

To liberate oneself

For those who are already caught in the clutches of these scam online loan applications, here are some tips:

1) Negotiate with your borrower in writing. Send your letter to the online lending platform by courier and get these documents received with a date and signature. Do it as soon as you realize that you can’t meet your due dates. Do not use cell phones, calls or emails. You must have documentation. Some of those who traded successfully reduced their total payments by 80%.

2) Alert your contacts on your phone that someone might be sending them these kinds of messages. It’s better that they hear your predicament from you.

3) If your emotional and mental state is already at risk, change your number and deactivate your social media accounts.

4) Take an inventory of all your debts. Put them in a spreadsheet with the highest interest rates first. Draw up a debt payment plan in which you are able to repay each of your lenders every period. Each time a lender is paid off in full, add the amount you pay them to the amount of the second loan. This considerably speeds up your payment process.

5) Look for registered and legitimate loan consolidators. Try government lenders like the social security system or the insurance system of government services, co-ops or family and friends. Sell ​​as much of your personal belongings as you can. If you are borrowing from family and friends, write a contract and the terms of your loan. And make sure you pay them on time.

My company, Empower and Transform, helps those who are in debt due to unavoidable circumstances like hospitalization and debt by teaching them these strategies. —FIVE CONTRIBUTED

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