The Role of Credit Scores in Online Loan Applications in the Philippines


Accessing financial services has become an essential part of our daily lives. With the rise of microcredit companies providing online loan services, obtaining loans in the Philippines has become accessible and more comfortable than ever. Filipinos can use online loans to finance their short-term needs, such as urgent medical expenses or unexpected bills.

However, getting an online loan can be a challenging task as various factors determine its approval. One such critical determinant is a credit score, which plays a significant role in online loan applications. This article will explore the importance of credit scores in online loan applications, how it affects the relationship between banking institutions and clients, and what borrowers need to know about this process.

What is a credit rating, and how does it affect the relationship between banking institutions and clients?

Credit rating refers to a system used to calculate the percentage of risk of granting a loan to a customer. It’s based on factors such as the customer’s previous loans and debts. This system applies not only to traditional banking systems but also to companies that provide online loans. Credit rating is one of the most crucial aspects for decision-making for traditional banks. The rating system helps the bank to assess the creditworthiness of the borrower. These lending institutions rely on the information on credit reports to determine whether an individual is qualified for a loan or not.

On the other hand, online lenders attach less importance to credit rating but still consider it while approving a loan application. Credit rating is still a factor for online applicants, but these lending companies may consider other factors such as the applicant’s monthly income to determine their ability to repay the borrowed amount.

Will you be approved for an online loan if you had problems with debt repayment in the past?

Credit history is the most significant factor taken into consideration in determining the likelihood of an online loan application’s approval. One of the reasons for this is because borrowers with a good credit score represent a lesser risk to the lenders. Therefore, these borrowers are more likely to receive a loan than those with a bad credit score. Clients with debts in a traditional bank can still apply for an online loan, as these companies do not focus on credit history as much as traditional banks. Microfinance companies providing online lending services can approve loans even if the borrower has questionable credit history. They provide a loan at minimal documentation, and these loans are targeted towards individuals with poor credit history or someone who needs cash immediately.

However, borrowers must note that while online loans may appear more accessible, the interest rates can be considerably high. If the borrower fails to repay the loan on time, they are likely to face an interest rate that can go as high as 800%. These rules apply legally in the Philippines. Based on this, borrowers need to be cautious while taking an online loan. They must read the loan agreement carefully and ensure that they can repay the borrowed amount according to the agreed terms.


To conclude, online loans are a convenient way to access funds for short-term needs. Credit history does not play a significant role in such loans, and even borrowers with a questionable reputation are the main target of microfinance companies. Despite this, we advise borrowers to proceed with caution when signing the agreement. Calculating the ability to repay the borrowed amount is essential, as interest rates can be a significant burden if the borrower defaults on repayment. Thus, always be careful and take the time to research which lending company suits your needs best, allowing you to access finance without getting into a debt trap.

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CashLoanPH Changed status to publish 06/05/2023