Pay Now? Pay Later! A Guide to Product Loans

At the start of this exciting journey called adulting, one of the first things most people do is buy furniture and appliances. Sure, you can rent out a furnished space, borrow from friends and family, or buy secondhand. However, you might want to invest in brand new products that’ll surely last. 

Of course, there’s an obvious roadblock here: furniture and appliances are expensive. If you’ve only started working, you probably don’t have the means to buy them upfront. A fast and easy way around that roadblock is taking out a product loan.  

What is a product loan? How do you get one, where can you get one and – most importantly – what's the catch? Read on to find out!

What is a Product Loan? 

A product loan is a type of loan that can be used for specific products. These include furniture, appliances, gadgets, clothing, and more.

While you can also use a personal loan to buy those products mentioned, product loans are different in that you can apply for them in-store while you shop, making the experience much more seamless. 

If you think getting a product loan is too risky, think again. In recent years, more and more FIlipinos have been trusting and taking out product loans when shopping. In fact, the Philippines is one of the top three adopters of Buy Now, Pay Later (BNPL), a type of product loan, in Southeast Asia!

Types of Product Loans in the Philippines

• In-House Financing: Retailers offer this type of financing directly to customers for purchasing products. It allows you to pay for items over time, often with little to no interest, depending on the terms. 
• Bank Product Loans: These are personal loans provided by commercial banks to finance purchases such as appliances, gadgets, or furniture. They often come with competitive interest rates and flexible repayment terms. 
• Lending Companies & Microfinance Institutions: Lending companies and microfinance institutions offer smaller, short-term loans with easier approval processes, typically for individuals who may not qualify for traditional bank loans. 
• Buy Now, Pay Later (BNPL) Services: BNPL services allow you to purchase products and pay for them in installments, usually over a short period. They offer a flexible, interest-free payment plan but may charge late fees if payments are missed. 
• Credit Card Installment Plans: This option allows you to convert large purchases into installment payments using your credit card. The payment terms are set by your credit card provider, and interest may apply depending on the plan. 

Product Loan Eligibility Requirements 

• Age and Citizenship Requirements: You must be of legal age (usually 21 or older) and a citizen or legal resident of the country to qualify for a product loan.
• Proof of Income and Employment Status: Lenders typically require proof of income (e.g., payslips, bank statements) to verify your ability to repay the loan. Employment status (whether you’re employed or self-employed) may also be considered. 
• Credit Score: Your credit score is used to assess your financial reliability. A higher score improves your chances of loan approval and may result in better loan terms. 
• Other Documentation (valid IDs, proof of billing, etc.): You may be asked to provide additional documents like government-issued IDs, proof of address (e.g., utility bill), and sometimes a co-signer, depending on the loan type. 

Step-by-Step Process of Applying for a Product Loan

Step 1: Research and compare loan options: Don’t go for the first product loan you see. Do your research – visit the lender’s website, check online reviews, and ask friends and family. Once you’ve got all the information you need, assess if it’s the right one for you.

Step 2: Check eligibility and prepare documents: Speed up the approval process by finding out the requirements and preparing them before you apply. Pro-tip: Make a checklist so you don’t forget anything!  

Step 3: Submit application (online or in-store): The big day! Show up with requirements, and make sure you know everything you need to know about the product loan.  

Step 4: Loan approval and credit assessment: This might be the hardest part of the process because you may have to wait. Be patient, luv! 

Step 5: Signing the loan agreement: If you reach this stage, it means you’ve been approved! However, don’t get too excited – make sure to read the contract first before you sign.

Step 6: Product release and repayment terms: The final stage. You finally get to go home with your product. Remember to pay on time! 

How to Get a Product Loan from Tonik Bank? 

Tonik’s product loan is Shop Installment Loan. You can borrow up to P100,000 for up to 3, 6, 9, or 12 months with interest rates as low as 0% at select partner stores! Want to apply, luv? Here’s a quick step-by-step guide: 

Step 1: Download the Tonik App: Complete the onboarding process. Be ready with a valid ID. 

Step 2: Visit a partner store: Tap “Loans” on your Tonik App and select “Shop Installment Loan.” Then, visit a partner store (such as Home Along and FC Home Center) and approach a Purple Pro. Don’t worry, they don’t bite! 

Step 3: Scan the QR code: They’ll present a QR code to you. Scan it to see your loan summary.  

Step 4: Complete the Loan Application: Provide the required information and documents. Follow all on-screen instructions. 

Step 5: Accept the Offer: Double check your loan details, accept the offer if you agree, and virtually sign the necessary documents. 

Step 6: Finalize Your Purchase: Complete the transaction and get the confirmation code from the cashier, then enter it on the app. Finally, wait for the cashier to confirm your purchase! 

Interest Rates, Fees, and Repayment Terms

Before you apply for that product loan, there are very important factors that you need to consider: 

• Interest Rates: The interest rate is the additional amount you’ll pay on top of your monthly installment. It’s essentially the cost for borrowing money. Interest rates can vary depending on the lender, so it's important to choose one that aligns with your financial situation. 
• Additional charges (processing fees, late payment penalties): Some lenders may charge you with additional fees. They’ll sneak that in through the Terms and Conditions. Again, make sure to read everything before you sign anything! For full transparency, Shop Installment Loan only requires a 10% minimum downpayment – no processing fees! 
• Repayment period and monthly installment calculations: Remember that you’ll have to repay that product loan in the coming month/s. Make sure the one you get has monthly installments that you can manage! 

Tips for Getting Approved 

• Maintain a Good Credit Score: Lenders look at your credit score to assess your reliability as a borrower. A good credit score increases your chances of getting approved for a loan and helps you secure better interest rates. If you’re not confident about your credit score yet, try getting Tonik Credit Builder Loan first. Borrow up to P20K and build your credit!
• Choose a Loan That Fits Your Financial Capacity: Make sure the loan you apply for matches your ability to repay. Consider your monthly income and existing financial obligations before committing to a loan. 
• Avoid Common Application Mistakes: Double-check your application for errors such as misspelled names, wrong details, or missing documents. These small mistakes can delay your approval process or even lead to a rejection. 
• Understanding Hidden Fees and Charges: Be aware of any additional costs associated with the loan, like processing fees or late payment penalties. Understanding these charges helps you make an informed decision and prevents unpleasant surprises later on. 

Risks and Considerations

• Potential Debt Traps (High Interest Rates, Hidden Fees): Product loans often come with high interest rates and hidden fees that can make it difficult to repay over time. Be sure to read the fine print to understand the full cost of the loan before committing.
• Consequences of Missed Payments (Penalties, Legal Action): Missing payments can result in late fees, higher interest rates, and possible legal action. Defaulting on a loan may also damage your credit score, making it harder to secure future loans.
• Alternatives to Product Loans (Saving Up, Secondhand Purchases): Instead of taking out a loan, consider saving up for the item you want over time. Buying secondhand items or exploring financing options with lower interest rates may also help you avoid taking on unnecessary debt.

Shop with Tonik’s Product Loan Today

Product loans can be a big financial help. However, it can backfire, too, if you’re not responsible enough. Make sure that you have the right eligibility requirements and follow the tips we laid out here. More importantly, keep in mind that there are risks and considerations involved!

Think you’re ready for a product loan? Visit a partner store and apply for Tonik Shop Installment Loan today!

But first – download the Tonik App, luv!