Despite the higher income that overseas Filipino workers (OFWs) get abroad, many of them still fail to manage their finances well – going home empty-handed and sometimes even burdened by debt.
Borrowing money is common among many Filipinos. A survey by the Bangko Sentral ng Pilipinas (BSP) shows that eight in ten Filipinos have experienced borrowing money. The most common purposes for borrowing money is to buy food, pay for school-related expenses, and finance emergencies.
OFWs are no exemptions to the culture of borrowing. Many OFWs leave to be able to pay for their loans or borrow money in order to finance their move overseas. With loans hounding them, OFWs fail to save and often end up overextending their stay abroad.
Vince Rapisura, president of the Social Enterprise Development Partnerships, Inc., a social enterprise that provides financial literacy trainings to low-income OFWs in 15 countries worldwide, recently launched a book entitled (L)earning Wealth: Successful Strategies in Money Management.
According to Vince, there are a few things an OFW should consider before borrowing money.
Vince suggests that OFWs follow these 5 cardinal rules of borrowing:
Filipinos often borrow for emergencies, which according to Vince, should be avoided.
Ask yourself the following questions before getting a loan:
At least 71% of Filipinos who borrow money get it from informal sources – family, relatives, friends, and informal money lenders. Only 4% borrow from banks.
According to Vince, it is best to borrow from formal financial institutions since they offer the best rates available in the market and are subjected to strict regulations.
There is no standard prescribed interest rate for loans, but Vince suggests that you look for the lowest interest rate available and make sure that the return from the investment (if you used the loan to invest) is higher than the interest you need to pay.
Vince says bad debts are those used for non-productive purposes.
Many OFWs resort to borrowing money, especially during emergencies, and learn the hard way that this is not good. But it is never too late. Here are 4 steps to free yourselves from bad debt:
This story originally appeared on: https://www.rappler.com/move-ph/balikbayan/141827-ofw-tips-getting-out-of-bad-debt
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