Local consumers nuts over hulugan

What’s an immediate, convenient access to cash? For many local consumers it is a loan commonly known as hulugan, a scheme that involves installment payments popularly referred to as "gives".

"The installment culture seems to be firmly ingrained in Filipino consumers, who are fond of the ‘gives’ system. And it’s very easy to understand why. The installment scheme is all about ease in payment, which, given our general economic and social situation, is always a welcome proposition to local consumers," Noemi Azura, director for consumer loans of Citibank explained.

Informally, this type of installment loan is popular in offices and similar settings. Here entrepreneurial types sell anything from cosmetics and lingerie, to educational books and homemade food, to jewelry and electronic gadgets such as cellular phones, on the basis of equal installment payments or "gives". The payments are usually spread over two to four consecutive paydays, or even more, depending on the total amount of the purchase.

These loans are generally easy to secure as the transactions are very informal. However there are risks involved. Some borrowers end up not making any profit, or worse, not recovering their investment as lenders can choose not to honor the payment agreement at anytime.

Employed individuals can also turn to formal and more secure environments for cash installment loans such as the Social Security System (SSS) or Pag-IBIG Fund.

The upside is these facilities charge relatively low interest rates; the downside is they have very strict requirements and borrowers must be contributors.

Moreover, the loan amount is strictly dependent on the total amount of contributions a potential borrower has made and, thus, is very limited.

Some banks offer similar loan facilities, which can be tapped for different types of expenses. However, the document requirements are voluminous, and the application procedures quite tedious.