My husband and five of his long-time friends had an impromptu get together mainly to discuss the present predicament of one of their close friends. He is on the verge of losing his house, which is his family’s main residence, to a bank.
He has three outstanding loans or mortgages from one single bank and the amounts are 1M, 2M, and 6M, using his residence as a guarantee or what is called collateral. He defaulted in one of his loans, so the bank exercised it’s unilateral authority to call all his total loans with the threat to foreclose his property if he failed to pay asap plus penalties, interests, surcharges, etc.
Our friend is also negligent in handling his financial obligations. I am sure the bank had given them sufficient notices but the borrower probably think it was not urgent or they probably didn’t know how to handle situations like these. I understand this could be overwhelmingly stressful.
He’s been having difficulty collecting from the government contracts he has with local agencies because the budget allegedly is on hold because of the election, and the situation is aggravated by the national government’s issues on budget insertions.
Let this story be a good lesson.
I am telling you about our friend’s serious predicament to warn all of us that BANKS ARE FAIR WEATHER FRIENDS.
When your business is doing very well, banks will come knocking on your doors offering money. Very tempting, but KEEP IN MIND, that money they are dangling before you is UTANG, NOT LIBRE. Banks see an opportunity to lend you money but that does not come free. You have to pay for fees and taxes, and monthly interests. Every month, on a particular day, you MUST come up with the funds to pay for your monthly mortgage or amortization or hulog. If it’s due every April 1, then you must pay on or before April 1. The fees and charges will multiply once you miss out on your payments, or nahuli ka ng hulog, or delayed ka ng hulog.
As much as possible, do not guarantee a loan that is not yours. It happened to me before. It was a 3M loan fully collateralized by a condominium. I was kampante. I trusted that because the guy’s 3M loan was less than his condo worth P5M at that time, I thought if he faltered on his obligation to the bank, then I would be fully covered. That the bank would just foreclose on his condo. Hindi. After a few years, I received a letter from that particular bank demanding P2M from me, being the guarantor. And what was the 2M for? Additional penalties, interests, surcharges, etc. Whatever the bank could think of to squeeze more blood from hapless individuals. The bank was not content in getting the P7M worth of condo (it had appreciated), they wanted more money. Sa kanila na rin galing. When they saw my name as the guarantor, their greedy faces lit up.
I hired a lawyer to threaten to sue them. But that did not solve my problem. Banks have one floor of lawyers who are paid whether they are suing someone or not. My problem ended when I discovered who the bank’s big boss was, kakilala ko pala at kakilala ng isang dosena kong kakilala. I wrote him a letter, explained what was that loan about.
I saw the bank’s president in person. He promised to look into the file of this person whose loan I guaranteed. After a few weeks they agreed to call it quits. And they admitted to me that “lampas-lampas na sa utang yung nakulekta nila. Hindi lugi ang banko. Nabawi na nila yung 3M na inutang, plus sangkatutak na interests, inilit pa nila yung condominium na patuloy tumataas ang value. Grabe ano?
Kaya mag-ingat sa mga banko. They can make your life miserable and take everything including your house and cars, if you don’t play your cards right.
Our dealings with banks span over 30 years and we’ve experienced up close how they operate. Maintaining a good credit line is integral in all businesses. Kahit mga banko, nangungutang din. We would not grow without the trust, cooperation, and support of banks. But we always keep in mind that they are friends in good times only, never in bad times. Banks will be the first to abandon you once they smell you have a slight hiccup. They will force you to return their money knowing fully well that you don’t have money. This allows them to demand that you pay all your loans or else they will take your properties.
I came home one day seeing lots of people in front of our neighbor’s house. This was in another village. Their personal belongings were scattered on the street. Yun pala they borrowed 2M loan which they failed to pay. Pinalayas sila sa bahay nila na minana nila sa kanilang mga magulang, worth 10m at that time. This happened 30 years ago.
I’ve seen a friend lose her beautiful house in a posh village in Pasig. Their loan was only P8M which ballooned to P14M due to additional penalties. They were trying to negotiate with the bank to buy back their house but the bank claimed they already have a buyer for P14M.
Wala, ipina-sheriff din sila. I tried to help them by calling the president of the bank but I was too late. The bank had already signed a sale agreement with another person.
These are the things that I want all of you to remember:
1. Hindi libre ang pera na ibinibigay ng banko. Hindi yan bigay, yan ay utang. Money lent to you by banks are not gifts, they are loans that must be paid on time or on demand.
2. The documents they ask you to sign contain very small prints and light colored ink. No one reads those terms and conditions at the back of the promissory notes or loan agreement. I did one time, I had questions but the bank never cared to clarify certain provisions. I tried to contact their lawyer who drafted the contracts but they just ignored me. Siguro sa libu-libong client nila, I was the only one who dared question them. But they never gave me the courtesy of an answer. If you would only read what’s written, matatakot kang mangutang. Baka mahubaran ka ng damit. The terms I questioned was about the auto loans. Puro one-sided lang ang nakasulat duon. Grabe. Hindi pala grabe, superduper grabe.
3. Bank interest rates are high. The interests are going up these days. If you miss a payment, they will slap you with fees and lots of fees so the more you will have difficulty paying.
Lalo ka nilang ilulubog sa utang.
4. When you negotiate for a loan, always insist to put in the contract that a) there is no prepayment penalty. Meaning, kung biglang magkapera ka, pwede mong bayaran agad yung utang mo na walang dagdag na fees ang banko. Meron gmga banko na magbabayad ka na nga ng utang, dadagdagan pa ng prepayment penalty.
b) diminishing balance— insist that you can pay any amount on top of your monthly payments. For example, kung ang hulog mo buwan-buwan ay twenty thousand pesos (20k), if you pay 20,500 the 500 excess should be deducted by the bank directly from the principal. This will shorten the number of years you have to pay. Small amounts could add up and before you know it, a loan that has a term of 5 years, baka 3 years lang bayad mo na kung every month dagdagan mo ang hulog.
5. Control yourself. Impose discipline. If you have a business, borrow only what you really need or necessary for use in your operation. Do not splurge on a fancy looking office unless money flows from your faucet. Do not borrow money that you will use to shop for personal things or to renovate your office or house. If you really have to, limit your spending to a manageable level.
6. For businesses, bigger offices multiply your operating costs. You need more aircons, which dramatically increases your monthly electricity bill. Unless you own the lot, the building, and you have no mortgage, and you have a stable income, then do as you please.
7. Do not put all your eggs in one basket. Protect yourself from banks. No matter how good your relationship is with one single bank, spread your reach. Develop good relations with other banks too. Do not borrow three loans from one bank using three collaterals. Use one collateral per bank. And if the loan is small, negotiate for clean loans (no real estate collateral) like in our friend’s situation, his loans were 1M or 2M only.
For collateralized loans, use your residence last. If you can, don’t mortgage the house where you live. The first opportunity na magka-pera ka, bayaran mo na ang utang mo dun sa bahay, at itago mo na yung titulo. Bring the cancellation of mortgage document to Land Registration Authority (LRA) to remove the annotation at the back of your house’s transfer certificate of title (TCT).
8. Banks can be your best friend and they can also be your worst enemy so be careful, Beware. Play your cards well. Do not think banks will save you when your boat is sinking. No, they might push you off your boat and get your boat.
