What is an ATM Loan? Is it the Same as a Personal Loan?

There are many types of loans, some helpful while others harmful. Make sure to know the difference.

Learn about the differences and similarities between an ATM Loan and a Personal Loan to help inform your financial decision.

Due to the for a quick personal loan option, some people resort to an ATM (Automated Teller Machine) Loan in times of dire financial situations. This type of loan is seen as a viable alternative for those who do not want to process requirements, or for those with less than favorable credit. But is it really a sustainable loan option especially to those who are coping with financial difficulties?

It would help to define and distinguish between the two. Personal Loans are defined as a multi-purpose loan meant for personal consumption. It can be availed by employees, self-employed individuals, OFWs, or anyone with a monthly source of income. Since it’s multi-purpose, you can tailor the loan to suit your individual need – be it to pay your children’s school fees, home repairs, purchase an appliance, or deal with unexpected medical bills. Lastly, a Personal Loan can be availed from banks, ‘formal’ or SEC-registered lending companies, and ‘informal’ or unregistered lending companies that operate illegally.

Meanwhile, ATM loans may be classified as a type of Personal Loan where the borrow surrenders his ATM card used for by the company he is employed with for salary disbursement. The ATM card along with your PIN (Personal Identification Number) are used as collateral to ensure that the borrower pays the loan in part or full every payday. ATM Loans are usually offered by non-bank lenders, both formal and informal.

What are the dangers of getting an ATM Loan vs. a Personal Loan?

Even the Bangko Sentral ng Pilipinas (BSP) has warned the public against using their ATM card as collateral for a loan. BSP’s Financial Consumer Affairs Group (FCAG) that it could lead to financial trouble, including the possibility of creditors withdrawing more than the agreed payment amount.

Aside from this, ATM loans also make borrowers susceptible to a cycle of loans. For example, if the lender withdraws the majority if not the whole amount of the borrower’s paycheck disbursed through the ATM, the borrower may have to avail of another loan to cover his living expenses until they next paycheck. This, plus the higher interest fees can cause the borrower to further sink into debt.

How Can I Get a Formal, Legitimate Personal Loan?

It really is not as complicated as would be first-time borrowers think. Read up on the loan criteria and requirements of banks and lending companies to know if you qualify. You can also use a loan calculator to see how much money you can borrow given your current income. Prepare all necessary documents for your loan application with a bank or financing company. You should also shop around for the best interest rates, as banks and lending companies vary on this.

Loansolutions – the Philippines #1 Loans Marketplace – can help you get that legitimate loan. Our 3-Step Online Loan Application is cross-referenced with the criteria of top banks and lenders in the Philippines, to make sure that we find lowest interest personal loan that you can qualify for.  A dedicated Loansolutions Concierge will contact you to answer all your loan questions, and help review and submit the required documents to banks and lenders on your behalf. Because we stand against predatory lending, we only work with the biggest network of legitimate lenders in the Philippines.

Apply for a Legitimate Personal Loan 


Written by Kash Avena

Kash has been with Loansolutions.ph in marketing and business development roles since 2014. Now based overseas, she is happy purveyor of financial literacy for OFWs and their families.

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