Drowning in Debt: A Cautionary Tale

Today, we’re going to talk about “Angela”. A friend of mine, she’s as average a Filipina as average can get. She has a 9-to-5 job, works hard to provide for herself and her family, and has dreams of saving up for her future. She’s pretty much like any one of us—average and very relatable.
Like many of us, she occasionally borrows money when the need arises—a medical emergency, a rush expense, and even when she just really wants to buy something. Unlike many of us, however, her debt has become so great that she’s actually drowning in it.

A Really Big Problem

It began when she “inherited” a debt from her mother at the company they both work for. Since her mother’s retirement, she continues to work—essentially—for free. That’s because her company withholds her paychecks to slowly whittle away at an over 1.3-million peso debt. Apart from the fact that that’s actually highly illegal—you can’t inherit debt per se nor can your paycheck ever be withheld—she also has no money to spend for her day-to-day needs.
This led her to pulling out a personal loan from a close friend of hers. Because she had no money to begin with, she couldn’t afford to pay him back. Not wanting to get into trouble with her friend, she borrowed again—from another friend. This repeated itself until she ran out of friends willing to lend her money. She then moved on to smaller banks and lending companies where the cycle continued with a vengeance. At this moment, she’s over 1.8-million pesos in debt and constantly living in fear of the next call from her (understandably) angry creditors.

Very Deep Roots

An article released in August last year by Inquirer.net took a very in-depth look at the overall financial perception and engagement snapshot of Filipinos based on the BSP’s National Baseline Survey on Financial Inclusion. Focusing on loans, we find that over 47.1 percent of Filipinos owe someone money. While a lot of that comes from friends and family at 61.9 percent, lending companies and pawnshops came close behind. Banks, surprisingly, are among the least popular options.
With regard to self-inflicted debt cycles like what Angela experienced, it’s usually a matter of not knowing the better options for quick cash as well as ignorance of what the law provides for. You can partly peg this down to our concept of hiya. Rather than cop up to the inability to repay, many would prefer to borrow again to temporarily alleviate an awkward situation.

A Better Way to Go

PawnHero presents a unique, safer, and more convenient alternative to informal loans. With pawning, you stake a tangible item against what you’re borrowing. Should you find yourself unable to pay like Angela couldn’t, you lose the item, yes. But what you also “lose” is the fear of being hounded to repay. You “lose” the feeling of needing to borrow again to stay afloat. You “lose” your slot in the debt cycle that tends to trap many Filipinos.
Based wholly online, PawnHero makes the process of application easy and painless. Just fill out our online form, snap a few shots of your item, and we’ll send you an appraisal within minutes. If you accept that appraisal, we can have you item picked up for free via our shipping partner, 2GO Express. Your funds will immediately reflect in the PawnHero card that we issue to all our customers. Repayment happens through this card too. Complete your payments and we ship your item back to you.

Taking Responsibility

At the end of the day, what we offer is a loan grounded on a sense of personal responsibility. Because you have to bank on something valuable to you, there’s less of a chance to fall into the trap of pushing the real consequences of debt out of mind. In a sense, that reflects what we hope to achieve at PawnHero: developing a sense of financial awareness and responsibility in Filipinos. Hopefully, this can spare people from the all-to-real financial problems they face everyday.
Are you facing a huge debt problem like Angela? What got you into that problem? Share your thoughts!