What is a Disclosure Statement and Why You Must Read It

When you are approved for an online loan, it can be tempting to click 'accept' immediately to receive the funds. However, before signing any agreement, you must review the loan's Disclosure Statement. Under the Truth in Lending Act of the Philippines, this document is a legal requirement designed to protect you from hidden charges.

Key Elements of a Disclosure Statement

A standard disclosure statement must contain the following information:

• Net Proceeds of the Loan: The actual amount of cash you will receive. This is often less than the principal amount because processing fees are deducted upfront.
• Itemization of Charges: A breakdown of all non-interest costs, including processing fees, service charges, documentary stamp taxes, or insurance fees.
• Finance Charges: The total amount of interest and other fees you will pay over the life of the loan.
• Schedule of Payments: The exact dates and amounts of each repayment instalment.
• Late Payment Penalties: The charges and interest rate applied if you miss a payment deadline.

Take the time to compare the approved principal with the net proceeds. If the deducted fees are excessively high, you may want to reconsider the loan. Never sign a loan agreement if the disclosure statement was not provided or if the terms are unclear.