TIPS: How Filipinos can get out of debt


Posted at Sep 15 2023 10:49 AM

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How can Filipinos get out of debt?

Efren Cruz, chairman and chief executive officer for Personal Finance Advisers Philippines Corp., said the best way for Filipinos to avoid debt is to save money.

He stressed, however, that people need to change their mindset about saving.

"Don’t tell yourself to save. Because our brain interprets that as a loss," he said.

"Present it as another way. Ask a person, can you live on 70 percent of your income? That’s a different story. The brain perceives that as zero-based budgeting. Whatever is not budgeted, it’s just a foregone gain. You can still spend that in the future," he explained.

He also advised Filipinos to follow the STOMP or stay-on-minimum-payment model.

"If you’re on P5,000 a month, then pay that amount. But don’t use the card again. Next month is going to be a lower minimum, still pay P5,000. Repeat that. You will see that, even before you reach three years of doing it, you would have fully paid your credit card already," he said.

Cruz also stressed that debtors must not not be afraid to negotiate payment terms with their creditors.

He recalled having a client who was hiding from his creditors for two years, after owning them P75,000.

Cruz said he advised his client to talk to the debt collector.

"A few days later, the collector calls back, and says, 'Alright Sir, it’s been a while since you had this outstanding due. If you really want to get rid of it, all you have to do is this: pay us one time P9,500.' And we said 'What? That’s an 83 percent discount,'" Cruz said. 

"The reason for that is when it comes to credit cards, the central bank has told the credit card companies owned by banks, if it’s past due from the 6th month, write it off. At that point, the bank is just waiting to collect anything so that they can book it again as income. So that’s what we tell people, try to negotiate," he said.

— ANC, 14 September 2023