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Utang and Instant Pautang: A Simple Guide to

the Lending Culture in Philippines

(Updated March 26, 2018)

Nasubukan mo na bang umutang?

Most Filipinos have experienced borrowing money from family members, a friend, a
moneylender, a “Bombay,” or a bank.

Even business owners borrow money, let alone those who work at a minimum wage
each day. “Utang” has been a part of Filipino culture, prominent enough to have caught
the attention of Pres. Rodrigo Duterte.
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During the 2016 elections, then presidency candidate Mayor Duterte clearly stated his
plans to irradiate the ‘5-6’ lending scheme in the country. The ‘5-6’ lending system is
known to be the famous business of Indians, locally known as “Bombays,” here in the

The Bombays are usually depicted to be wearing turbans, riding motorbikes, sometimes
walking with a long umbrella, and offering loans with daily repayments. It does not matter
if the repayments are as small as 20 pesos a day, they will diligently come at the
borrower’s doorsteps every day. Sometimes they will even offer furniture, small
appliances, and other household items and the payments will be just the same every

5-6 Loan Computation

The 5-6 lending system was brought by Indian nationals in the 70’s and it has spread like
a wildfire. They didn’t need any advertisements. The Indians’ lending business was
popularized by gossips in the neighborhood. Since borrowing money is part of the
Filipino’s culture, this lending system was greatly accepted despite the staggering
interest rate of 20%.

If you borrow P500, you have to pay with the additional 20% interest: 500 x .20 = 100.
You have to pay Php600 divided into daily installments.

Why did 5-6 become so popular? Since the repayment is on a daily basis, the cash to be
paid seems smaller than it really is.

It is easier to part with a 20 peso bill each day rather than Php600 in a onetime payment.
Also, there is no need to hassle yourself with any required documents unlike in banks.

Aside from the 5- 6, there are other types moneylending in the Philippines.

Fix Rate Loan Definition

This is usually a verbal agreement between the lender and the borrower.
Neighbors usually practice this system as many Filipinos seem to have the habit of trying
their luck first with their neighbors when it comes to utang.

There is no standard interest rate, they just talk about the fixed amount of money to top
up when it comes to repayment. If you are lucky enough, you might have a kind neighbor
who won’t ask for any interest at all.

Incremental Borrowing Rate

The interest rate increases after a certain period of time. With this system, the borrowers
are forced to pay as soon as possible or they will have to pay more.

While this secures the lenders that they will get some profit from the basic principal loan,
it is too risky for the borrower. The interest rate may start in as small as 3%.

If you fail to pay within a month, the interest rate will increase to 4% the next month.

Diminishing Interest
Many Filipinos prefer this system. The borrower will pay monthly installments and the
amount of interest will seem to decrease as it will be based on the current outstanding
balance of the capital.

How to compute diminishing balance on loan?

For example, if you borrowed Php 1,000, then your outstanding balance will be Php
1,200 if the interest rate is at 20%.

Php 1,000 x .20 = Php200

Php 1,000 + Php 200 = Php 1,200

 If the first payment is Php 300, the Php 200 (20% of Php 1,000) is for the interest and
the Php 100 will be for the capital.
 Then the new outstanding balance of the capital will be Php 900.

Php 900 x .20 = Php 180

Php 900 + Php 180= Php 1,080

 Then on the 2nd month, you’ll pay Php 300 (Php 120 for the capital and Php 180 will be
for the interest).
 The current outstanding balance of the capital will be Php780.
Recurring interest
The lender will keep on collecting the interest as long as the lender had not paid the debt
in full a payment, not by installment. This is the lending system used by pawnshops in
the Philippines.

Pool funding is also as popular as 5-6. This is commonly done within a neighborhood or
close circle of friends or workmates.

A group of people will collect a certain amount from each other then they will do a
‘casting lots’ or “bunutan” to know which one will be the first to use the pooled fund.

Then on the next day or week, they will once again create a pooled fund with the same
amount and the next person (as decided by the casting lots at the beginning of the
system) will take home the money. The system will go on until the last person will be
able to have his or her chance to take home the same a month of the collected pooled

Money Lenders vs Banks

Private lending companies in Philippines can offer short-term loans, with least required
documents- sometimes none with the case of Bombays.

On the other hand, not so many Filipinos are keen to take loans from banks, this is due
to the hassle of required documents and a long time of processing.

Banks also don’t usually give out short-term loans.

Online Private Lenders

Online lenders are private lenders willing to give short-term loans at the shortest process
borrowers can ever experience. Lenders such as Cash Mart can even disburse cash
within the day of application.


The Truth Lending Act mandates all lenders including banks, and private lenders, to be
transparent with their terms and disclose all costs in the agreement contract. All costs
and amounts must be itemized to prevent lack of awareness in part of the borrowers.
Kung kailangan mo ng instant pautang pero ayaw mo ma-experience ang hassle ng
mahabang pila o pumunta pa sa lending companies’ offices or bangko para mag-submit
ng application, you can try Cash Mart’s fast cash loan.

Start filling in our online application form.

Expect the process to be smooth and short. For more inquiries, call Cash Mart now at
(02) 829-0000.

Our loan products are just right at your fingertips




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