Filipino borrowers do not argue with your philosophy of interest. They argue with the number on Friday. If your “flat” product feels like reducing to them — or your interest-only teaser balloons without a clear end — trust dies faster than any spreadsheet can repair.
This guide is for Philippine money lenders and small MFI product owners who need loan products that match real schedules: flat, reducing balance, interest-only, and compound. You will see peso and rough USD examples built for desks in Metro Manila, Central Luzon, and Visayas branches. Soft pointer only: PesoLend features can hold product rules next to schedules so officers stop inventing math in Notes. You still own the product policy.
Why product type is an ops problem, not just a pricing slide
Two desks can both say “3% a month” and mean different cash paths. One charges flat on original principal. Another accrues on declining balance. A third collects interest-only for four weeks then dumps principal. A fourth compounds on missed buckets. Borrowers in Marikina and Bacolod hear the marketing line. Collectors live the schedule.
Pick the type that matches how you actually collect — weekly market routes, semi-monthly payroll, or monthly salary loans — then train one story every officer can recite in sixty seconds.
Flat products: simple pitch, honest disclosure
Flat remains common for short Philippine microloans because the installment is easy to quote.
Example A — ₱10,000 (~$175) for 10 weeks, flat fee ₱1,500 (~$26) total. Total payable ₱11,500. Weekly installment ₱1,150. Officers love it. Finance must still know that the effective cost is higher than a reducing product with the same headline fee, because principal does not decline in the fee math.
Use flat when:
- Tenor is short (often under 3–4 months)
- Borrowers pay the same amount every visit
- Your cashiers need speed more than elegance
Do not use flat as a way to hide cost. Say the total payable out loud in Tagalog or Cebuano the borrower prefers. Write it on the disclosure you keep in the loan file.
Reducing balance: fairer math, more training
Reducing (declining) balance interest is easier to defend to a careful borrower and to a board member who reads amortization tables.
Example B — ₱20,000 (~$350) over 4 months, monthly reducing. Early months carry more interest; later months lean principal. The payment can be equalized (amortized) or interest-plus-fixed-principal. Equalized payments feel familiar to salary borrowers in Makati BPOs and Laguna factories.
Train officers on one visual: “Interest follows what you still owe.” If they cannot explain that without insulting the borrower, do not launch reducing on Monday.
Interest-only windows: use with an exit date
Interest-only (IO) can help a sari-sari rebuild after a slow fiesta month — or a tricycle operator after engine repair. It becomes a trap when IO has no hard end.
Example C — ₱15,000 (~$263), 4 weeks IO at ₱450/week (~$7.90), then 12 weeks amortizing. Publish the switch date in the schedule. Put it on the receipt. Remind in week three that week five changes. Branches in Cavite and Pampanga that skip the reminder create angry week-five visits.
IO is a Must-capable schedule pattern when your LMS can show the full path. It is not a forever product costume.
Compound: define the trigger or do not offer it
“Compound” in small-lender talk often means interest or fees stacking on overdue amounts — not Wall Street continuous compounding. Be precise.
- Does penalty compound on unpaid penalty?
- Does unpaid interest join principal on a set day?
- Is compounding daily, weekly, or only at period end?
If you cannot answer in one sentence, do not enable it. Philippine borrowers will feel it as punishment even when your policy is legal and disclosed. Prefer simple overdue fees many desks already explain (without turning this article into a late-fee deep dive you may already publish elsewhere).
Map product type to PH collection rhythms
| Rhythm | Often fits | Watch-out |
|---|---|---|
| Weekly market (Divisoria, Carbon, Bankerohan) | Flat short-tenor | Do not stretch flat to 8 months silently |
| Semi-monthly payroll (NCR, CALABARZON) | Reducing amortized | Align due dates to paydays |
| Seasonal agri / rebuild | Short IO then amortize | Hard stop on IO |
| Miss-heavy books | Clear fees, careful compounding | Disclose stacking rules |
Configuration checklist before you go live
- Name the product in plain language borrowers hear in branch.
- Lock tenor options officers may sell (no freehand 17-week specials).
- Generate a sample schedule for ₱5k, ₱10k, ₱25k and print them for training.
- Define grace days and holiday behavior (Holy Week and year-end in PH matter).
- Define what a partial payment does to the next due — in writing.
- Assign which roles can edit a live product vs only create loans from it.
Role locks matter as much as the formula. A cashier in Cubao should not silently change reducing to flat on a Friday afternoon.
What this is not
This article does not claim exotic pricing engines, investor modules, or AI product pickers as live needs. It is about Must-level loan product types Philippine lenders already run: flat, reducing, interest-only windows, and carefully defined compound/penalty behavior — configured so schedules match cash.
Explore capability shape on features, plan boundaries on pricing, and configure inside the app via login.
Pilot plan: two products, thirty days
Desks that launch five products in week one drown training. Try:
- Product 1: Weekly flat ₱5k–₱15k, 8–12 weeks — your bread-and-butter market book.
- Product 2: Semi-monthly reducing ₱15k–₱40k — salary and small formal income.
Run both for 30 days in one branch (say San Juan or a provincial hub in Iloilo). Measure on-time rate, average days to post, and how often officers ask “ano ba talaga ang interest?” If Product 2 needs a third training, fix the script before you copy to Davao.
Closing
Loan products that match Philippine schedules are an honesty tool. Flat, reducing, interest-only, and compound each have a place — when officers can explain them, schedules show them, and borrowers in Quezon City or Cebu hear the same story the LMS stores. Pick fewer products. Disclose total payable. Train the sixty-second version.
Ready to configure with clean schedules? Start at https://pesolend.com/app/login.