Share Now
how traditional loan works
khmer-prosperity-loan-trusted loan banner


Money matters; it’s crucial for shaping our dreams and securing our futures. In Cambodia, like anywhere else in the world, they need money through financial support to be a game-changer. Whether you’re striving to expand a small business, start on an educational journey, or weather an unexpected storm, taking out a loan is one of your best choices. But not all loans are created equal. In this article, we’ll embark on a journey to understand what the difference is between traditional loans and personal loans in Cambodia. What makes them different, and what makes them similar? Let’s dive right in.

Understanding Personal Loans

Personal loans are known as quick loans because they are short-term and unsecured. These loans are typically a contemporary form of financial support, designed for the fast-paced world we live in. They’re tailored to provide swift access to cash without the complex paperwork and weeks-long waiting times that come with traditional loans. What sets them apart is their speed, convenience, and flexibility. There are various loan options for Cambodians to choose from to achieve their goal; understanding each type of quick loan helps you define if the loan is right.

Types Of Personal Loan

Home Renovation Loans

Whether it’s to fix a leaky roof or to give a home some paint, homeowners can use the loan to upgrade their living spaces. Loan service providers in Cambodia typically require some form of collateral, so check with your loan provider in Cambodia to fund the loan.

Education Loans

Recognizing the importance of education, many Cambodian financial institutions now offer loans aimed at covering tuition fees and other related expenses. These loans can be used to help bridge the gap between aspiration and access to quality education.

expenses covered by education loans

Agricultural Loans

It assists farmers in purchasing equipment, seeds, or livestock. This loan is also ensuring that the nation’s agricultural backbone remains strong and competitive. Khmer Prosperity Loan encourages Cambodians who run relevant businesses to get agricultural loans because it helps the country grow better and provides more job opportunities.

Payday Loans

Payday loan providers are not common in Cambodia, but they exist. It allows you to finance a small amount of money and pay back the loan on your next payday.

what to know about payday loans

Emergency Medical Loans

Life is unpredictable. For unforeseen medical emergencies, some institutions provide loans that are offered in a few hours, ensuring that financial constraints don’t hinder access to necessary medical care.

Payday Alternative Loans: Microfinance Loans

It is another payday alternative loan, and it covers more underserved Cambodians. Think of them as small loans for people who might not have the easiest time getting a traditional bank loan. Great for personal or business needs. There’s a sample size of 1660 people and found 28% were objectively insolvent in microfinance loans so remember that easy doesn’t mean we don’t have to pay off the loan.

Pawn Loans

Have you heard that a loan is funded by a pawn shop? Pawn shops can hold onto it and give you cash in return. It allows you to borrow money using the barter method and get your stuff once you pay back the amount of the loan.

Online Loans

An online loan is a type of loan that allows you to complete the entire loan application through an internet device. When you take out a personal loan from an online platform, you have a high level of privacy because Khmer Prosperity Loan doesn’t ask about the purpose or how you use a personal loan.

Secured Personal Loan

A secured personal loan is a borrowing arrangement where the borrower offers collateral. This collateral reduces the lender’s risk, leading to lower interest rates and higher loan amounts. However, failure to repay can result in the loss of the collateral.

Make sure you understand each type of personal loan because we’ll use some of them to clarify the differentiation between a personal loan and a traditional loan.

How Personal Loans Work

Personal Loans have gained immense popularity in Cambodia due to their ease of access. Just a few taps on your smartphone, and you could have the funds you need to grab that business opportunity before it slips away.

The key players in this arena are online lending platforms and fintech companies. These digital disruptors are transforming the lending landscape, like Khmer Prosperity Loan is allowing anyone with a smartphone and an internet connection to apply for a loan. Cambodia, with its rapidly increasing smartphone penetration, is fertile ground for such innovations.

Process Of Borrow Money Through Personal Loan

Getting a personal loan can be simple in Cambodia. The process often involves the following steps:

Application: You fill out a straightforward online application, providing essential personal and financial details.

Document Submission: You may be required to upload a photo of your ID card, proof of income, and possibly other documents. This is usually far less demanding than the documentation needed for traditional loans.

Credit Scoring: Many personal loans rely on alternative credit scoring methods, often using your smartphone data, social media activity, or transaction history to assess your creditworthiness.

Approval: Thanks to the streamlined process and advanced algorithms, approval decisions can be lightning-fast. Contact Khmer Prosperity Loan today, you will possibly get loan approval in the next day.

Disbursement: Once approved, the funds are transferred directly to your bank account or mobile wallet.

types of disbursement methods for fully drawn advance loans

Personal loans have broken the barriers of time and space, offering an incredible level of convenience. However, it’s vital to keep in mind that the speed and accessibility of these loans can come at a price.

Traditional Loans and Term Loans in Cambodia

Historical Context and Evolution

Now that we’ve explored the history of personal loans, let’s pivot to the well-established world of traditional loans in Cambodia. These loans have a rich history, deeply intertwined with the country’s economic development. It was invented to help entrepreneurs expand their businesses, so it is also called a business loan or conventional loan, which often requires collateral.

Historically, traditional loans in Cambodia have been offered by a variety of financial institutions, including banks, microfinance institutions (MFIs), and credit unions. Their evolution mirrors the socio-economic landscape of the country.

Over the years, the traditional lending landscape has seen significant expansion. Banks have multiplied, with international players entering the Cambodian market, bringing with them modern banking practices and services. In contrast to personal loans, traditional loans are deeply rooted in Cambodia’s financial history and are still a reliable source of financial support.

how traditional loan works

Key Players and Institutions For Conventional Loan

In Cambodia, traditional loans primarily originate from the following sources:

Banks: Commercial banks have a considerable presence in Cambodia. They offer a wide range of loan products, including personal loans, business loans, and mortgages. Banking institutions such as ACLEDA Bank and Canadia Bank have established themselves as major players in the country.

Microfinance Institutions (MFIs): Cambodia boasts one of the most vibrant microfinance sectors globally. MFIs have served as pillars of financial inclusion, providing loans to the unbanked and underserved communities.

Credit Unions: These community-based financial cooperatives cater to a more localized demographic. Credit unions offer members access to savings and credit services.

credit unions versus banks

Unsecured Personal Loans vs Business Loan: Interest Rates and Fees

Now that we’ve explored the distinct characteristics of personal loans and business loans in Cambodia, it’s time to delve into one of the most critical aspects of any loan: the financial costs.

Interest Rate

Personal loans are celebrated for their swiftness and accessibility, but they often come with relatively higher interest rates and fees. Let’s break down the financial aspects of these loans:

Business loans generally feature lower interest rates compared to personal loans. For instance, personal loans from banks often carry annual percentage rates ranging from 7% to 20%, depending on your creditworthiness. The rate is one of the appealing offers that traditional loans attract. Traditional loans have much lower interest rates compared to personal loans, especially those coming from unlicensed money lenders.

Personal loans can have high interest rates compared to business loans. Most lenders offer personal loan APRs that can range from 18% to 60% or more. While these rates might seem high, they’re offset by the convenience and speed offered. There’re still some exceptions for licensed loan lenders in Cambodia, like Khmer Prosperity Loan, which insists on setting their interest rate at 6.99% with a fixed rate.

Fees and Charges

Both loan providers impose extra fees on the borrowers, but we can still differentiate between them by observing what type of costs you have to incur. The personal loan lender often prefers to charge service fees because it is a long-term earner for them.  These fees are typically calculated as a percentage of the loan amount or may have a fixed component.

For example, you will get charged when your loans are renewed multiple times or there is any minor action regarding your loan account. In contrast, traditional loan lenders will only charge for processing or application fees, which are mostly one-time expenses. These fees are typically disclosed upfront, so make sure you calculate all the loan charges in advance.

Late Payment Charges

Missing a payment on a traditional loan can result in late payment penalties, although they may be less severe than those on personal loans. For example, if you do not repay your loan on time after the 7-day grace period. The traditional loan lender will charge daily at the initial interest rate plus 3%, counting from the due date until the due amount is paid.

Personal loan providers use the same method to calculate the late penalties as well, but some of them apply significant late payment penalties in different ways. They penalize the borrower in an increasing manner, like 1% for the first late payment date, 2% for the second late payment date, and a continuous increase on it. This example frequently happens to unlicensed money lenders because they are not regulated by any authorized party, so they never default on the loan.

Both personal loans and traditional loans have their pros and cons. Personal loans, with their higher costs, are ideally suited for borrowers who prioritize speed and convenience over lower interest rates. They can be invaluable in situations where urgent financial assistance is needed. Due to the low interest rates, the traditional loan approval process can be more time-consuming and documentation-intensive. Additionally, they may be less accessible to those with limited credit histories.

Which Loan is Right Decision: Repayment Terms and Flexibility

40% of Cambodian tourism businesses reported layoffs, and the main reason is that they do not have sufficient cash flow to sustain themselves until the pandemic. This phenomenon reflects that Cambodian businesses do not emphasize back-up capital to cover unexpected problems, so loans that may have high flexibility are a treasured quality. The ability to tailor your repayment schedule to suit your financial situation can make all the difference. Let’s explore how traditional loans and personal loans in Cambodia fare in this aspect.

Customized Schedules

One of the standout features of personal loans is their flexibility in repayment terms. Borrowers have the advantage of customizing their repayment schedules to align with their cash flow. On the other hand, traditional loans are also named term loans because they normally stick to a specific schedule that is stated in the loan agreement.

Loan Term

A payday loan is a short-term loan that is typically not longer than twelve months. A short-term loan can lead to higher monthly repayments, but you can relieve the burden sooner. Traditional loans offer longer repayment tenures, which can translate to more manageable monthly payments.

No one can determine if a short-term loan is better than another because it depends on your personal situation. Cambodians understand the concept that the earlier the loan is settled, the lesser interest incurred. However, if someone is not capable of repaying the loan, it may lead to bankruptcy, so it’s crucial to evaluate whether your budget can accommodate these payments.

Payment Frequencies

You will typically follow a fixed monthly payment schedule. Differing from this schedule may result in penalties, although traditional loans usually have more lenient late payment penalties compared to personal loans. For personal loans, many providers offer options for weekly, biweekly, or monthly payments. This flexibility allows borrowers to select the frequency that suits their income cycle and use a loan calculator to calculate their best repayment frequency.

payroll frequency

Early Repayment Considerations

While some traditional lenders allow early repayment, it’s not always straightforward. There may be prepayment penalties or restrictions, which can hinder the flexibility of these loans. It is harmful to Cambodians, especially business owners who have chances to earn huge profits within a certain period to pay the loan back. With a lump sum of money, they can only either continue to pay continuous interest or get penalized by traditional loan lenders; whichever option they pick, they also need to pay the loan with extra costs.

You can ease this concern by paying off your loan with personal loans because the lenders often allow you to make early repayments without incurring prepayment penalties. The reason they allow you is because these kinds of loans are short-term; there’s no big difference between settling in the 6th or 10th months of the Khmer Prosperity Loan. If your financial situation improves, this can help you save on interest costs.

Rolling Loans

Some personal loan lenders support the feature of rolling loans, which traditional loans do not have. Rolling loans allow you to extend the loan term whenever you are in hardship. Prepare the relevant documents and visit the Khmer Prosperity Loan. Tell us your reason for applying for this feature honestly.

The flexibility of personal loans in terms of repayment schedules is ideal for those who prefer the loans for short-term commitments or need to cover immediate, short-lived expenses. It’s a perfect match for situations where you need cash in a pinch but can’t commit to long-term payments.

Traditional loans, with their longer tenures and fixed repayment schedules, are suitable for borrowers with more extended financial horizons. They work well for investments like education, housing, or large-scale business ventures that require substantial funding and can be repaid over time.

Conventional Loans and Payday Loans Work With Collateral and Security Measures

Loans, regardless of their type, are financial transactions that carry inherent risks. Collateral and security measures are key differences you should be aware of when borrowing money. Understanding how lenders mitigate these risks is crucial for both borrowers and lenders. Let’s explore how personal loans and traditional loans in Cambodia handle collateral and security measures.


Traditional loans typically require collateral, such as property, land, or vehicles. Banks’ favorite way to borrow money is to finance a secured loan to their borrowers because it is the safest of all loan types. These assets act as security, allowing the lender to recover their funds in case the borrowers are unable to pay them back. But does every Cambodian have collateral for applying for a traditional loan?

Apparently, no. That is why personal loans were invented to cater to Cambodians, especially those underserved. Even though there is a secured personal loan in Cambodia, it only applies to borrowers who finance a huge amount. Personal loans are typically unsecured and do not require any collateral, which makes it easier for Cambodians to finance a loan. You can know this from Khmer Prosperity Loan, which has up to a 99% approval rate, so be one of the successful borrowers to get a loan with us.

Alternative Credit Scoring

The banks always say loans don’t cater to borrowers with poor credit scores. Traditional loans rely heavily on credit histories and scores to assess a borrower’s creditworthiness. A favorable credit history can lead to better terms and lower interest rates. A personal loan has a completely different method to do the assessment by using non-conventional credit scoring. They may consider factors such as smartphone data, social media activity, and transaction history to determine your financial responsibility before lenders offer personal loans. Thus, for Cambodians, securing a personal loan is much easier than qualify for a traditional loan.

Processing Time

As we know, the assessment methods apply to two loans, and they take different times to complete the entire assessment. Personal loans that are provided have a relatively short duration, reducing the overall risk exposure for both borrowers and lenders. It minimizes the time during which potential financial changes can impact the borrower’s ability to repay. Traditional loans almost always involve complicated assessments that require other parties, like getting credit history from the Credit Bureau of Cambodia (CBC).


Other than the collateral, some traditional loans generally require a guarantor, an individual who agrees to repay the loan in case the borrower defaults. Guarantors provide an additional layer of security for lenders. If you don’t have a guarantor, then the Khmer Prosperity Loan will be your best financing option. Do not worry about whether anyone backs you up to secure the loan; just start processing your loan application with us and be ready to receive the loan funds.

Financial Documentation

Borrowers typically need to submit extensive financial documentation, such as income statements, bank statements, and proof of assets, when applying for a traditional loan. The documentation will increase when you choose other loans, like business loans, that require a business blueprint, business plan, balance sheet, and other documents relevant to your business.

For Cambodians who are tired of preparing complicated documentation, personal loans offer a simple way to start their financial journey with the least amount of documentation required. A personal loan will be approved once lenders acknowledge your repayment ability, while some straightforward loans do not require a personal credit score.

While personal loans may not require traditional collateral, they do carry higher interest rates and fees to offset the risk they undertake. It’s essential for borrowers to be aware of these costs when considering this type of financial support. Traditional loans, with their focus on collateral and financial history, can be more suitable for borrowers who have substantial assets and established credit histories.

list of documents require for a home loan

Customer Support and Service Quality

The quality of customer support can greatly influence a borrower’s experience with any financial institution. Different types of loan service providers have their own framework of customer support, and both of them bring various conveniences to the borrowers.

Time Availability

A personal loan is usually available for 24 hours because most reliable loan providers offer all-day customer support to borrowers for any unexpected emergencies. Unlike personal loans, traditional loans are provided by banks, microfinance institutions (MFIs), and credit unions. All these companies have the same characteristic, which is having a fixed operation time that usually follows the usual working hours, from 8 a.m. to 4 p.m. You will never get any reply or assistance after the working hours, but the next working day.

Online Chat and Branches

Personal loan platforms often feature online chat support and dedicated hotlines, making it easy for borrowers to get quick answers to their questions. Call Khmer Prosperity Loan anytime and tell us your financial situation, Professional loan advice will be customized in a few hours for you.

Traditional loan lenders provide online services like personal loans as well, but you may have a longer waiting time with their customer support, while many other Cambodians are queuing for other inquiries like account status, fixed deposit rate, and so on. Traditional lenders emphasize serving their clients offline, so they usually have an extensive branch network, offering accessibility to a wide geographical area.


In this comprehensive exploration, we’ve uncovered the dynamic world of personal loans and traditional loans in Cambodia. Each of these financial instruments offers distinct advantages and serves specific financial needs.

Personal loans have high speed, accessibility, and convenience. They cater to individuals and businesses whose loans are used for urgent, short-term financial requirements. However, they come with relatively higher interest rates and fees.

Traditional loans, offered by established banks and MFIs, offer stability, long-term commitments, and structured financial support. They are ideal for substantial investments and projects. Traditional loans are backed by a regulatory framework that ensures borrower protection.

Traditional loans and personal loans have their pros and cons in every aspect. Doing an assessment of your financial needs to see which type of loan is more beneficial to your financing journey If your answer is a personal loan, then contact your reliable money lender, Khmer Prosperity Loan. We reserve $2,000,000 for Cambodians to ease their problem at any time.

khmer-prosperity-loan-trusted loan banner

Frequently Asked Questions (FAQs)

Q1. What type of loan is a personal loan?

There’s many types of loans such as agriculture loan, payday loan, pawn loan and others loans which apply under personal obligation.

Q2. What is a loan category?

A loan category is like a group or category that different types of loans belong to. These categories are based on things like why you’re borrowing money, how good you are with repaying debts, when you’ll pay the money back, and what rules the lender follows.

Q3. What is an example of a personal loan?

Personal loan is also known as a consumer loan is a multi-purpose loan, which you can use to meet any of your immediate needs like pay for home renovations, consolidate debt, or plan a dream wedding.

Q4. What is the most common type of loan?

In Cambodia, microfinance loans are among the most common. These small, short-term loans help individuals, especially in rural areas, access funds for various needs like farming, business, and daily expenses.

Vannak Sen

Vannak Sen is Khmer Prosperity Loan's dedicated financial advisor. His expertise lies in guiding entrepreneurs through the loan process with ease. Vannak’s articles offer simple, actionable advice, helping your business navigate the financial landscape and thrive. For personalized, clear, and practical strategies that resonate with the Cambodian business community, rely on Vannak’s insights.

9 Reasons Why Best Startup Business Loan Opti

In Cambodia, the process of starting a business is an i...

101 Ultimate: Eligibility Criteria of Quick L

In this blog article, we'll simplify the eligibility cr...

Leave a Comment

Khmer Prosperity Loan

With more than 10 years in the market, we bring the best financial solutions for all kind of businesses. 


© 2013-2024 All Rights Reserved by