A guide: How to join or start a successful Paluwagan

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Paluwagan groups where coworkers, friends, or family save together for their own goals, are widespread in the workplace, community, and neighborhood. This savings method can be suitable for you if you are putting money aside for a significant purchase or an impending expense. In this article, we are going to share with you how Paluwagan system works and some tips you should keep in mind in case you want to join or start a Paluwagan sooner or later.


What is Paluwagan?

Paluwagan is an informal group lending and savings in which participants take turns borrowing from the accumulated savings after making regular fixed contributions to a common fund. Once everyone has made their full payments and received their payout, the cycle is over.

How Paluwagan System Works

Before starting a paluwagan cycle, participants must decide and concur on the following conditions:

Members and Collector: WHO will be joining the group, how many are they, and who will be tasked with collecting and distributing the funds.

Schedule of the Cycle: WHEN will the collection begin and how frequent will the collection be. It may occur weekly, semi-monthly, or monthly. Typically, payout and collection are arranged for the same day or as soon as all members have submitted their payments.

Amount of Contribution: HOW MUCH is the total amount each member will contribute throughout each collecting period. The total funds available for payout will be determined by the agreed fixed amount and the number of participants.

Order of Payout: Depending on the needs of the members, the ORDER in which the “salaries” are paid out may be decided randomly by drawing lots or by collective agreement. Members should be aware that they will only receive one payment and that they must continue to make regular contributions even after receiving a payout.

How to compute Paluwagan contribution (A sample)

Let’s say for instance, beginning on January 15, a paluwagan group of 12 people will contribute PHP 1,000 per month, for a total of PHP 12,000. The first member will receive the combined donation of PHP 12,000 on the same day. The second member will be paid PHP 12,000 on February 15 and so forth.


On December 15, when each member has given a total of PHP 12,000 to the common fund and has had a turn receiving their dividend of the same amount, the cycle will come to an end. The organization can choose to extend an invitation to new members and begin a new cycle of savings.

How to join or start a successful Paluwagan

A Paluwagan will more likely to succeed depending on how reliable and conscientious its members are in keeping their obligations.

To prove that all parties are aware of their responsibilities and accept the provisions of the paluwagan, a signed contract or agreement can be used. This may also resolved any disputes in case any has occur during the course of Paluwagan cycle.

It must include all pertinent information, including the contribution amount, payment and payout schedule, fines, designated collector, and other conditions. Each participant should sign it to formally declare their acceptance of the contract’s conditions. You can also have the paper notarized to prove that the signatures are authentic.

Tips for a successful Paluwagan

Know the paluwagan’s participants. Members belonging to a common group has a greater likelihood that group members will cooperate and carry out their duties.

Ask a fellow member who is familiar with the member’s character if there is one you do not personally know.

Avoid participating in a paluwagan with strangers, especially if no contract or agreement has been made.

Members may explain why they joined the paluwagan. As a result, the group becomes more transparent and accountable.

Set reasonable deadlines and contributions to prevent payment default.

Create backup strategies in case donations are lost or delayed. You may, for instance, charge a fee for late payments, which would be added to the delayed payout. Ensure that any extra conditions are accepted by all parties and are specified in the contract.

Watch out for fraud. It may be tempting to invest in a program giving high interest rates, but keep in mind that any scheme with terms that seem too good to be true carries significant risks.

Organizing a paluwagan involves a lot of responsibility. The members may hold the administrators accountable if it fails for whatever reason, even if it was not entirely their responsibility.


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