Car Loan: What You Should Know Before Getting Your Vehicle

When it comes to buying a car, most people rely on car financing to make it possible. There are several different types of car financing available. So, it can be tough to decide which one is best for you.

In this blog post, we’ll look at the most common types of Car Loan and explain how each works. By understanding your demand, you can select the best option for yourself.

4 Car Financing Options In The Philippines

Financing your car sale in the Philippines can be a daunting task if you don’t know where to start. You may find the one that suits your needs in these options below:

Bank Financing

When you take out bank funding, you can receive the precise amount from purchasing a car. You will submit the annual payment once a month for the loan duration, which ranges from 12 to 60 months. But, there are extra interest costs that you have to pay.

If your credit is good enough, this is a great option. Immediate financing, which means you’ll get your money right away from the bank, is one approach to finance a car sale.

Pros:

  • Can review the lending policy from various banks for the final decision
  • Save 4-5% interest fee compared to dealership credit

Cons:

  • Necessitates a higher down payment than other retailers
  • Requires time and dedication for the approval 

Dealership Financing

Borrowing through your local dealer is one of the finest methods to buy a car. It’s simple, convenient, and free of stress!

You and the dealer have an agreement to commit to repaying your debt along with interest. Then, there’s another bank or financier that handles everything for them.

Pros:

  • Fulfill the acquisition and leasing of a vehicle in a single operation and location
  • A broad array of automobile finance solutions from several associate banks and businesses
  • Lower down payment than lending from a bank
  • Simple, quick confirmation, and extra gifts

Cons: Massive interest costs and more fees

Credit Card

You must first check that your resources will allow it and then ensure the coverage for all related expenses to use this strategy.

You may have heard that some retailers allow you to buy cars with a credit card, but not all. It is an option accessible at most vehicle dealerships. It demands permission from your bank before completing the transaction.

Buying a new car is easier than ever with just a credit card!

Buying a new car is easier than ever with just a credit card!

Home Equity Loan

If you need money for a new vehicle, try taking a home mortgage. You would get the profit from the sale or refinancing of your home and use them towards purchasing an auto.

See also: Personal loan Philippines – 12 things you need to know

How To Get Car Financing In The Philippines

Step 1: Check If You’re Qualified For An Auto Loan

The first steps are following the bank’s regulations and performing a reliable credit report. Before you apply, you may get pre-qualified!

Car Loan Eligibility Requirements

You must be a Filipino citizen who resides in the Philippines or anywhere. This service is also available to foreign citizens who have eligible co-borrowers. The smallest age needed is 21, and the bank will not accept anyone over 65 as a lender.

If you want to get a loan, you must have an annual wage or family earning at least PHP 30K-50K. Before applying, you must also have two years of work experience or retail operations.

Good Credit Score

Banks use this score to determine whether to accept your request based on your credit history. The greater your quality profile, the better your chances of getting approved low-interest lending.

Auto Loan Pre-Qualification

You must answer all important questions before purchasing your new vehicle in pre-qualification. It includes your budget estimation. And the online tests are available from Metrobank, Security Bank, and BPI.

Step 2: Compute How Much You Can Borrow

Living paycheck to paycheck may be a risky game. But it’s not so horrible when you know how much money will go toward your debts each month for the next 3 to 6 years. 

This way, the bank will know exactly where their money is going and will not repossess your vehicle. No one wants everything going bad at the end!

The following critical elements can help you to determine how much you can borrow:

  • Vehicle type and price: Which vehicle will you buy, the new or second-hand one? Conduct your research to determine which one meets all your requirements. Make sure it also satisfies your financial plan!
  • Down payment: This payment ranges from 20% to 50% of the automobile’s price. It determines how much you have to repay every month. The greater the down payment, the less time and money you will need to borrow from a bank and pay for interest charges.
  • Length of the loan: Auto lending payback durations in the Philippines range from 1-6 years. Shorter-term mortgages have less expensive interest fees but cause more frequent bills. Whereas the longer ones have reduced amortizations but higher interest rates over time.

You may also consider extra expenditures that your debt installments do not include. They are maintenance, repair, insurance, and gasoline. Don’t ignore these details unless you have a tough time figuring the total bill every month for a vehicle.

Careful monthly budget determination can help with getting rid of all the potential risk!

Careful monthly budget determination can help with getting rid of all the potential risk!

Step 3: Compare Loans

When seeking the finest vehicle financing in the Philippines, research is essential. You should analyze several lenders and their services according to your requirements. They include interest rates or down payments, borrowing budget, and the repayment period.

Look no farther than these top banks on the sort of auto you can finance: BPI, EastWest Bank, PSBank, and Security Bank. 

They all provide mortgages that are ideal for any scenario, whether you’re shopping for a new or used vehicle. At the same time, Metrobank does not account for used vehicles lending.

The age of a vehicle may have a significant influence on its performance. Security Bank, for instance, will finance automobiles up to 11 years old, but BPI would not support autos older than five years.

Step 4: Complete the Car Loan Requirements

Before submitting an application form, be sure you have all the relevant paperwork to verify your identity and earnings.

Most banks ask applicants to provide supplementary documents, including valid government-issued identification. A certificate of work, and a payslip  You must prepare audited bank records or a business certificate and deposit evidence as well.

Step 5: Submit Your Loan Application

Vehicle loans are available from most institutions, and you can apply in person or online. When visiting the local branch, be sure to have all the necessary paperwork with you.

All you need to do is fill in the simple application form to have car loan!

All you need to do is fill in the simple application form!

Technology advancements have resulted in a simpler method of getting loans: online registration. The process will need you to capture the documentation and submit them to their webpage.

Step 6: Wait for the Loan Approval and Release

In the Philippines, the waiting time for a bank financing operation is one day. If your application approval is successful, you must do the following tasks before the official publish:

  • Sign your borrowing paperwork
  • Fulfill the extra criteria if needed
  • Complete the initial deposit transaction as well as any related charges; such as chattel borrowing charge, processing fee, and one-month advance payment
  • Prepare a robust auto insurance coverage

If you have gone through all these steps, then congratulations! Now you can welcome your new four-wheeled baby to your home.

Final Thoughts

With all the car loan options above in the Philippines, it’s never been more convenient to take care of your transportation needs. At first, financing may be intimidating. 

But once we figure out how everything works together, it becomes clearer which service is best for your specific situation. 

Your time has come, don’t wait for another chance!

See also: Student Loans – Everything You Need To Know

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