Car Loan Requirements in the Philippines

Buying a dream car is a goal that many Filipinos want to accomplish. When you buy your first brand new car, you get to enjoy convenience, practicality, and comfort. But in order to make this substantial investment, you need a lot of money. Over half a million pesos is the price of the cheapest sedan on the market today. You shouldn't spend all of that money on a car, even if you have it in savings.

It's a good that getting a car loan is accessible and easy. You can buy the car of your dreams without having to pay cash in full with a car financing plan. However, auto loans come with interest and other fees for processing. Since the vehicle serves as collateral for the loan, the financial institution can take it back from you if you are unable to make your payments on time.

How Does Vehicle Financing Work?

You would likely have companions or family individuals who possess cars and know how car financing works. Be that as it may, how precisely does a car advance work within the Philippines?

A bank or other financial institution loans you cash to pay for a car through car financing. Getting an auto loan permits you the opportunity to use the unit and divide the unit's price in littler, more manageable payments. Typically, you need to prepare a down payment that costs not too much. There are even down payment worth as low as Php 10,000.00.

Auto Loan Options in the Philippines and How They Work

Did you know that there is further than one source of car loan in the Philippines? Here are some options you can choose from.

1. Bank Financing

In this auto loan type, the bank or a lending institution lends you an amount of money so that you can buy a car. You will also pay the loan amount in a series of monthly amortization over the term or period of the loan, specifically between 12 and 60 months. But other than repaying the loan amount, you will also be settling the interest.

Bank financing is also called as Direct Lending because the buyer gets a loan directly from a bank rather than going through the dealership. Purchasing a car via this loan type is practical if you have a good credit standing with the bank.

Pros

Bank backing is a better option for purchases that bear an advanced loan quantum, like an auto purchase. Away from the advanced quantum that you can advance, banks also offer lower interest rates than dealer financing. Also, you can get to compare auto loans from different banks and enjoy a more individualized service.

Cons

Of course, there’s a strike to bank financing as well. For one, auto loan approval may take as many days. Getting approved for this type of financing is also more grueling because you need to have an excellent credit history or be in good credit standing with the bank. It also requires an advanced down payment.

2. Dealership Financing

Another ideal way to pay for a vehicle purchase is through dealership financing. It's the stylish option if you prefer the convenience of buying and funding your auto in just one place. Basically, there is a contract where you agree to pay your dealer the loan amount plus interest. The dealer has a partner bank or lender that processes the loan and collects your payments.

Pros

Dealership financing makes the auto loan application easier and faster and offers auto buyers convenience. You can finish the vehicle purchase and financing process in one position and sale, generally at the dealership exchange or office. Also, they are giving away freebies.

Cons

Some downsides of dealership financing include advanced interest rates and retired charges, which means you will be paying advanced financing costs. Also, like an auto loan from a bank with a long prepayment period, your auto will cheapen when you’re done paying it off.

3. Credit Card

Using a credit card to buy an auto is possible only if your credit limit is high enough to cover the cost. On top of that, there are numerous freights that you may need to cover.

This type of sale can be arranged by the dealer and requires the issuing bank's approval. Take note, however, that not all dealerships accept this auto financing scheme. Some dealers may just accept a portion of the auto’s selling price to be charged to the credit card.

Pros

With an auto purchase going hundreds of thousands of pesos, you can earn thousands of credit card points, long hauls, or cashback. Buying an auto with your credit card can work if you consistently pay off your balance. The interest will accumulate if you do otherwise.

Cons

As credit card interest rates are advanced than that of regular auto loans or dealership financing, anticipate to pay further on interest. The interest can be stunning if you can’t completely pay off your credit card balance after buying an auto.

4. Cash Basis Payment

Also, of course, there’s outspoken cash payment, the auto financing option everyone would like to do if they have it by all means. You ’re paying for an auto in full and in cash, so you don’t have to apply for an auto loan and make yearly disbursements. It’s like buying commodity in a store and going home with it!

Pros

When you buy an auto in cash, you don’t need to worry about your budget and whether you can make your yearly disbursements. Once you’ve paid for the auto, you can enjoy it. You also don’t have to pay any interest and loan processing freights.

Cons

Paying your auto’s monthly amortization can help make your credit history. However, you can’t use your yearly disbursements to make credit, if you pay in cash. Also, rather of using the substantial amount of money for savings, investments, or paying off other debts, you just used it to buy a car.

 Car Loan Process in the Philippines: 6 Steps You Need to Take

Understanding the steps involved in obtaining a car loan is beneficial if this is your first time purchasing one. You will avoid the hassle and guarantee a speedy approval and release.

1. Check if you're qualified for an auto loan

First, see if you meet the bank's car loan requirements. Find out what the Philippines' minimum wage is to qualify for a car loan. Review your bank statements to get pre-qualified for a loan. Take note that the most important thing is to have a good credit score.

2. Calculate your borrowing capacity

How much can you manage to pay each month without being broke? Your monthly amortization will eat into your budget for the next three to six years, so it's important to figure that out. The bank will take your car away from you if you don't pay back your loan for a long time. In order to avoid having your car repossessed, make sure the amount you borrow is within your means.

Check out these factors that influence the cost of a loan for car financing to determine the amount you can realistically afford:

Type of vehicle and cost: Will you purchase a used or brand-new vehicle? Which make and model of car are you thinking about? Check to see that your choices fall within your budget.

Security deposit: A 20% to 50% down payment on a vehicle is required by banks. The amount of your monthly amortization will be affected by the down payment you choose. The less you borrow from the bank, the higher it is. If you pay a larger down payment, you'll save more money on interest payments.

The amount of the loan: The repayment terms for auto loans in the Philippines range from one to six years. Your monthly amortization will be higher with a shorter term, but you will pay less interest over time. Long-term loans, on the other hand, have a lower amortization but will cost you more in interest.

Also, think about other costs associated with your vehicle, like fuel, insurance, upkeep, and repairs. Costs associated with owning a vehicle are unavoidable expenses that are included in your budget even though they are not included in your loan repayments. If you want to make full- and on-time monthly payments on your loan, you need to pay attention to them.

3. Compare loans in the Philippines

Researching and comparing auto loans lets you pick the most ideal one that will work best for your budget. Particularly, investigate the various lenders' interest rates, loan amounts, down payments, and repayment terms.

Also, think about the kind of car for which you can get a loan. Car loans for personal or business use are available in different local banks.

4. Complete the Car Loan Application Form

One more thing you must do before applying for a loan is prepare all of the necessary documents to demonstrate your identity and income.

The following are typical requirements for auto loans in the Philippines:

• Duly accomplished application form

• Passports, driver's licenses

• SSS IDs/UMIDs

• OFW IDs

• Alien Certificates of Registration

• and/or other valid government-issued IDs Certificate of employment

• Payslip or income tax return (ITR) for local employees

• Certificate of Business Registration

• Business Permit

• Bank statements and audited financial statements for self-employed individuals

• Proof of remittance

• Payslips or certificate of employment for OFWs

5. Submit your auto loan application form

The majority of banks that provide loans for vehicle purchases accept applications in person as well as online. At the branch closest to you, you can bring your completed auto loan application form and supporting documents.

However, submitting a loan application online at the bank is more convenient. Please keep in mind that if you apply online, you will need to scan or take pictures of your documents and upload them to the bank's website.

6. Wait for the Car Loan's Approval

In the Philippines, an auto loan application can be processed and decided upon by banks in as little as one banking day. The following actions must be taken by you before your loan can be released if it is approved by the bank: pay the down payment and any other loan-related fees, such as the chattel mortgage fee, handling fee, and one-month advance payment (if applicable), before signing the loan documents. Get comprehensive car insurance. You have a few options when it comes to car insurance: via an online broker or the bank. Once everything is settled, you can finally drive your brand-new car.

Once your loan is approved and you need to take home your brand-new car, the next thing you need to consider is your parking space. Of course, a secure and safe parking space is one of the integral factors in ensuring your car will last long. With that, Lumina Homes is your best option. We offer not just well-designed units but also affordable house and lot with parking space. This is certainly an investment that will provide you, your family, and your assets a guaranteed protection.

Among our affordable house and lot for sale with parking space is the Angeli Single Firewall. It's a two-storey, single firewall unit with a carport provision. You will definitely have peace of mind when you know that your car is parked in a safe, secure place near you. This is specially true at night time when most car-related crimes are happening. So what's holding you back, if you are also in the search for house and lot in the Philippines that have a decent garage for your brand-new car, contact one of our accredited sellers to inquire.