While today’s terrible traffic and skyrocketing petrol prices are likely to put off first-time car buyers, it’s indisputable that owning a car has its advantages. And if you’re considering purchasing one with a loan, you’re in luck, because this article will walk you through the process of obtaining a car loan in the Philippines. A car loan is when you borrow money from a lender to buy an automobile. To put it another way, you borrow money to buy a car. You repay the money lent to you plus interest on a regular basis in exchange for the money. The vehicle will be repossessed if you do not make payments.
Who is eligible for a car loan?
In general, the following are the minimal conditions for persons seeking a car loan:
- A Filipino citizen between the ages of 21 and 65.
- A monthly income of at least 30,000 dollars is required (varies depending on the lender)
- Has proof of income (employee: a minimum of two years with the company; self-employed: a minimum of two years of profitable operation)
- OFWs and foreigners can get a car loan with the help of a guarantor or co-maker (Filipino)
Car Loans of Various Types
Here are a few different options for financing your car loan.
Car Loan from a Bank
The car will be paid for by the bank. In exchange, you’ll pay the bank plus interest. It helps if you have a solid credit history with them. A 20 percent down payment is usually required.
Car Loan from a Dealer
You buy the car straight from the dealer using their in-house financing arrangement. Instead, some dealers work with partner lenders to finance your loan. They’re the ones who sell the “All-in” packages with cheap DP that you find in shopping malls.
Cooperatives and credit unions are two options.
Some credit unions and cooperatives offer car loans to their members. The basic idea is that they will pay for your car while you repay them plus interest.
The lender buys the car and leases it to the borrower in this scenario. The borrower will then make regular monthly payments to repay the loan (borrower will shoulder maintenance and repair). When the lease term ends, the borrower will have the choice of returning the vehicle, refinancing it, or purchasing it outright (pays the remaining balance). It’s worth noting that the lender is the car’s stated owner, which can only be changed if the borrower wants to buy it at the end of the lease.
Car Loan (Bank) vs. Car Loan (Non-Bank) (Dealer Financing)
Experts say that obtaining a car loan from a bank will result in a lower interest rate than obtaining financing from a dealer. They do, however, have a more severe approval process and typically require a 20% downpayment. If you don’t have the funds up front for a 20% down payment, you can receive a car loan through dealer finance. When compared to banks, they frequently offer cheap DP “All-in” packages (including car registration and complete car insurance) and approve loans faster. They do, however, have slightly higher interest rates, and because the initial cash out is lower, the monthly payments are larger. Before deciding on either choice, make sure to think about your current and future financial circumstances. It’s vital to keep in mind that you’ll need to budget for fuel and regular maintenance, so choose a financing option that allows you to do so comfortably.
What to think about before taking for a car loan
The following is based on what I learnt and put into practice when I purchased a car using bank financing.
Choose a vehicle that meets your budget and requirements.
For some people, purchasing a car is an emotional experience. However, it was entirely for utilitarian purposes for me. We opted to acquire a car a few months into our marriage merely for convenience, and we felt that it was a smart way of “investing” our money in something that would be truly beneficial in the future, especially if we wanted to have a child. My wife became pregnant a few months after we bought a car, which is why I want to emphasize the importance of picking a car that meets your budget and demands. It’s a good thing we went with something that was well within our budget and allowed for any unexpected costs. If we’d chosen anything more expensive, we’d most likely struggled to pay for it. I’m not a financial guru, but I believe that having some wiggle room when it comes to paying for something applies even to less expensive items. Why make things difficult for yourself in the long term (and risk having your automobile repossessed) when you may choose something that you can simply pay for? It’s a good thing we went with something that was well within our budget and allowed for any unexpected costs. If we’d chosen anything more expensive, we’d most likely struggled to pay for it. I’m not a financial guru, but I believe that having some wiggle room when it comes to paying for something applies even to less expensive items. Why make things difficult for yourself in the long term (and risk having your automobile repossessed) when you may choose something that you can simply pay for?
Researching on the best deals
Before choosing on a financing option, I did a lot of research and asked a lot of questions about the entire car-buying process. It assists in avoiding frequent errors, receiving important information, and comparing dealership and bank offerings. Finally, I was able to select a car loan that met all of my requirements and was simple to complete.
Checklists and Requirements for Car Loans
In this part, we’ll walk you through a fast checklist of items you’ll need to have and accomplish in order to ensure a smooth car loan approval procedure.
- Obtain pre-approval.
- Examine the lender’s website for any essential documentation and paperwork.
- Examine the loan’s terms and conditions.
- Choose a vehicle that meets your demands and fits your budget.
- Choose a loan term that you’ll be able to afford.
- For any further information or needs, contact the lender.
- Prepare all of the required documentation.
- All requirements must be completed and submitted (online and physical paperwork)
In a summary, vehicle loans offer numerous benefits and features. As a result, rather than depleting your long-term resources, it is one of the most popular ways to acquire your ideal four-wheeler. However, before taking out a car loan, it is usually advisable to conduct extensive research.