What is a car loan?
A car loan (also known as an auto loan or car loan) is a type of chattel mortgage that allows potential vehicle consumers to purchase their dream car on a monthly basis with interest instead of paying for it in a single payment. In simple terms, you borrow money from a bank or other leading service to pay for the vehicle. And if you fail to make the payments, the vehicle will be repossessed.
A car loan, like personal and chattel mortgages, can be secured or unsecured depending on the circumstances. However, most lending services and banks offer secured loans, which require consumers to offer collateral.
How to apply for a car loan
For first-time buyers who are a bit overwhelmed and don’t know where to start their auto loan journey, here is the auto loan process and how it works.
Step 1: Check your credit score qualification
Your credit score will serve as your resume when applying for personal loans as well as car loans. Your credit score will be based on your credit reports and the better your credit reports, the higher your credit score. And if you’re a first-time buyer with a high average credit score, you can get a low mortgage rate that will help you earn lower interest and save more money.
Step 2: Choose the best payment option
Before deciding to borrow for your vehicle, be sure to calculate what you can reasonably afford. Figure out how much you can pay monthly without breaking your budget, then use a car loan calculator and amortize the amount you can pay monthly to find out the total value you can spend on a vehicle.
Then you can choose the best amortization option for you, whether it’s 3, 4, 5 or 6 year terms. The longer the term, the less you pay your debt monthly, but with much higher interest.
Step 3: Choose your dream race
Once you’ve figured out how much you can spend on a vehicle, choose something that fits your budget perfectly. If you plan to buy a used car rather than new cars, you can still use your pre-approved auto loan. The interest for a brand new car loan varies up to 80% of the purchase price, while for a used vehicle, it can reach 70% of the appraised value. If you are planning to buy a used vehicle, you can afford a luxury ride without paying its original price when it came out, and we all know that a new car released loses 20% of its value after a year after its release, which makes it more affordable.
Step 4: Finalize all necessary documents
Once you have reached an agreement with the lender as well as the seller, make sure to finalize all documents, documents and agreements to avoid any confusion in the future.
Step 5: Start paying off your debt and enjoy the ride
After finalizing the transaction and the sale, you will receive monthly information about your payment schedule, then you will finally take home your new personal ride. Suppose you were unable to pay this month’s payment, don’t worry, there is usually a maximum delay of 3 months (depending on the contract you signed) before the repossession takes place . But, make sure you never miss any payment to avoid difficulties.
How to Get Approved for a Car Loan: Requirements and Checklists
For locally employed consumers:
- Duly completed application form.
- Valid government-issued ID (with signature and photo)
- The last proof of invoicing.
- Copy of the Certificate of Work with allowance and at the latest (ITR).
- Three months of payslips.
For self-employed or business owners:
- Certificate of business registration with DTI (sole proprietorship) SEC (under partnership/corporation)
- Last ITR.
- Latest financial statements (audited financial statements, statement of assets and liabilities, statement of income and expenses, bank statements and/or photocopy of your passbook for the last three months)
- Latest proof of additional/other income) rental agreements, certificate of deposits and/or share certificates)
For the OFWs
- The latest employment contract (with authentication from the Philippine consulate)
- For Seafarer/Seaman – last crew contract.
- Proof of payment (last three months or more)
- Get pre-approved
- Review and review all required paperwork and documents from the bank or any leading lending service
- Review the terms, conditions and details of the agreement
- Choose the best car for you that fits your budget
- Choose the best term payment option for your budget
- Keep in touch with the lender for any additional details or requirements
- Prepare all necessary documents
- Complete and submit all requirements and documents
The best car loan in the Philippines
Find the best auto/car loan in the Philippines with Upfinance! Upfinance is a site where you can find all the best current Philippine credit offers with the cheapest and lowest interest rates and their comprehensive financial services information. You can also use Upfinance to write sample offers, anywhere and any amount to find the cheapest deal that fits your budget perfectly!
Here are the top 10 best car loan offers in the Philippines
- Brand New – 5.75% interest rate – 30.3% APR, term up to 60 months
- Second Hand – 8.4% interest rate – 33.9% APR, term up to 48 months
- Brand New – 5.9% interest rate – 31% APR, term up to 60 months
- Second Hand – 7.19% interest rate – 36% APR, term up to 48 months
- Brand New – interest rate 6% – 9% APR, term up to 60 months
- Second Hand – interest rate 8% – 14% APR, term up to 24 months
- Brand New – 9.95% interest rate – 11.43% APR, term up to 60 months
- Second Hand – 9.95% interest rate – 14% APR, term up to 36 months
- Brand New – 6.77% interest rate – 37.63% APR, term up to 60 months
- Second Hand – interest rate 16.5% – 24% APR, term up to 48 months
- Brand New – 8.6% interest rate – 10.2% APR, term up to 60 months
- Second Hand – 16.7% interest rate – 22% APR, term up to 48 months
- Brand New – 9.4% interest rate – 10.4% APR, term up to 60 months
- Second Hand – interest rate 12% – 20% APR, term up to 48 months
- Brand New – 12.48% interest rate – 18% APR, term up to 60 months
- Second Hand – 18% interest rate – 20.76% APR, term up to 48 months
BDO Network Bank
- Brand New – interest rate 17.33% – 30% APR, term 36 – 60 months
- Second Hand – interest rate 14.11% – 30% APR, term 24 – 48 months
Sterling Bank of Asia
- Brand New – 14% interest rate – 19.04% APR, term up to 60 months
- Second Hand – 19.74% interest rate – 26.65% APR, term up to 48 months
Author Emilia Tueres de Funding