Gibson Perez
Having a car lets you hit two birds in one stone: necessity and pleasure. It’s exciting to drive a brand-new car. But if you think getting a second-hand is practical and equally delightful, then you are right. Another wise thing to do is getting that dream car through a loan, which everyone else does.
Here’s how to get an auto loan in the Philippines.
What qualifies you for an auto loan?
Before applying for a loan, make sure that are eligible based on these criteria:
- Filipino, residing in the Philippines or abroad
- Foreign residents with eligible Filipino co-makers
- 21 to 65 years of age upon the maturity of the loan
- Must be a regular employee for at least 2 years
- P30,000 to P50,000 minimum income per month
What are the documents needed for an auto loan application?
Prepare these documentary requirements for your car loan application:
- 2 government-issued IDs
- Copy of OR/CR (Official Receipt and Certificate of Registration)
- TIN (Tax Identification Number)
- Valid ID and contact number of the seller
- Proof of residence (such as your most recent bills or any document bearing your name and present address)
- For employed, payslips for the last 3 months
- For business owners, business permit
- For recipients of remittance, proof of remittance/receipt for the last 3 months
What is chattel mortgage fee?
There are a lot to consider in getting an auto loan, especially all the obligations related to finances. Aside from the insurance and processing fee, you also need to pay for the chattel mortgage fee.
Chattel mortgage fee serves as your payment for the financing institution in exchange for processing a secured loan. If you are unable to settle your monthly dues, the loan provider has the right to seize or repossess the car. On the other hand, upon completion of loan repayment, the mortgage will be nulled.
The formula on how to compute for the chattel mortgage fee varies with the auto loan providers, but the amount of the said charges can be determined through their online loan calculator. The value usually ranges from 0 to 60% depending on the condition and type of the vehicle.
Factors affecting the cost of an auto loan
Consider these factors before you choose the car to finance:
1. Type of vehicle and its price
Is it a second-hand car or brand new? What is the model and make of the car? These factors affect the cost of your loan, so always remember to stay within your budget.
2. Amount of down payment
Generally, banks implement a down payment worth 20% or 50% of the vehicle’s selling price. The higher the down payment rate you pay, the lower the amount you will take as a loan from the providers.
3. Loan term
The loan repayment plan stretches from one to six years. Take note that a longer loan term has a lower monthly payment, but you are paying a higher interest rate in the long run. A shorter loan term entails higher amortization but it has less interest rate over time.
Where to apply for a car loan
First-time car buyers ask which is the best way to finance a car: banks or dealership. However, they didn’t know that there are other means of car financing. Here are the options:
Car Dealer
Car dealership refers to the vehicle distribution companies that sell brand new or used cars at the retail level. It’s convenient as the purchase is done with salespeople of the distribution companies. There are many options offered, but the rates can be high and competitive. Although it’s a very direct and quicker approach to go for a dealership, the offers usually have high mark-up and promos or discounts are rare.
Bank
Next to the car dealership, banks have also served as providers for car loans. Since no dealer or middleman works between you and the car-selling company, the rates are lower. However, the process is long as it involves the evaluation of your financial capabilities, credit score, and other requirements that are strictly observed. Also, the sale is non-negotiable. There is already an estimated cost through the bank’s loan calculator, giving you a loan term where payments are evenly distributed.
Car Financing Institution
Other than dealership and banks, there are also institutions that provide loans for cars and trucks. Car financing companies offer more affordable rates and have an easier process when it comes to the application. It is the best option for those who want to finance second-hand cars.