Wazzup Pilipinas!
Loans are tricky business among Filipinos, as many still think that borrowing money—especially for something as important as a car—is either difficult, burdensome, or downright impossible given their life circumstances. For those with little confidence in loans, the best solution may be to save cash for a one-time, all-in payment of a vehicle. But saving for this purchase may take a lifetime, costing a Filipino family many hours’ worth of convenience, mobility, and safety inside of a car.
With an auto loan, however, you won’t need to wait until the end of time to secure the car of your dreams.
Auto loans in the Philippines from the country’s top banking institutions open up a lot of chances for potential car owners. You can apply for a loan on a brand-new car, a reliable secondhand four-wheel drive, or even refinancing for a vehicle that’s already in your garage.
Though there are several steps to getting a car loan approved, the process is not as hard as you think it might be. Here are seven questions to guide you through your auto loan application, tackling everything from your eligibility to your financial plans.
Are you prepared for the responsibility of owning a car? A good car is an investment that will last you for decades, but you will need to shell out for expenses like registration, gasoline, and routine maintenance in that same amount of time. The most important prerequisite of getting an auto loan is that you are a responsible car owner, capable of managing your car’s day-to-day needs.
Will you opt for a brand-new car, a secondhand car, or refinancing for a vehicle you already own? Banks offer different loan rates for new vehicles, used vehicles, and vehicles that are up for refinancing. Some can even refinance cars that are between 5 and 11 years old. With the number of flexible loan packages out there, you’ll need to decide on which arrangement is the most reasonable.
Do you meet the basic eligibility requirements of your bank? Depending on your partner banking institution, you’ll need to be of a minimum age ( usually from 21 to 25) to have your auto loan approved. They may also demand that you hold Filipino citizenship, that you meet a certain monthly household income, and that you are employed or involved in a profitable business venture for a certain number of years. It is best to check with individual banking institutions on what their eligibility requirements are.
Do you have the paperwork to accompany your auto loan application? Aside from the application form, your bank is likely to ask for the following: (1) government-issued IDs; (2) banking statements; (3) a certificate of employment; (4) your latest Income Tax Return (ITR) Form 2316 from the Bureau of Internal Revenue (BIR); (5) proof of your billing address. Once you find out what these attachments are, you can start collecting the paperwork in advance.
Do you have a good credit history? Your partner bank will need proof that you have the financial capacity to repay the loan on time. To increase your chances of getting the auto loan approved, make sure to settle other matters that pertain to your credit history: pay all your other bills on time, settle outstanding loans, and obtain certificates of payment from previous lenders that you can show to the bank.
How much have you set aside for down payment? For most auto loans in the Philippines, banks demand a down payment of between 20% and 50% of the total amount. If you can save up for a more substantial down payment, the better it will be for you—you’ll borrow less from the bank, and you’ll pay a smaller amount for your monthly amortization.
How long will you give yourself to pay off the loan? As early as now, you should choose a target date for repaying the auto loan in full. Is it better to choose a shorter repayment term and higher monthly amounts, but less interest? Or will you opt for a longer repayment term with smaller monthly amounts, with the interest mounting over time? Decide the length of your repayment term based on what’s best for your monthly budget.
Once you have the answers to these questions, getting an auto loan approved shouldn’t be as scary as you first imagined. Doing so will allow you to spend less time raking in your savings and more time cruising through the city inside your dream car.
Ross is known as the Pambansang Blogger ng Pilipinas - An Information and Communication Technology (ICT) Professional by profession and a Social Media Evangelist by heart.
