• Jogent Emmanuel Tan

What kinds of auto loans are available in the Philippines?

Normally, there are two types of car loans that prospective borrowers can avail of in the Philippines: secured and unsecured.

Secured car loans need collateral. For this purpose, it’s the car that you’ve just acquired out of the dealership. If you are delayed with your payments over a few consecutive months, the bank or lending institution will eventually repossess your car. Several banks implement this rule for personal use cars. But other banks also apply this to auto fleet financing, wherein borrowers intend to acquire three or more cars for their own business.

Unsecured car loans, on the other hand, will not oblige you to turn your newly acquired car into collateral. But instead, the bank will give you a higher interest rate. To be eligible for an unsecured car loan, you’ll have to prove that you have a good credit standing.

Is it possible to buy a second-hand car with a car loan?

The answer is yes! Many banks allow borrowers to use the loaned money for the acquisition of a used car or second-hand car. In the same way, you can utilize your car loan for compensating your purchase or refinancing a second-hand car.

Where to get a car loan?

Car dealerships and banks offer car loans. In-house financing from dealerships provides convenience through an easy application procedure, fast approval, and some freebies. But typically, it’s more expensive than financing from a bank.

You can acquire 4% to 5% lower interest rates by obtaining a loan directly from a bank. For first-time car owners, money savings on interest payments is much better, especially if you are on a budget.

Although, keep in mind that applying for a bank loan on your own entails a bit more effort and patience. Here are the prerequisites when purchasing a car through bank financing.

Who can get a car loan?

Filipino citizens between 21 years old and not more than 65 years old when the loan reaches maturity with a monthly income of at least P30,000 (P40,000 for some banks) can apply for a car loan. In case that the borrower doesn’t reach the minimum monthly income, a co-maker shall be required and their income will be included to create a joint monthly income.

Moreover, some banks will require the borrower to be employed for at least two years on a permanent or regular basis. There are special requirements as well for borrowers who are self-employed or business owners.

What if I’m living/working abroad?

Those living abroad or working as OFWs can also apply for a car loan as long as they have a related qualified Filipino citizen guarantor or co-maker.

Foreigners living or working in the Philippines are also eligible for a car loan if endorsed by the company that he/she is working with and has a qualified Filipino citizen guarantor or co-maker.

What are the documentary requirements?

Borrowers who are locally employed need to physically submit the following documents listed below:

  • Accomplished car loan application form.

  • Borrower and co-maker two (2) valid government-issued I.D. such as Driver’s License, SSS, GSIS, Passport, etc.

  • At least two (2) proof of billing address.

  • Certificate of employment with declared monthly salary including latest Income Tax Return (ITR).

  • Latest payslips (for the last three (3) months).

For those who are self-employed or have businesses:

  • DTI business registration certificate for entities with a sole proprietorship or SEC registration certificate if under partnership/corporation.

  • Latest Income Tax Return.

  • Latest Audited Financial Statements, Statement of Assets and Liabilities, Statement of Income and Expenses stamped received by BIR, bank statements, and/or photocopy of your passbook for the last three months.

  • Any proof of additional/other income such as lease contracts, certificate of deposits, and/or stock certificates.

If you’re working abroad, you will need the following documents:

  • The latest employment contract authenticated by the Philippine Consulate.

  • Seafarer/Seaman must have their latest crew contract.

  • Proof of remittance from abroad for the last three months or more.

Apart from these documents, other assets such as real estate and other owned vehicles can be used as supplementary proof of capability to pay hence increasing your chances of getting your car loan approved.

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