Almost everyone we know probably wants to have their very own four-wheeled ride. Although this may seem simple for those who are financially capable, it isn’t an easy item to purchase for a lot of us.
The good thing is that automakers are peeking into the capacity of potential customers. Asides from the automakers themselves, there are also other third-party companies that are willing to help you out.
These companies are capable of loaning you the money you need to take your dream car home. This is, of course, provided that you agree to their terms and conditions. You can also consult banks to help you out with this big financial leap in your life.
Banks actually provide a better deal for you when it comes to the interest of your loan
In general, banks actually provide a better deal for you when it comes to the interest of your loan. Compare this to the deals that you can get from a dealership, and you’ll find that banks have 4 or 5 percent lower interest rates.
While on the upside, dealership loans are also actually faster when it comes to approval. It also has an easier application process and freebies like car accessories and the likes.
But if you’re after savings, in the long run, you can go ahead and settle for the bank loan instead. If you’re not sure how to kickstart your bank loan, just follow the step-by-step guide Philkotse.com prepared below.
Step 1. Check yourself if you are qualified for a bank loan
The first step is to make sure that you are capable of paying off your loan. If you’re going to get yourself in a serious matter like a loan, you need to make sure that you are responsible enough to pay it off. You should first meet your chosen bank’s requirements. You should also have a good credit score before you get pre-qualified for your preferred loan.
The first step is to make sure that you are capable of paying off your loan
Local banks have different requirements, but the minimum qualifications are listed below:
- The applicant must be at least 21 years old and should not be older than 65 by the time that the loan matures.
- The applicant must be a Filipino citizen who is living within the Philippines or abroad (OFWs).
- The applicant may also be a foreign resident but should have a qualified Filipino co-borrower.
- The applicant must have a monthly household income amounting from Php 30,000 to Php 50,000.
- The applicant should also have at least two years of employment or a profitable business.
>>> Check out: 8 Things to Consider to Get a Car Loan in the Philippines.
Why a good credit score matters
If you are a first-time borrower, you may not fully realize how your current credit score can affect the outcome of your loan application. Your chosen bank will utilize your credit score in evaluating your ability to pay back the loan that you’re applying for. The higher your credit score, the higher is the chance that your car loan will be approved by the bank.
The higher your credit score, the higher is the chance that your car loan will be approved by the bank
So, if you think your credit score isn’t that neat, you should consider taking action. You can correct or repair your credit score in advance before you apply for a car loan. This will help minimize the chance of the bank, saying “no” to your car loan.
If you’re not sure as to how you can check your credit score, you’re going to have to prepare a fee. This will be necessary once you consult the accredited credit bureaus that we have here in the Philippines.
If you have applied for a car loan before, keep in mind that late payment can also leave a black mark on your credit score. If you don't know about this, make sure to check our article on car loan defaults and voluntary surrender of vehicle Philippines.
The auto-loan prequalification process
This process lets the applicant know whether they are ready to apply for a car loan or not. It would also inform the applicant about how much the bank is willing to lend him based on his financial capacity.
The Auto Loan Pre-Qualification Process can also require you to pass an online pre-qualification exam. But this is only if you’re applying for a car loan under Metrobank, Security Bank or BPI.
The auto-loan prequalification process lets the applicant know whether they are ready to apply for a car loan or not
Step 2. Compute how much you can afford to pay
Before taking the bigger leap, figure out how much you can borrow. In fact, you need to think about how much you can chop off of your monthly salary and allot for your car loan.
The duration of car loans usually lasts about three to six years. You may need to consider how much you’re willing to pay the bank while still providing for you and your family’s needs.
Before taking the bigger leap, figure out how much you can borrow
>>> You might want to know:
- Car loan Philippines: Which car financing option is right for you? (Part 1).
- Car loan Philippines: Which car financing option is right for you? (Part 2).
The elements that can affect the cost of your car loan
Take these factors into consideration so get the most realistic amount for the car loan that you can afford.
- The vehicle price and type – Will you be buying a used car or a new one? Which car models and makes caught your eye? These are some of the questions you should ponder over. Keep in mind that your choices should be within your budget.
- The downpayment – Remember that the down payment you choose to pay will affect how much you pay every month. So think about this factor carefully.
- Loan duration – Remember that the shorter your term is, the higher your amortization will be. But you’ll also be paying less interest. A longer-term will mean a smaller amortization but more interest in the long run.
Step 3. Compare different offers
Don’t be afraid to compare and research about different offers from different banks. You can also read reviews about other people’s experience so you feel more secure. Once you’re satisfied with what a bank has to offer, you can proceed to step 4.
Don’t be afraid to compare and research about different offers from different banks
Step 4. Prepare your car loan requirements
Once you know which unit you want and how much to borrow, you can start completing the bank’s requirements. Here are some of the usual documents that they will ask from you:
- Valid government IDs
- Certificate of employment, income tax return or payslip
- Proof of remittance, certificate of employment (OFW), payslips
- Business registration office, bank statements, audited financial statements,
Step 5. Submit your application and wait for the approval
After completing the bank requirements, all you have to do now is to submit them. You can either upload them to the bank’s online application site or visit their nearest branch. Once you submit the documents, just wait for them to contact you in the timeframe they’ve given.