How to apply for a car loan in the Philippines?

Are you planning on buying a car soon? Perhaps you've already made up your mind about which vehicle you want to buy after conducting extensive research on the internet using sites like PhilVex.

Unfortunately, not everyone, whether individuals or businesses, can afford to pay for a car in full at once, not to mention the additional costs of insurance and registration resulting from acquiring such a vehicle. Even if you have enough cash, it is impractical, especially for businesses, to withdraw a large sum of money from their bank account when that money could be put to better use.

Thankfully, auto loans and other forms of financing make it easier to get your ideal car, as long as you meet the qualifying criteria for getting financed. If this is your first time applying for a car loan in the Philippines, here are some tips:

1. Check the minimum eligibility requirements for getting a car loan

Before you apply for a car loan in the Philippines, you must first determine if you meet the following minimum qualifying requirements:

1. Age. You must be at least 21 years of age but not more than 65 years old at the time the auto loan matures.
2. Citizenship. You must be a Filipino citizen either residing in the Philippines or abroad. For OFWs, the beneficiary must be a resident citizen of the Philippines. Foreign nationals residing or working in the Philippines can also apply for a car loan if they have qualifying Filipino co-borrowers/co-makers or if the company they work for endorses them.
3. Minimum monthly income. This varies depending on the loan provider, but it normally ranges from Php30,000 to Php50,000 of the entire monthly household income.
4. Tenure/Business Status. Employees must have been employed on a permanent or regular basis for at least 2 years. Banks normally approve auto loans for businesses that have been in operation for at least 5 years.

2. Decide where to get financed for your car loan

You can now choose where to finance your ideal car once you've determined that you're eligible for a car loan in the Philippines. When it comes to financing your car purchase, you have various alternatives:

1. Bank Financing

   Bank financing is a financing scheme that lets you lend a specific amount from a bank so you can buy a car. The borrowed amount will subsequently be paid back in a series of monthly installments over the loan's duration, which is usually between 12 and 60 months. In addition to your monthly installment, you must pay interest on the amount you borrowed from them, which varies between 4% and 20% annually depending on the bank.

   What's great about bank financing is that you deal directly with the bank, unlike other financing options like dealership financing, which typically charges a commission when you're approved for a car loan, resulting in higher interest rates.

   Banks usually offer you a car loan when they determine that you have established good credit with them.

2. Dealership Financing

   Dealership financing is another common type of financing scheme in which car financing is made through car dealerships by a network of partner banks and other lending institutions. Some car dealerships also have their own financing arm (known as in-house financing), which ensures quick processing, free registration, chattel mortgage, and insurance. All these options give you the ability to compare offers including interest rates, and down payments.

   When you get car financing from a dealership, you can usually get special offers like 0% interest (for a year), low down payment schemes, or straight monetary discounts, all of which give you the advantage to make a purchase.

   What is good about this scheme is that it acts as a one-stop shop for car purchases which includes the unit and the financing. However, the disadvantage of this scheme is that you will pay more interest and other hidden charges, which will cost you roughly 4% and 5% more than bank loans.

3. Prepare for the auto loan requirements

The most typical prerequisites for obtaining a car loan in the Philippines are listed below. This varies depending on the type of borrower:

• Locally employed
  • Valid government-issued ID with signature and photo such as passport, driver's license, UMID/SSS
  • Certificate of Employment (COE) issued by your latest employer
  • Income Tax Return (ITR) – usually BIR form 2316, 1700, or 1701
  • Latest three months’ pay slip
  • Latest proof of billing such as electricity, water, or internet bills
  • Duly accomplished form
• Self-employed (or with Business)
  • Photocopy of Certificate of Business Registration for Sole Proprietorship (DTI), Articles of Partnership for Partnership (SEC), or Articles of Incorporation for Corporation (SEC)
  • Photocopy of Latest Income Tax Return (ITR)
  • Photocopy of Audited Financial Statements for the last two years including Statement of Financial Position (or Balance Sheet) and Income Statement
  • Bank Statements or Photocopy of Passbook for the last 3 months
  • Valid government-issued ID with signature and photo such as passport, driver's license, UMID/SSS of the owner or the authorized representative
• Overseas Filipino Worker (OFW) / Working Abroad
  • Latest employment contract authenticated by the Philippine Consulate for OFW or latest crew contract for working as Seaman/Seafarer
  • Proof of remittance for the last 3 months or more

Physical assets, such as real estate and other owned vehicles, can also be used as extra evidence of your ability to repay your car loan, increasing your chances of approval. You only need to show proof of ownership.

4. Submit your loan application

If you want to apply for a loan from a bank, you can do it either walk-in or online. If you want to apply through a car dealership, you can do so by going to the nearest branch and filling out an application.

Using the online facility to apply for a loan is a more convenient choice. Other automotive websites, such as PhilVex, also provide quick online car loan applications.

If you choose to apply online, you must scan or take pictures of your documents and upload them to the company's website.