Auto Loans for Second-hand Cars: A Beginner’s Guide
Here’s the deal: Brand-new cars are set to become much more expensive once the Auto Excise Tax takes effect in January 2018.
Luckily, second-hand cars are not affected by the tax reform, which means car ownership is still possible for most Filipinos. That means if you’re in the market for second-hand cars for sale in the Philippines, you’ll be presented with a lot of easily available options.
What’s more, several lending companies offer reasonable auto loan rates to help people finance their car purchasing. Most banks and loan providers offer auto loan interest rates at a lower price, allowing people to save money.
Eyeing used cars for sale? Might as well apply for an auto loan for second-hand vehicles. Read this handy guide to get you equipped before you search for the best auto loan rates for used vehicles on the market.
Benefits of choosing secondhand vehicles
- Affordability
- Depreciation benefits
- Endless supply of car inventory to choose from
- Favorable rates and payment terms
- Reduced car insurance costs
Auto loan eligibility
To be eligible for a vehicle loan, the applicant must be:
If employed:
- A regular employee
- Has a monthly income of at least P20,000
If self-employed or business owner:
- His/her business should have a legal business permit
- The business should have been running for at least three (3) years
All car loan applicants must be a minimum of 21 years of age and a maximum of 59 years old, upon the loan maturity.
Auto loan requirements
To have a quick and hassle-free loan application, the loan applicant must secure the following documents:
If employed:
- Duly accomplished loan application form
- 2x2 ID picture
- Copy of two (2) government IDs (e.g. passport, postal ID, driver’s license)
- Copy of three (3) months’ pay slips (latest)
- Certificate of Employment (COE) (the income and employment duration must be indicated)
- Copy of Income Tax Return (ITR)
- Copy of marriage contract (if married)
- Copy of proof of billing - water or electric bill
If self-employed or business owner:
- Duly accomplished loan application form
- 2x2 ID picture
- Copy of two (2) government IDs (e.g. passport, postal ID, driver’s license)
- Copy of three (3) months latest bank statement (if self-employed)
- Copy of business papers, such as SEC Registration, Articles of Incorporation & By-Laws if partnership and corporation or DTI Registration if single proprietorship
- Copy of marriage contract (if married)
- Copy of proof of billing - water or electric bill
Other documents that lending companies may require are:
- Copy of Certificate of Registration (CSR)
- Copy of notarized Deed of Sale
These are the common documents required in applying for an auto loan in the Philippines. However, these may still vary depending on the loan provider you choose.
Auto loan application process
- Make sure you meet the qualifications by checking the list of eligibility requirements above.
- Compare and choose different secondhand car quotes from several loan companies. Make sure to review all the available auto loan options and shop around to get the best secondhand car deals.
- After you select your loan provider, complete the necessary documents required by your chosen lending company.
- Wait for the confirmation of your loan application. Auto loan approval usually takes about 1 to 3 days. However, the processing time will still depend on the lending company you choose and if you submit complete requirements.
2nd hand car loan interest rate
The interest rate in a typical loan is based on how much the loan amount is and the chosen payment term of the loan applicant. However, with a secondhand car loan, the interest rate will be solely based on the year model of the car the applicant will be purchasing. Here’s the car loan interest rate table to guide you accordingly.
| Car year model | Interest rate | Processing fee |
|---|---|---|
| 10 years old (Option A) | 1.25% | 5.50% |
| 10 years old (Option B) | 1.30% | 4.00% |
| 10 years old (Option C) | 1.50% | 3.50% |
| More than 10 years | 1.75% | 5.50% |
Other fees and charges
Apart from the interest rate and monthly amortization, loan applicant may pay other fees and charges. Here’s a list of fees and charges that you need to settle.
| Fees | Charges |
|---|---|
| Processing fee | Car loan take-out – 5.5% Second-hand vehicle – 7% |
| Late payment fee | P1,500 or 15% of the monthly amortization, whichever is higher |
| Documentary stamp fee | Will depend on the loanable amount |
| Notarial fee | Will depend on the loanable amount |
Applying for a vehicle loan shouldn’t be a daunting task, especially with this guide to help you out.
Once your vehicle loan is approved, the next step will be to buy the best car insurance policy available to get you insured from any financial losses that may arise in the event of an accident.
Second-Hand Car Loan FAQs
How do I get a loan for a car?
- Check your credit score first
- Shop around to get the best secondhand car rates
- Complete the necessary documents
- Wait for the loan approval
How much is the loanable amount for secondhand cars for sale?
The loanable amount will be 50% to 70% of the vehicle’s fair market value.
How is the interest calculated on a car loan?
Unlike in a typical loan application, the interest rate for used vehicles is based on the year model of the cars. Note that the older the vehicle, the higher the interest rate will be.
Furthermore, the availability of secondhand car loan calculator in several websites today enables consumers to project their monthly amortization, interest rates, and other essential amounts they need to settle.
What is the mode of payment available?
Loan borrowers can pay either through cash payment or postdated checks (PDC). Cash payment can be done at Cebuana Lhuillier and MLhuillier.
How long should my car loan be?
Payment terms can be done at a minimum of three (3) months to thirty-six (36) months.