So you’ve read reviews, asked around for advice, hopped from one showroom to another, and probably even did a few test drives. You’re almost ready to buy the car that has been giving you sleepless nights for months now. All you need is to seal that car financing deal with the bank and you’re good to drive home your dream.
Whether or not you’ve pinned down your car brand, model, and a variant of choice, it helps to familiarize yourself with car financing rates and auto loan companies to expand your options. Below are some car loan tips that will make your money go the distance.
What are valid reasons to get one?
1. When acquiring a vehicle through bank financing and paying it back for a certain period.
2. When reimbursing the amount of a brand new car within 30 days from purchase.
3. When acquiring a cash loan with the use of an existing car as collateral or refinancing an existing auto loan.
4. At least 21 years of age and not exceed 65 years at the time of loan maturity.
What’s the best way to get a car loan?
Since it is a form of financial assistance, getting an auto loan requires stringent process from lending firms or banking institutions in the Philippines. Below are the necessary points you need to look into for a flawless and maximized car loan application.
Tips for getting the best loan deal
1. Maintain a good credit history. Naturally, banks want a responsible borrower. If you have unsettled debts, repay your debts before application to make sure you have a clean slate.
2. What’s the best bank for car loans? You can always gather substantial information on auto loan offers online. Otherwise, go to a branch that you have already established a good banking relationship with. This will give you a higher chance of getting approved as the bank has seen your good track record with them and trust is already built.
3. A stable source of income is a must to show that you are capable of paying. Aside from showing your proof of income, reassure your bank through a guarantor.
4. Ensure that every detail of your loan application is true and correct. Financial firms do their background check. Altering information will only rise suspicion and lower your chance of approval.
5. Apply for a realistic amount. Compute for the ideal target amount by dividing your monthly debt divided by your gross monthly income. That is your debt-to-income ratio.
Should you opt for bank financing or dealership financing?
Bank financing. These days, many banks offer auto loan at favorable interest rates and repayment tenures. By doing research before signing up for a bank, you can get loans at low-interest rates with added benefits—like using a loan calculator.
Loans are usually provided before the purchase. Borrowers with good track record with the bank are given special rates and can even negotiate for flexible tenures.
Another advantage of a bank financing scheme is that the rates are likely to be lower here as there are no middlemen who will cut commission. On the downside, however, customers may not be able to negotiate once the quote is released.
In-house/dealership financing. This is an all-in deal as it covers the actual car purchase a car down to the financing. While it seems more convenient for customers, dealers acquire commissions from the loan. However, if you are after the convenience, make sure that the lender or bank still provide competitive rates.
Pick the payment term that works best for your income and lifestyle
As mentioned above, your monthly loan payments should not amount beyond 40% of your monthly income. Dealers require a down payment from the customer and the remaining amount is to be paid through monthly installments. The conventional payment option is a down payment of 20% and five years to pay the rest of the loan. Ideally, paying a bigger downpayment in cash is advisable as it lowers the amount to be paid in the long run—which means reduced interest rates.