A beginner’s guide to car loans
By now, you’ve probably picked and test driven a car of your choice at the 2016 Auto Focus Summer Test Drive Festival. Just as crucial as selecting a car is paying for the car.
Some people buy cars by paying cash upfront. It saves them the hassle of monthly payments and higher interest rates in installments. But for people who have no access to ready cash, the other viable option is car loans. This saves you the difficulty of paying the full amount of the purchase upfront, especially if you don’t have enough funds yet.
Requirements
Documentary requirements needed in buying a car depend on one’s nature of employment.
If you are a typical company employee, among the requirements include two valid government-issued IDs (passport, SSS, PRC, postal, or driver’s license), your latest three-month bank statement, Income Tax Return, Certificate of Employment, co-maker or guarantor, and latest billing statement (electrical, telephone or credit card bill).
For self-employed ind iv idua ls , the aforementioned requirements are also needed, with the addition of your business permit issued by the Department of Trade and Industry (DTI).
Meanwhile, OFWs have to complete a separate set of requirements given the foreign nature of their employment. These include two valid government-issued IDs, Contract of Employment, latest three months proof of remittance, co- maker or guarantor, and special power of attorney (SPA), in case the OFW is still abroad and wants a relative to make the purchase on his or her behalf.
Once you’ve submitted all the required papers and your application has been approved, you can already avail of your selected vehicle through a car loan.
Types of car loans
There are two types of car loans: bank loans and in-house loans.
With the number of banks that offer car loans, it’s generally convenient to acquire one these days. Banks usually offer these at a reasonably low interest rate. Among the criteria that banks check in approving your loan application is salary, amount of savings in your account, and credit history. If the bank determines that you have satisfied these criteria, they are likely to approve your loan application, which usually takes a day or two.
But if you don’t have a preferred bank to takeout a loan from, the other logical option is in-house loans. Most automakers featured in the 2016 Auto Focus Summer Test Drive Festival have tied up with various banks or lending companies to offer this option. This option frees you from the hassle of looking for a bank that would approve your loan, and makes the auto dealer a one- stop shop for both cars and loans.
Now, the way car loans work is that, it allows you to make a minimum down payment for the vehicle ( usually 10 to 20 percent of the price of the car) while the bank or lending institution will shoulder the rest of cost. With this principle, the bank technically owns the car until you have completed all the payments and ownership is transferred to you.
If you think there will be a time that you will be