Good news! A auto loan with collateral is one of the easier auto loans to avail if you choose to apply for one. Approval for any loan is…read more >>
Personal Loan or an Auto Loan?
Is it the new Honda that has caught your attention or are you just tired from too many years of commuting in buses, FX’s and Jeepneys? No matter what the reason, we totally understand. The daily grind in Manila and other major cities in the Philippines is already too much for one to handle for too long.
A frequent question we are asked by our customers is what type of loan do they need? One of the most common items that Filipino’s borrow money for is to purchase a new motorbike or car. Therefore, a question we hear day after day is: “What type of loan do I need?” / or “What type of loan should I get?”.
The features of a personal loan and an auto loan are different and should be treated as such. Just like it is not recommended that you purchase a second hand car with a credit card because of the high interest rate you will be charged, it is the same that purchasing a car with a personal loan would also not be generally advisable. A ‘auto loan’ will be more customer friendly to the borrower if used to purchase a car over other loan types. Having said that, it would also be very unlikely that a bank or loan provider would lend you a personal loan for the reason of purchasing a car.
Key Features of an Auto Loan
1). The duration of the loan will generally be longer than that of a personal loan. For example, a BDO auto loan can have a maximum length of 6 years while their personal loan maximum is only 3 years.
2). The minimum loan amount of an auto loan is also generally higher than that of a personal loan. You can expect to borrow a minimum of approximately P100,000 with an auto loan.
3) The maximum loan amount is based on the value of the vehicle and your ability to repay the loan. Therefore, if you can afford to repay a P200,000 loan and the car is also valued at P200,000, that would be an amount you could be approved for in theory. (normal credit history checks will still apply).
4) You likely be required to make a downpayment for both new cars and used cars. This down payment will be different depending on who you borrow the auto loan from. PNB currently have a minimum of 25% down payment if you wish to avail an auto loan from them.
Therefore, if you are not looking to purchase a used or new car you should look to apply for a ‘personal loan’. However, if you are wanting to purchase a car with your loan then an ‘auto loan’ will be your best and probably only option. The auto loan requirements that you will be personally required to provide will be the same as other major loans. These requirements will include complete all or some of the below depending on the provider you choose:
Government issued I.D’s
Recent payslips and most recent ITR.
Complete application forms.
COE (Certificate of Employment)