We’re sure you’ve already daydreamed of this a million times: you cruising down a trafficless EDSA in your own car, wearing your favorite sunnies, and singing along to your favorite songs. But unless you were born filthy rich, buying your own ride in full cash is nearly impossible in your early 20s and you may need to get a loan to make that dream come true. Don’t worry! Auto loans aren’t that scary at all. Let’s walk right through it, shall we?
1. What is an auto loan?
Basically, a bank will buy your car for you and allow you to pay for it over a period of time. In return, you compensate the lender for its service by paying interest.
This type of loan gives you the liberty to pay off your car according to your spending capability. Keep in mind that the larger the down payment + the shorter the payment term = the lower you have to pay for interest. Yes, you may have to spend a larger chunk of money every month, but it’ll cost you less in the long run. Top Gear gave the lowdown here.
2. What questions should you ask when hunting for the perfect car loan?
You need to understand exactly what you are signing up for, so ask as many questions as you need. Here are the basics to get you started:
Am I eligible to apply for a car loan?
Most banks or lenders require their loaners to be at least 21 years old and with a total family income of P30,000 per month. You should be ready to present your Certificate of Employment (COE), latest Income Tax Return (ITR), and other income statements. The requirements may vary from one lender to another, so make sure to do your research.
How much do I need for a down payment?
The minimum is usually 20% for a brand new car and 30% for a second hand unit. Remember that the higher your down payment is, the lower you need to borrow, and the sooner you can pay it off.
How much interest will I pay?
Each bank has its own add-on rates to compute for this, so you may want to shop around before settling for one. But basically, the longer you plan to pay for your car, the higher the interest rate will be. Other factors such as your credit history (or how well you paid your previous bills), debt-to-income ratio (or your ability to pay a lender back), amount borrowed, and down payment will also come into play.
What are the other fees I should know about?
There’s the processing fee, car insurance, chattel mortgage fee (a loan taken from movable properties like car/auto), LTO registration fee, and others. Some banks offer freebies such as free comprehensive insurance for a year, so don’t be shy to ask.
3. What are the do’s when getting a car loan?
Do arm yourself with information. Research, take notes, ask!
Do choose the loan package option that works best for you.
Do know what kind of vehicle you need. We suggest you go for function over style, or a balance of both.
Do know how much you can afford. Also, consider other expenses such as fuel, maintenance, and repair when setting your budget.
Do know your credit history.
Do pay on time to avoid incurring penalties/surcharges.
Do ask about the modes of payment available.
Do inquire about ongoing promos and freebies.
Do stick to your budget. Overstretching just to buy your "dream car" could get you in serious debt.
4. Final tips
We know it’s a lot to take in, but it’ll all be worth it once you get the keys to your ~*own*~ car. Our final tips? Do your research and trust a reputable lender like BPI Family Savings Bank. For starters, they have low interest rates and easy payment schemes. Also, they have made it fast (you can get a loan decision in as fast as 3 to 8 hours) and easy (via internet, their 800+ branches nationwide, and 300 partner auto dealers) to apply for a loan.
They also have a 60-Second Auto Loan Online Pre-qualification Tool that allows you to personally evaluate your qualification for a car loan and the different car options that suit your budget, and loan advisors that will assist and guide you throughout the whole process!
Talk to a loan advisor now and click here to know more about BPI Family Auto Loan.