A step-by-step guide to refinancing your car in the Philippines

Getting a car loan is a big deal, right? While a borrower is at it, a lot can change in his personal life and economic condition. Now, that's where car loan refinancing comes in handy.

Also Read: Beginner's guide to financing a used car in the Philippines

Let's now dive into what car loan refinancing is all about, its ups and downsides, and how to get it.

What's car loan refinancing?

For a borrower, car loan refinancing can be a strategic move to lower his/her monthly payments, reduce interest rates, or adjust the loan term.

Why refinance your car loan? Will it be helpful?

The answer is a big YES. Car loan refinancing helps a borrower in more than one way. The list includes -

• Lower monthly payments
• Cut down on interest
• Quicker loan pay-off
• Boosts ownership stake in the car (which is pretty cool!)

However, it should be noted that car loan refinancing is not for every borrower. Depending on the borrower's situation, it might lead to more problems than proving to be a solution. In worse situations, refinancing might lead to -

• Bigger monthly payments than you can handle
• Paying more interest over a longer loan
• Owing more on your car than it's worth
• Dealing with extra fees or insurance costs

If you are not in the danger zone and opting for car refinancing will do only good for you then.

Also Read: Top 5 tips to get approved for a used car loan

Here, we have curated a guide to providing a detailed step-by-step process for refinancing their car loan in the Philippines.Step 1 Know your current loan terms and finances

• The borrower must first review the existing car loan agreement, including the interest rate, remaining balance, and monthly payments
• Next up, the borrower must evaluate his current financial situation, which includes looking at one’s credit score, income stability, and debt-to-income ratio

Step 2 Check available lenders and loan options

• It is a good idea to explore your lending options well in advance. The list includes different banks, credit unions, and online lenders in the Philippines that offer car loan refinancing
• Do not forget to compare interest rates, loan terms, and eligibility requirements from various lenders
• When selecting a lender, always consider factors such as customer service, reputation, and flexibility in repayment options

Step 3 Check for eligibility

• Once a few potential lenders are identified, it’s time to review their respective eligibility requirements
• Typically, lenders may consider factors such as credit score, income stability, employment history, and vehicle value. A borrower must ensure he/she meets the criteria before proceeding further

 

Step 4 Collect all the important documents

• Your paperwork must be in place and up-to-date. A borrower must be ready with documents such as proof of income, identification (government-issued ID), and vehicle registration papers
• Some lenders might ask for additional documents, such as proof of insurance coverage or residence verification
• It is a good idea to organize all the required documents in advance, as it will help streamline the application process

Step 5 Submit the refinance application

• After finalizing the lender, it is time to complete the refinancing application form provided by the chosen party
• It is always advisable to double-check all information for accuracy before submission
• Do not forget to attach the necessary documents as per the lender's instructions
• Some lenders offer online application options for added convenience, which might require you to attach the documents. Therefore, it is advisable to keep uploaded documents beforehand

Step 6 Await for loan approval

• Once you have submitted your application, the lender will then review your financial information and assess your eligibility for refinancing
• Depending on the lender's internal procedures, the above process may take several days to weeks. It is thus advised to stay patient and be prepared to provide any additional documents if requested

Step 7 Review loan terms and conditions

• Once your application is approved, it is advised to carefully review the loan terms and conditions provided by the lender
• Always, always, pay close attention to the interest rate, loan term, monthly payments, and any associated fees
• Make sure you understand all aspects of the refinanced car loan before signing the agreement

Step 8 Sign it off

• Once you're satisfied with all the loan terms, it is time to sign the refinancing agreement as per the lender's instructions
• For your records, do retain a copy of the signed agreement
• Note this is the last and final step that formalizes the refinancing process. You're now bound by the terms outlined in the agreement

Step 9 Time to pay off

• Upon finalizing the car loan refinancing agreement, the new lender will handle the payoff of your existing car loan directly
• To avoid any additional charges or complications, a borrower must ensure that all outstanding balances are cleared with their previous lender

Step 10 Time to enjoy the benefits of refinancing

• Once your existing loan is paid off and the new loan is in effect, you can start enjoying the benefits of refinancing
• These include - lower monthly payments, reduced interest rates, improved cash flow, and a more favourable loan term.
• However, timely payments on the new loan are a must to maintain financial stability

Summing up

Car loan refinancing in the Philippines is a great opportunity for a borrower to improve his/her financial condition. How? By securing a more favourable loan term. Just follow the steps mentioned above, and you’ll navigate the refinancing process stress-free. In the long run, you’ll end up saving money.

Also Read: Mistakes to avoid when refinancing your car loan