Car Loan 101: Choose the Car Financing Option That’s Right for You
A lot of Filipinos are now finding it easier to take out a loan when they buy a car. Thanks to a robust economy, more efficient financing schemes, easier rates, and accessible information via the internet, car buyers are becoming more intelligent consumers, able to make better decisions when it comes to choosing which vehicle is right for them.
Here are some of the most popular car financing options that are available in the Philippines. They all make valid options for car buyers like you, but be sure to weigh them depending on your particular needs and unique situation first.
Ask anyone you know if they have a bank account lodged in somewhere, and chances are they’ll say yes. So really, banks are the easiest car financing alternative you can take. Not only are they literally scattered everywhere, but you can also go online should you decide to stay at home and watch a marathon Netflix series.
One strong benefit that many banks offer is low interest rates. Some may vary a bit, but they’re still competitive, nevertheless. It’s also easier to apply for a loan if you already have an account with a bank, since they can easily retrieve your information from their database.
Many banks can spread your monthly amortization for up to five years, although you should have a good credit rating first to qualify for this option. Note that a lengthier loan means you will have to spend more on interest rates, so keep this in mind if you’re thinking of getting in debt for more than five years (or more).
Cooperative or Credit Union Loans
Looking for really good rates that can rival your friendly neighborhood bank? Then you should choose car loans offered by cooperatives or credit unions.
You have to be a member first before you can get approved for their loan options. But the biggest advantage here is that they’re not as strict as banks when it comes to checking your credit scores. So even if your credit rating looks like it’s falling apart, your chances of getting approved is still better compared to a banking institution.
A car lease is when your lender purchases your vehicle choice and then leases it to you (the borrower) for a given period. You pay the lender fixed monthly payments, and you will be responsible for the car’s maintenance and repair over the entire time it’s on a lease.
Once it expires, you have three choices: return the car, refinance it, or just purchase the vehicle by paying the remaining amount. Unlike bank auto financing, you won’t be listed as the car owner while you’re leasing it. However, you have the option to own it once your contract ends.
Home Equity Loans
Do you own a house? Then perhaps, a home equity loan is the best option for you. This type of loan allows you to borrow money from financial institutions in exchange for one thing: they use your home as equity. This means that they get to keep your house in case you won’t be able to pay your debt.
This can be quite risky, since you might lose your home in the process. Better to think twice before you choose this option, and make sure you really have the financial resources to pay your loan.
Car Dealership Loans
As the name aptly suggests, dealership car loans are given by car dealers to help their customers purchase a vehicle. One of its advantages is that dealers are well-connected to many lenders, so the chances of getting approved for a loan is quicker.
It’s important to do a lot of research before you decide to choose this option. Some dealers tend to charge higher interest rates on this type of loan, so study the rates and terms offered by many dealerships first before you decide to take the plunge.
Credit Card Loan
It’s possible to buy a car using your credit card as long as your credit limit is high. However, not all dealers accept this type of loan payment, and those that do often impose certain fees before they give you the green light.
And while it’s not as flexible as other car loans, many car loans allow zero percent interest on purchases for a fixed period. This helps you avoid paying any interest for that given time frame.