Aside from buying or building their own dream house, one big life milestone that many Filipinos have is having their own car. Indeed, it’s extremely convenient to travel using your own vehicle; you also have the freedom and complete control of when you leave and where to go. Having a car is also advantageous in case of emergencies.
Of course, cars aren’t exactly cheap. Even if you go for second-hand units, a vehicle still costs a lot of money. It can also take a long time to save up for the full amount; the price may also change within months, so the money you set aside may still not be enough.
As such, it’s a good idea to explore car loans from banks for financing your purchase. Many auto dealers also offer loans through partner banks or credit institutions; however, there are plenty of reasons why it might be better for you to opt for bank auto loans. Here are just a few:
1. You can “Shop Around”
The best thing about dealership financing is that you don’t have to do the legwork. All you have to do is to submit the requirements and the auto dealer will be the one to handle negotiations, follow-ups, and other processes. The downside is that you don’t really get to compare and choose the best loan offer for you.
On the other hand, getting a car loan from a bank allows you to shop around and see which one has the lower monthly amortization and interest rates, as well as payment terms. Depending on your relationship with the bank, you may even get offered exclusive promotions or the bank can tailor-fit the terms for your needs. All of these mean that you can properly plan your budget and lessen the risk of missing your dues.
2. Bank car loans have lower interest rates
In relation to the previous point, choosing a bank auto loan lets you enjoy lower interest rates because you’re working directly with the establishment. Essentially, if you opt for in-house financing, the dealer acts as the middleman in the transaction. Just think of the higher interest rates and other additional charges as the convenience fee you have to pay.
3. Lower monthly payments
One of the things that turn off some people from bank car loans is the high amount of the down payment amount. Sometimes, this can be a fixed value; other times, it can be a percentage of the car’s total selling price. Whichever the bank uses, the rate is definitely so much higher than in-house financing down payments; some dealers may even let you take out an auto loan with just a Php 5,000 initial payment!
However, the consequence of a low down payment is higher monthly dues. In contrast, a higher down payment means you’ll be paying lower amortizations. This can give you more wiggle room when it comes to your budget for necessities. With lower monthly payments, you can also shorten the term of the loan and therefore pay less interest. Ultimately, this will save you a lot of money.
4. You can go for either secured or unsecured loans
In the Philippines, there are two types of car loans from banks: secured and unsecured. A secured car loan requires collateral, which is usually going to be the car you’re going to buy. The loan will have lower interest but if you don’t pay your monthly amortizations over a certain period, the bank will repossess your car. Often, this is applied for cars that are for personal use. Meanwhile, unsecured loans don’t require any collateral. However, you’re going to be charged a higher interest rate. You also need to have a good credit standing in order to qualify.
Going for bank financing means you can choose between these two types of car loans. If you’re confident that you can make your payments on time, then go for a secured loan for lower rates. Otherwise, you may benefit more from an unsecured loan.
5. It can help you build a good credit history
The Philippines is not like other countries where there is a credit scoring body that determines if an individual will be able to repay a loan in a timely manner. Still, local banks can exchange information to verify a customer’s borrowing behavior. If you’re able to maintain a good standing on your accounts, banks can give you preferential treatment because they know the money is safe with you.
Thus, when you apply for a car loan and you’re able to consistently pay your monthly dues, you’re not just improving your reputation to one bank but many banks. Therefore, when you need to take on bigger loans, you have a higher probability of getting your application granted.Bank loans are nothing to be afraid of. What’s more, they’re not as complicated as many people might think. As long as you provide the necessary documents and are able to prove that you can return what you borrowed, there’s a good chance that your loan will be approved