Four to-dos to gauge your car loan readiness
Commuting to and from work can be such a hassle—not enough public transportation, kilometer-long lines at the bus or MRT station, steep Grab/cab fare during rush hour. The road situation is so back to normal that you wish you have a car. Even if traffic is bad, at least you’ll be comfy behind the wheel, listening to your favorite music.
Not everyone can pay for the full price of a vehicle upfront. Good thing there are financing options available. Tired of jostling for space inside the MRT? Maybe you can get a car loan! Do these four simple things to know for sure if you are car loan-ready:
- Research - Check the internet or read flyers to understand how to go about getting an auto loan, what your options are, and what the requirements are to determine whether or not you are ready and eligible for one. To apply for a car loan from banks, you have to be of legal age, with a steady source of income from employment or business, and with good credit standing, meaning you have a good track record of paying off your debts. Typically, the minimum salary or household income requirement is P30,000 to P50,000. If this is a check mark for you, then you’re off to a good start.
- Check your finances - If you think you qualify for a car loan, the next question is can you afford the down payment and the monthly amortization? A bank will not lend you the full purchase price. You can borrow up to 80% for brand new vehicles and up to 70% for second-hand vehicles. So, for example you’re considering a brand new sedan worth P950,000, be ready with P190,000 for down payment. For a five-year term, the monthly amortization for that vehicle is about P16,600, and if that amount doesn’t exceed 30%-40% of your gross monthly salary, then you’re ok.
- Compute some more - Car ownership doesn’t end with the down payment and monthly amortizations. There are other costs to consider, like the chattel mortgage fee. Banks in the Philippines typically charge 2% to 3% of the loan amount as the chattel mortgage fee. Then, there’s insurance. Third-party liability (TPL) is mandatory, comprehensive is optional. Unlike TPL insurance, a comprehensive plan offers a superior coverage by compensating you in case your vehicle suffers any damages during an accident. And of course, there’s gas, parking, toll, maintenance, and regular TLC (tender loving care –washing, waxing, detailing). If your budget can accommodate these car ownership expenses, then you’re getting warmer.
- Improve your credit score - Aside from the financial information submitted for an auto loan application, banks look at borrowers’ credit report and credit score to gauge their ability to pay. Just like in a test, you either pass or fail. Credit bureaus calculate credit scores based on five criteria: credit payment history, credit utilization ratio, length of credit history, types of credit used, and new credit. So, if you want to get approved for a car loan or any loan for that matter, regularly pay your debts on time, don’t max out your credit cards, and manage your debt well. If you think you have a high enough credit score, then yes, you’re good to go!
Vehicle financing takes planning, computations, and saving up. Contemplating on your readiness for such a financial responsibility is a step closer to driving your own car. Have you done the math and determined that you’re ready? China Bank can help. With China Bank AutoPlus, owning a vehicle, whether brand new or second hand, is easy and affordable. Enjoy low interest rates, low monthly amortization, low down payment, and flexible payment terms. Apply now at any China Bank branch or China Bank Consumer Loans Centers near you or click here for more information.
