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5 Tips to Get the Car Loan That Works for You

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You’ve read the reviews, been from one showroom to another, and did a few test drives. This is it! You’re ready to buy a new car. All you need to do is pay for it…but that’s easier said than done.

Read more: Auto Tax Reform: What It Means for Car Buyers

Choosing the best car loan can be stressful with the abundance of options offered by banks and dealers. Here are a few tips and tricks to help you get the right one for you.

Review your credit report

Lenders turn away irresponsible borrowers when they smell one, and it’s easy to do just that by looking at your credit score. You’ve come this far so be sure not to let a bad credit report stop you from driving your dream car. Be sure to tidy things up before submitting your car loan application.

A high credit score can also help you get better car loan rates! Here’s our in-depth guide: The 5 Easiest Ways to Improve Your Credit Score

Compare options

Shopping doesn’t end after choosing your car; your car loan options need some attention too.

Many people go directly to the dealer, assuming that they can work out the loan without knowing they can find better offers by looking around. Research which car loan best fits your budget and lifestyle.

Don’t forget to check if a lender is running a promotion for their car loan offer. These promos can net you more value from your loan and save you a ton when they add up. For example, Security Bank offers free 1 year life insurance to their clients who apply for a Security Bank auto loan.

Decide on the right loan term

Should you opt for a long-term loan with lower monthly payments? Or a shorter one by shelling out more cash in the short-term? It all depends on your financial capacity.

Long term loans may be tempting because of lower monthly payments but they also have higher interest rates. They also give you more room to maneuver in terms of cash. Plus, you can make other investments or maybe put your extra cash in a high-yielding savings account to offset–and even earn more–from your set-up.

On the other hand, a shorter loan frees you from your obligation sooner, allowing you to take on more debt for other ventures. And for some, having that peace of mind is a clincher, sans the higher monthly installments. If you’re strapped for cash, this option may not be advisable.

You can estimate how much you can borrow with our Auto Loan Calculator below:

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  • Please enter a value between 199999 and 100000000.
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  • *Quoted loan amount and monthly amortization below are indicative only. Final loan amount, monthly amortization and applied rate shall be confirmed in your loan documents upon loan approval. Final loan approval shall be subject to the submission of required documents and the Bank’s credit policies and procedures.

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Find a credible lender

No one wants to make a deal with people you cannot trust–especially when applying for a car loan. A trustworthy lender is crucial as it will make the entire process smoother. It also gives you peace of mind, and that is priceless when dealing with your long-term finances. Ask yourself, are they reliable? How well do you know the institution? Is it a one-stop-shop? Are they processing your loan faster than others?

Going for an award-wining bank is always a wise option. Security Bank, the reigning Bank of the Year-Philippines of The Banker Magazine, offers a car loan option that comes with free 1 year life insurance. You can even get approved in as fast as 1 banking day. Check out their offer here.

Read carefully before signing

Don’t get too excited when you receive your car loan approval. Make sure that you have thoroughly read and analyzed the contract before signing. Make sure your lender explains the terms and conditions stated on the contract before inking down anything.

Check the prepayment penalties, variable interest rate, guaranteed auto protection, annual percentage rate, the total amount of payments, and so on. Don’t be afraid to ask questions if anything is unclear. This is a big purchase, and you do not want anything to go wrong.

Lastly, it’s important to know your rights as a borrower of any loan. In the Philippines, we have the Truth in Lending Act (RA 3765), which protects a borrower from any hidden charges.

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