Car Loans: The Full Guide

Buying your first car is one of the most exciting milestones in your adult life. Most of the time, people will know what they are looking for. For example, growing families could be looking for a car that could fit all of the family members inside. And businesses might want to expand their operations and require a few more vehicles for their operations.

Whatever the need is, it is no question that paying for a down payment on a car will require a substantial percentage of the total price. There is also no denying that cars are considered essential for traveling to work, school, or running errands. For some people, commuting might still be a good idea. But for those who foresee the need to travel using their own car, buying a vehicle might be inevitable.


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Written by: Piggyy

Car Loan Offers



Take advantage of competitive loan rates. Apply for a loan with UCPB now.


Sterling Bank of Asia

Sterling Bank of Asia offers different loan types for individuals and businesses. Check out their loan products now.


Security Bank

Security Bank offers attractive loan terms. Get this offer now.



RCBC offers higher loan amounts. Apply for a loan now.


Philippine National Bank

What are Car Loans?

A Car Loan or an Auto Loan is a type of loan where a person borrows money (typically from their local bank) to purchase a motor vehicle for personal or business needs. The vehicle serves as collateral until the loan is completely paid, usually within a period of 3 to 5 years. 


Auto Loans are considered simple interest loans, where the borrower typically pays a fixed monthly installment for the principal amount borrowed plus the interest on the loan. 


The car loan rates may vary depending on where the automobile loan is applied. Therefore, if you are looking for a car loan in the Philippines with the lowest interest rates, it will help to shop around and look for a car financing that fits best for you and what you can afford. 




Types of Auto Loans

Car Loans in the Philippines are not just limited to purposes of personal use. Businesses also have the option to apply for car financing to expand their business operations. 

A typical auto loan in the Philippines provides financing for these types of vehicles:

  • Passenger Cars
  • Asian Utility Vehicles (AUVs)
  • Vans
  • Sports Utility Vehicles (SUVs)
  • Light Commercial Vehicles (LCVs)
  • Big Bike
  • Trucks


With these types of vehicles in mind, when a person applies for a car loan, they can also decide whether they prefer to apply for a secured or non-secured loan. The key differences between the two are the following:


Secured Car Loan

A secured car loan requires collateral, and in this case, the collateral is the vehicle you have taken out. Some cases that Filipinos are familiar with is when a bank or a lending company takes the car when the borrower is not up to date in paying off the monthly payments. For personal car loans, this practice is widely applied. 


Unsecured Car Loan

Unlike a secured car loan, there is no need for collateral for an unsecured loan. However, a bank or a lending company will charge higher interest on the loan. The caveat here is that the borrower should have an excellent credit standing. 


What To Look For

Buying a car has costs that do not end with the monthly amortizations you need to pay for. Even then, you have to check and compare the down payment, interest rates and other offers that banks and lending companies are willing to offer. Although some offer free car insurance in the first year and other freebies, consider the following when seeking a car loan:


Required Down Payment

The down payment required on an auto loan typically depends on whether you buy a brand new or second-hand vehicle. In most cases, brand new vehicles require a minimum down payment of 20%, while a second-hand car requires a minimum down payment of 30%. Other times, car dealerships have promotions and sell vehicles at 0% down payment.


Monthly Amortizations and Payments

Monthly payments on auto loans will be comparatively higher than renting or leasing a car. However, the concept of leasing is not that popular in the Philippines because there are vehicles that offer more reasonable terms of payment that can almost compare to leasing a car. 

But before going ahead with a car loan, one must first consider the use of the car, the monthly payment on the loan, and consequently, compare it to what will be paid if the leasing option is selected. 


Maintenance Costs

A person is free from any maintenance costs (except fuel) if they are just leasing a car because that falls on the car rental company. But vehicle owners will face maintenance costs attached to owning a car. A few of these maintenance costs include the following:


  • Fuel
  • Car Wash
  • Change Oil
  • Tires


These costs will increase or decrease depending on how often the vehicle is used and the distance the car travels daily. 



Car trade-in is a practice that most people do when they wish to upgrade their existing vehicle to a newer one or look for a quick sale. There are benefits to trading on, but there are disadvantages as well – one of them is getting a lower value of the car when done through the car dealership rather than personally doing it yourself. 


End Cost

Admittedly, some people tend to focus on paying monthly rather than looking at the whole picture. For example, that’s how car dealerships and banks promote cars these days – low monthly payments or zero down payments. However, one must be wise enough to compare the principal amount plus the interest and other incidental fees. Based on this, a person will be able to identify for sure which bank or lending company to go for, the maximum down payment they can pay, and the term of loan they will be willing to commit to. 


Key Factors to Consider

Before you decide which vehicle to buy and whether or not to get financing, some factors need to be considered and carefully reviewed. Among others, here are a few of them:


Annual Percentage Rate (APR) 

The APR is critical when considering which loan to go for and the terms that will work best for you, depending on your budget. The interest will undeniably be lower for loan terms that are only for 12 months than loan terms that are 60 months, but the savings matter. 

For an average car loan in the Philippines, the maximum APR for a term with 3 years is 17.33%, and the maximum APR for a term of 5 years is 31%. 


Loan Term

Loan terms on auto loans depend on whether you buy a brand new or a second-hand vehicle. The maximum loan term you can choose for a brand new car is 5 to 7 years and 3 to 4 years for a second-hand vehicle. 



Down payments also depend upon the vehicle you are planning to take. Brand new cars require a minimum downpayment of 20% and 30% for second-hand vehicles.


Other Fees and Penalties

There is always a penalty for late payments like in any other loan. So, of course, borrowers must strive to avoid this to avoid the bank/lending company taking the vehicle from the owner. 


Leasing vs. Owning a Car

The decision to buy or lease a car will depend on some personal reasons. Many factors need to be considered, and eventually, the decision needs to work the best for that person. There are advantages and disadvantages to buying a car or leasing a car. 

Here are some of them:




  • Lower Monthly Payments
  • Freedom to Change Car Yearly
  • No Maintenance Fees to Worry About



  • You Can’t Own the Car





  • You Own the Car
  • Freedom to Customize Your Vehicle


  • Higher Monthly Payment
  • Take Care of Maintenance Cost

Other Automobile Loan Options

Car Loan in the Philippines is not just limited to the personal or business use of companies. Other purposes of taking an auto loan (car, truck, motorcycle, SUV, van, etc.) can be for the following business reasons:

  • Car Rental
  • Transport Service
  • Cargo

Frequently asked questions

Minimum Requirements to Qualify for a Car Loan

Most banks will require the following car loan requirements to be met:
Age: At least 21 years old
Filipino Citizen living in the Philippines for at least 2 years
Must be gainfully employed / self employed.
Must have at least a gross family income of Php30,000 a month
If employed, must be working for the same employer for at least 2 years. If self-employed, must have at least 2 years of profitable operation. Overseas Filipino Workers (OFWs) must be working abroad for at least 2 years.

What is a Good Interest for a Car Loan?

A good interest rate is the one that you pay for with loan terms that are under 36 months. Of course, this still depends on your budget. When applying for a car loan, you can always use the car loan calculator when you visit the websites of banks or lending companies. It will help you have an idea on how much you will be paying in amortizations according to the loan term that you are comfortable with.

How Does Auto Loan Work in the Philippines?

Those who wish to start applying for an auto loan may do so by directly going to car manufacturer dealerships, approaching agents and starting the loan application process either through them or through the bank directly. In most cases, car dealerships have tie ups with banks and will do the auto loan application for you.

Where to Pay for a PSBank Auto Loan?

When it comes to paying for your PSBank Auto Loan, they offer convenient payment options for their customers:

  • Online payment using your enrolled deposit account thru PSBank Online and PSBank Mobile.
  • Automatic Debit Arrangement from a PSBank deposit account
  • Post-dated checks
  • Cash or check payments via PSBank, Metrobank, BancNet ATMs nationwide
  • Over-the-counter cash or check payment at any PSBank branch nationwide
  • Via InstaPay by paying/transferring funds from your accounts in other banks to your 15-digit PSBank loan account number.
  • At any 7-Eleven store nationwide.
  • GCash
How to Avail of a BDO Auto Loan?

There are two ways for borrowers to apply for a BDO Auto Loan: in branch or online. For those who wish to apply through any of BDO’s branches, they may do so and bring all the requirements needed which they can find on BDO’s website. Applying for an auto loan online is also possible just by going to the website and clicking on the Auto Loan. From there, you can start the process.

How to Pay for a BPI Auto Loan?

To pay for your BPI Auto Loan, it can be through any of these methods:

  • Automatic Debit Arrangement (ADA)
  • Any of BPI’s 24/7 Channels
  • Through
  • BPI Phone Banking – Just call 889-10000
  • 1,200 Express teller ATMs
  • Over the counter payment at more than 800 BPI/BPI Family Savings Bank branches nationwide
Which Bank Offers the Best Auto Loan?

The offer that banks make to customers looking at auto loans will depend on a lot of different factors: what motor vehicle you need, for what purpose, for how long you pay the loan, whether it is brand new or second hand, etc. Ultimately, based on your requirements, you can choose what best fits your needs. You can look at a BDO Auto Loan, BPI Auto Loan, MetroBank Auto Loan, Security Bank Auto Loan, PSBank Auto Loan or even EastWest Bank Auto Loan.

Determine what you need, use each of these bank’s loan calculators to have an idea of the fees and interest that you will pay. And based on that, you will be able to know which one is the best for you.

Car Financing: Is It Better to Get a Loan?

This will depend on the current financial status of the borrower. Undeniably, paying for a car in cash will save you money on the interest. But if you are short on the budget and you have other financial matters to take care of, you can always opt for car financing.

Are Used Cars For Sale Eligible For A Car Loan?

Yes, second hand cars are eligible for car financing. However, some banks require that the car shall not be older than 5 years.


Deciding to take a car loan to buy a car is a big step. But knowing where you can get a better offer in terms of monthly payments, loan term and interest is just as important as deciding which car to go ahead with. At the end of the day, one must always consider what car will best serve its purpose according to the need that you have for it. 


״The secret of happiness, is not found in seeking more, but in developing the capacity to enjoy less״ - Socrates

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