How Does Car Loan Work In Philippines?

I’ve seen and heard people ask “How Does Car Loan Work in Philippines” a number of times and you can’t fault them for asking. Once you begin to ask yourself this question or hear anyone asking this question, then it means he or she may be considering going for one but wants a better understanding of the topic.

Are you considering getting a new car but do not have the means to pay upfront? Well, do not let that bother you because there are car financing options available for people like you. Because trust me you’re not alone in this.

The hard truth is that, not everyone can afford to pay for a new or used car from their savings without having a massive impact on their livelihood. That is why I have decided to answer this question “How Does Car Loan Work in Philippines” so you have an understanding of how it works and how you can also get financing.

READ ALSO: How Does Car Finance Work in the UK?

What Is A Car Loan? 

A car loan is a type of loan that is given to borrowers to purchase their desired car. The loans when given are expected to be paid back usually in monthly installments over a period of 12 to 60 months or sometimes more.

A car loan is normally calculated using the simple interest formula and is by far the best option to go for. You can get a car loan either from a financial institution such as a bank or credit union or from in-house ie. the dealership.

Who Can Apply For A Car Loan In The Philippines? 

There are a few eligibility requirements borrowers must meet before getting a car loan in the Philippines. Below are the general eligibility requirements although some lenders may have additional requirements specific to their brand.

  • Applicant must be at least 21 years of age but not exceeding 65 years.
  • Must be a Filipino citizen living either in the country or abroad. Or a non citizen with a cosigner.
  • A good credit score
  • Must be employed in a permanent job for at least two (2) years. In the case of self employed, the business must be a profitable one.
  • Borrower must also meet a minimum monthly salary of not less than P30,000

Documents Required

How does car loan work in Philippines

Below are a few documents required when applying for a car loan in the Philippines. They include;

  • A valid National ID (drivers license, passport, Alien Certificate of Registration, OFW ID, etc)
  • Proof of residence by providing a recent utility bill
  • Certificate of Employment for those who are employed, payslips and income tax return.
  • Self employed applicants must provide business registration certificate, bank statements, latest income tax returns, etc.
  • If you’re an Overseas Filipino Worker (OFW), you must provide certificate of employment, proof of remittance, recent payslips etc.

READ ALSO: How Does Car Finance Work Ireland

How To Finance Your Car In The Philippines

There are a few good options available to you if you wish to finance your dream car. Analyse them carefully and go for the one that suits you. The most common ones are;

  • At the bank/ auto finance company
  • At the dealership

Car Loan From The Bank/ Auto Finance Company

You can apply for a car loan from a bank or an auto finance company to finance your car. But before your loan application will be approved, you will have to prove your credit worthiness after which your money will be given to you accompanied by some terms and conditions.

Repayment will be spread over a specific duration with interest usually calculated using the simple interest formula. Getting a car loan from a bank is a bit cheaper than at the dealership. However, the process is quite stressful and time consuming as compared to financing at the dealership.

Tip: shop around, find out from at least two or three lenders what their rates and terms and conditions are before goinbbfor the one that is best for you.

Car Loan At The Dealership 

This type of car loan is when the dealership offers to give you the car without having to pay upfront except maybe a down-payment which is normally lesser than is required at the bank. The process is less complicated as compared to getting a car loan at the bank which takes more time and involves alot of back and forth.

With this, you’re dealing directly with the dealership hence the process is shorter and you will get to know your fate faster as well. The only obvious downside is that, it cost a bit more financing at the dealership than at the bank. They usually offer higher interest rates and shorter loan terms.


I understand that getting your new car or dream car can be exciting. However, do not rush the process! Examine yourself properly in terms of affordability and ability to commit yourself to a contract that binds you for 3 or 5 years.

Is your credit score good enough to get a better loan deal? This is important because the better your credit score or profile, the better the chances of getting a better offer. Hence if you realise your credit isn’t that great, maybe its best you take your time and build your credit before applying.

Additionally, going for a longer loan term may sound good to you because you will be paying less in monthly installments. However, it also means that you will be paying more in interest.

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