Car loans in the Philippines: how they work and what they cost

How a car loan works

A car loan here is a secured loan. The bank or financing company pays the dealer, you pay the lender every month, and the car stays mortgaged to the lender until the last payment clears. You decide how much to put down and how many months to pay. The lender sets the rate, and the rate goes up as the term gets longer.

The figures below use BPI's published auto loan rates as of November 2026 because they are public and easy to check. Other banks price differently and rates move, so treat them as a yardstick.

Downpayment: regular DP or all-in low DP

Banks finance a percentage of the price and you pay the rest upfront. BPI lends up to 85% of the price of a brand-new car, so its minimum downpayment is 15%. Putting down 20% to 30% keeps both the monthly payment and the total interest lower.

Dealers also push all-in low downpayment promos. An all-in DP rolls the downpayment together with the other cash you would normally hand over on release day: usually the chattel mortgage fee and first-year comprehensive insurance, sometimes registration too. The advertised figure looks small, but these packages usually lock you into a long term, often 60 months, and you give up the cash discount. Over five years you tend to pay more.

Our advice: ask the sales agent for two written quotes, one for the all-in promo and one for a regular 20% downpayment with the cash discount applied. Compare the total amount you will have paid at the end of the loan, not the size of the first check.

Loan terms from 12 to 60 months

Banks commonly offer 12 to 60 months on brand-new cars, and BPI's passenger car loan runs from one to five years. A short term means bigger monthly payments and far less interest. A long term does the opposite. BPI's published effective rate for a brand-new car goes from 9.88% a year on a 12-month loan to 11.19% on a 60-month loan.

A 60-month term isn't automatically a mistake. It leaves more cash for an emergency fund. Before you sign, ask whether the lender charges a fee for paying off early and how it computes the payoff amount.

How monthly amortization is computed

Philippine banks often quote car loans using an add-on rate. The add-on rate is applied once to the full amount financed for the entire term. The interest is added to the loan, and the total is split into equal monthly payments:

Monthly amortization = amount financed × (1 + add-on rate for the term) ÷ number of months.

Because the add-on rate covers the whole term, it looks small on a one-year loan and big on a five-year loan. To compare offers, use the effective interest rate (EIR). BSP Circular No. 730, the central bank's rules for the Truth in Lending Act, requires lenders to disclose it, and BPI prints both rates side by side.

Worked example: a ₱1,000,000 car with a 20% downpayment (₱200,000), so ₱800,000 is financed. Rates are BPI's brand-new car rates as of November 2026. Insurance, chattel mortgage and other fees are left out.

Reading the example

Take the 60-month line: ₱800,000 × 1.3101 = ₱1,048,080, and ₱1,048,080 ÷ 60 = ₱17,468 a month. Stretching the loan from 36 to 60 months cuts the monthly payment by about ₱8,700, and it adds ₱106,000 in interest. That trade can still make sense. Just make it on purpose.

Some lenders compute the payment on a diminishing balance instead. If you are quoted a monthly rate, run it through any standard loan calculator and compare the monthly figure and the EIR against the add-on quote.

Typical requirements: employed, self-employed and OFW

Everyone fills out an application form and shows two valid government IDs. If you are married, expect both spouses to sign. The rest depends on how you earn. The list below follows BPI's published checklist; other banks ask for similar papers.

• Employed: certificate of employment showing salary, position and length of service, plus your latest payslip or three months of payroll account statements. Commission earners add their latest ITR and proof of commissions.
• Self-employed: DTI registration or mayor's permit, latest ITR with financial statements, six months of business bank statements, and trade references. BPI asks for at least three major suppliers and three major clients.
• OFW: latest contract or certificate of employment, three recent payslips, proof of remittance and your passport. Seafarers add crewing agency details. Expect to sign a special power of attorney (SPA) so someone in the Philippines can sign papers for you.

Bank loan or in-house financing

Bank financing usually gets you the lowest rate if your papers are complete and your income history is steady. The bank checks your credit record, and approval can take a few days. BPI, for instance, lists a minimum household income of ₱30,000 a month and requires that you be at least 18 and no older than 70 when the loan matures.

In-house financing means the loan comes from the brand's own finance company or a financing company the dealer works with. These lenders are registered with the SEC under the Financing Company Act (RA 8556). They tend to be more flexible with self-employed borrowers and thin credit files, and approval can be faster. The usual trade-off is a higher rate, so compare EIRs, not monthly payments alone.

You don't have to use the dealer's preferred bank. You can get pre-approved on your own and bring the approval to the dealer.

Chattel mortgage: what you're signing

The loan is secured by a chattel mortgage on the car. Under the Personal Property Security Act (RA 11057), the lender registers its security interest in the Land Registration Authority's online registry, and the LTO annotates the encumbrance on your Certificate of Registration (CR). Until you finish paying, the lender usually keeps the original CR, and you can't sell or transfer the car without its consent.

Expect a chattel mortgage fee on release day unless the promo covers it. After the last payment, get the release of mortgage papers from the lender and have the annotation cancelled at the LTO. Skip this and you may only find out years later, when a buyer asks for a clean CR.

Tips for getting approved

• Pay down overdue credit card balances before you apply. Lenders check your credit record.
• Make sure your ITR supports the income on your application. If the ITR shows much less, expect the bank to go by the ITR.
• Apply to two or three banks at the same time through the dealer and take the best approved offer.
• Add a co-borrower with income, such as a spouse or parent, if your own income is borderline.
• Read the disclosure statement before you sign. The Truth in Lending Act (RA 3765) requires the lender to show the cash price, downpayment, amount financed and finance charge in pesos.
• Budget for running costs as well. Fuel, insurance, parking and maintenance can come close to the size of the amortization itself.