4 Topmost Considerations When Applying for Car Collateral Loan

Oct 22, 2021

In need of wads of cash for something urgent, and pondering on alternative financing? A cash backed loan, a secured type of loan entailing that you pledge something you own with significant value as collateral to be able to get funds at a lower rate may appeal to you. Collateral loans such as those offered by top Philippine online lenders may use a car as guarantee of payment. Reliable peer-to-peer (P2P) funding platform BlendPH recently rolled out such type of loan as part of its product offerings, enabling car owners to borrow money against the market value of their vehicles.

For those keen on diving right in and converting their car’s ORCR (official receipt/certificate of registration) into cash, here are helpful tips on how to get the best deal on a car loan:

Tip #1:  Shop around to get a good financial deal. Make that “the best rate.” Compare prices and terms of car collateral loans between a reputable online lender and a bank. Once you have determined that a trusted online lender or peer-to-peer funding platform is a better option, you may then check how flexible the lender’s interest rates are. Generally, a collateral loan from a reputable online lender bases the rate, the amount borrowed, and the length of the loan on both credit and the value of collateral.  BlendPH, a trusted P2P lender in the Philippines, lets legitimate car owners apply for a secured cash loan upfront. Under the P2P platform’s Auto Sangla, the amount of loan with car as collateral may range from 50 thousand pesos to two million pesos. The interest rate may fall in the range from 1.5 to three percent, depending on risk type, and the loan term can be from six months to three years.

Tip #2:  Figure out total loan cost. You definitely need to know more than just the appraised value of your car (leading to the amount of cash loan you get) and the monthly payment. You need to know how the car loan’s interest rate is calculated. A heartening fact is that collateral loans on vehicles can be easy to get approved and is bound to be less costly.  Keep in mind, though,  that key to getting the best car loan  is understanding from the get-go that “shorter term means higher monthly payments.”  A car title loan, in essence, lays down the ground rule that in the event that the loan is not paid back, the borrower will hand over ownership of the car to the lender. A lot of possible things – including financial hardship or crisis – may happen over time, so keeping the loan length as short as you can possibly afford makes much sense.  With shorter term, less money will be paid overall; you avoid paying more each month on finance charges.

Tip #3: Be sure that you still get to use your car. Were you able to check if the car title loan lender will let you keep using your car after you have been disbursed the loan or will your vehicle car impounded with them for the life of your loan? Take the time to ensure you get to keep your car.  Nowadays, getting secured loans for bad credit, or being able to pay off pressing financial obligations may be hard to come by. There are always cases of borrowers experiencing a hard time getting qualified for a loan, more so one with a low-interest rate. If you happen to be in a dire financial strait and unable to generate a steady income stream in the months ahead, you may want to opt for other forms of collateral to avoid putting your car at risk. Another factor to take into consideration is the tendency of cars to depreciate quickly. Newer car models with significant equity and a clear title are those that lenders are inclined to accept since they are taking the less financial risk.

Tip #4: Transact with a reputable company. Peer-to-peer funding platform BlendPH, for instance, encourages customers to understand the online application and approval process, and sets expectations on why rejections do happen (it may be incomplete documents submitted; or some other valid reason).  The P2P lender has funding partners to help it accomplish its main objectives, quicken the pace for loan approval, and drive financial inclusion for more creditworthy Filipinos. Transparency and fairness are important, and they seal consumer trust. On the other hand, consumers also need to understand what they are getting into and know if they can sustain payments.

A cash backed loan industry player in the US noted that collateral loans are best suited for those who need short-term liquidity.  When aiming to get the best deal on a loan with car as collateral, you need to do your homework. Get certified for a car collateral loan now based on your vehicle’s fair market value.  Check out the minimal requirements and flexible payment options for an Auto Sangla (ORCR) loan in the Philippines by visiting https://blend.ph/auto-sangla-loan/.