Auto loan requirements in the Philippines: List of accepted government IDs

Buying a car is never an easy process, especially if it’s your first time. From shortlisting the options to arranging the finances, there’s a lot that needs to be done and taken into account.

Suppose you have decided on the car you want to get home. Now, what’s next? Well, it’s time to secure the money, which here is a sizable amount. It doesn’t matter if you have the required amount in your bank account, as experts suggest not to use it all to buy a car. Instead, it is suggested that you get a car loan. With a good car financing scheme, you’ll be able to get your dream car without making the full payment in cash. Isn’t that great?

Now, how does car financing work?

Also Read: Important financial terms a car buyer must know.

Car financing - Basic understanding

Well, here a bank or financial institution lends a prospective car buyer money to make the big purchase. This loan is then broken down into monthly payments which are to be made over a period of time. Thus making car purchases much simpler and affordable. However, it’s not like the car owner is not spending at all, as mostly he/she is required to make a downpayment which in most cases is 10 to 20% of the car’s value.

Furthermore, the car loan comes at a cost, i.e., interest and certain processing fees. Also, until the loan is fully paid, the car acts as collateral, meaning it can be repossessed by the bank or financial institution if the loan is not repaid.

Also Read: From loan to keys: Your complete guide to car financing in the Philippines.

Car financing - Options & their working

After having an overview of the Philippines' car financing world, it’s time to check out the various auto financing options available to a Filipino car buyer. The table below gives an insight into the same.

Car Financing for Filipinos

Car Financing for Filipinos
Bank Financing	Also known as direct lending, here a bank or financing company lends a specific amount to buy a car. The borrowed money is paid back in the form of a series of monthly payments over a period of time, generally between 12 to 60 months. Interest is charged on the loan amount.
Dealership Financing	This is another great way to finance your big purchase. It is perfect for buyers who prefer convenience - both buying and financing. Here the dealer partners with the bank and all you have to do is pay the dealer as per the agreement.
Credit Card	This option is open for you only if your credit limit is high enough to cover the cost. However, for a dealer to arrange this transaction, bank approval is needed. Note, that not all dealers accept this car financing scheme.
Home Equity Loan	This option allows the car buyer to borrow money against his/her home’s equity. The cash from the home equity loan can be used to buy a car.
Cash payment	This car financing option is not everyone’s cup of tea. Not everyone has the resources to pay for a car fully in cash. Plus one needs to save money for emergencies, investments, savings, debt payments, etc.

Also Read: Should you finance a car? Weighing the pros and cons

Car financing - The process

In just seven easy steps, you can get yourself a car loan and ultimately get the keys to your dream car. Wanna know these steps?

Step 1. Check whether or not you are qualified to get a car loan. This involves meeting loan eligibility requirements and watching out for your credit score, as it has a great impact on the car loan. Here, taking a free online pre-qualification test works in your favour. Step 2. Compute how much you can borrow from a bank or financing institution. This involves knowing how much you can spare monthly against loan payment for the next three to six years. Make use of loan calculators online to estimate the cost of borrowing. Also Read: How to budget for your car loan repayment effectively. Step 3. Do thorough research and compare auto loans from different banks or loan providers. Here, you need to check the interest rate, repayment terms, and down payment terms of different lenders.  Step 4. Prepare all the required documents, which involve a valid government-issued ID and other requirements based on the applicant's profile - self-employed, local employee, or OFW. Step 5. Submit car loan applications; most lenders offer both walk-in and online applications.  Step 6. Wait for loan approval. Usually, banks take a few days to process and decide on an application. Step 7. Upon approval, you’ll be required to submit some additional documents, sign the loan agreement (read this before signing), pay the downpayment & other related fees like chattel mortgage fee, etc, and get a comprehensive car insurance policy.

 

Also Read: Car financing solutions for buyers with bad credit in the Philippines

Car financing & IDs - Basic understanding & requirement

If you have gone through the above-mentioned car financing process, then know that before submitting a car loan application form, having valid government-approved IDs is a must. And toda,y our focus is on these IDs and their importance.

So, why do banks or financial institutions require a loan applicant to submit valid IDs? What is the need? Let’s try and understand all this here.

A valid, government-approved ID acts as proof of the holder’s identity, age, and residency. Thus, making it is extremely crucial for banks or financial institutions, as it helps mitigate the risk associated with fraudulent activities and scammers. In short, it assures the genuineness of the loan applicant. Without proper identification, the loan application process would become super challenging.

Now, the question is, what is considered a valid ID proof?

It is to be noted that not every government-issued ID is accepted by the lender. An ID needs to meet certain specifications to get accepted or considered valid by banks or financial institutions.

Here are a few clauses that make an ID valid and acceptable by banks or lending institutions -

• Must be issued by a government body, provincial or territorial authority
• Must not be expired
• Must include information like the holder’s name, birth date, address
• Must have holder’s photo and signature

Car financing & IDs - List of valid IDs

Let us check out the list of valid government IDs in the Philippines that are accepted by banks when an applicant applies for a loan. The list includes -

• National ID
• SSS ID or UMID Card
• Driver’s License
• Passport
• TIN (Taxpayer Identification Number)
• PhiHealth ID

Let's understand each ID in detail.

National ID: This ID was implemented as per Republic Act No. 11055 and aims to establish a nationwide, unified identification system for all citizens and resident aliens.

In short, the national ID is the official national identity card for Filipino citizens worldwide and foreign permanent residents in the country. Implemented by the Philippine Government, it is part of the Philippine Identification System.

UMID Card: The Unified Multi-Purpose ID is a powerful card, as it allows you to engage in transactions with four government agencies. The list includes the Social Security System (SSS), the Philippine Health Insurance Corp (PhilHealth), the Government Service Insurance System (GSIS), and the Pag-IBIG Fund. Furthermore, it can also be used as an ATM to withdraw SSS Loans & Benefits.

Driver’s License: This ID is granted by the Land Transportation Office (LTO) and gives the holder a permit to drive legally on public roads. In the Philippines, there are three types of driver’s licenses: the student permit, the non-professional driver’s license, and the professional driver’s license.

The former is valid for one year and allows the driver to drive under the condition that he/she is accompanied by a professional or non-professional license holder. The non-professional license permits the holder to drive any private vehicle under 4500 kg, and the professional license, on the other hand, allows the holder to earn a livelihood from driving.

Passport: This ID is issued by the Department of Foreign Affairs (DFA) and allows the holder to travel internationally. As for its validity, it is for 10 years for Filipinos who are 18 years or older and 5 years for those below 18 years of age.

TIN: The TIN ID is issued by the Bureau of Internal Revenue (BIR) to every registered taxpayer as proof of membership. What makes it different is that it is free and never expires, thus making it free from the hassle of renewal.

PhilHealth ID: The PhilHealth identification number is issued to anyone registered for a PhilHealth membership. This card certifies the cardholder and the qualified dependents for PhilHealth benefits and privileges offered by the National Health Insurance Program. It is made for free and is valid for a lifetime.

Car financing & other requirements

In addition to submitting a valid government ID to the bank or financial institution, a loan applicant is also required to submit some other documents.

The list includes -

Proof of income - For employed individuals, it can be in the form of payslips, certificates of employment, and ITR. For self-employed people, on the other hand, it can be a business registration certificate, bank statement, ITR, business permit, or audited financial statement. OFWs need to submit a certificate of employment, payslips, or proof of remittance.

Also Read: Car loans made simple for OFWs: Everything you need to know.

Application form - Applicants need to submit a duly accomplished loan application form specifically to the lender or bank.

Also Read: Here's why your car loan can get rejected in the Philippines.

Car financing tips for a smooth application process

• Valid ID; before applying for a car loan, make sure all the required IDs are valid, i.e., not expired.
• Stay updated, and make sure you have the latest document and eligibility requirement list of the bank or lending institution where you are filling out the auto loan application.
• Prepare photocopies, and make sure to carry extra copies of the required documents, as officials tend to ask for duplicate copies for records.
• Verify documents, and make sure your personal details like name, age, address, and signature, are consistent across all documents.

Bottom line

In this day and age, to buy a car, most of us require financial assistance, which comes in the form of auto loans from banks and financial institutions. However, to be able to secure a loan, you need valid ID proof, as IDs are a part of the loan application requirement list, and there is no alternative. Therefore, make sure you have valid ID proof like a National ID, SSS ID or UMID Card, Driver’s License, Passport, TIN, or PhilHealth. Only by ensuring that the accepted identification and other requirements are met, a car buyer navigate through the auto loan process efficiently.

Also Read: Car loan scams in the Philippines: Applicants Be aware.