Getting Loans with a Car as Collateral in the Philippines

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Last updated: January 24, 2024

Key takeaways:

  • A car collateral loan is a short-term loan that uses the borrower’s vehicle as a security deposit to guarantee the payments.
  • The borrower seizes the car title but does not physically transfer the vehicle to the lender.
  • The lender repossesses the vehicle, if the borrower fails to fulfill their obligation to pay.
  • To request an OR/CR loan in the Philippines, you need to provide a valid ID, a copy of your OR/CR, TIN, a proof of residence and a proof of income.
  • You can apply for your first online loan with Digido at a zero interest rate.

Short-term loans can be a lifesaver when one experiences sudden financial struggles. It is a quick and unproblematic way to cover your necessities or unexpected situational spendings. In this article, you will find a brief overview of how to receive a car collateral loan in the Philippines, along with some tips on doing it in a safe and beneficial manner.

Loans with car as collateral

What is a Car Collateral Loan

A car collateral loan, also referred to as a car title or a OR/CR loan, is an arrangement whereby a borrower pledges their vehicle in return for the needed cash to secure their responsibility to pay the lender back. The collateral mitigates economic risks for the lender and motivates the borrower to keep up with their loan payments.

Loans with a car as collateral are rather popular in the Philippines. According to the finance and insurance data from Statista (1), this type of loan has become the fourth most popular type of loan among Filipinos throughout 2023. It is quick, easy, and lacks the usual bureaucracy of getting a traditional personal loan.

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How Does a Car Collateral Loan Work

To apply for a car title loan in the Philippines, the potential borrower needs to choose the most suitable program and submit an application along with the following documents:

  • A valid state-issued ID (in some cases an additional ID of a spouse is required)
  • A copy of the Official Receipt (OR) or Certificate of Registration (CR) of the vehicle
  • Taxpayer Identification Number (TIN)
  • A proof of residence (could be the latest electric and water bill)
  • A proof of income (could be the latest payslip, ITP or a bank statement for the last 3 months).

Note that this list is preliminary and may vary depending on the lender’s requirements.

Then there is an appraisal phase when the lender orders an expert evaluation to determine the state of the vehicle, its current value, and the subsequent loan amount. The examination may be held at the lender’s branch or office, as well as at a location preferred by the borrower.

If you are satisfied with the appraisal outcome, you will proceed to sign the loan agreement. Remember that in the Philippines, you do not give up your vehicle right after you sign the agreement. You can continue using your car while only submitting the title (OR/CR) to your lender as a security deposit.

Loans with car as collateral in Philippines

The lender can reclaim your car if you fail to fulfill your payment obligations. This process is called repossession. In this case, the lender will notify you about the upcoming confiscation and involve an agent to tow your vehicle.

There are options to stop that from happening though. For instance, you can get back on track with your payments, pay the repossession fee (expenses the lender had while towing your car), and get the loan reinstated (2).

If you have an unpaid car loan on your vehicle, you should consider sourcing an auto equity loan (3). A car equity is the difference between the amount you owe for the said car and the general market value of the vehicle. In this case, the loan amount available to you will directly depend on that difference.

Learn How to Get
Quick Cash Loan Without Collateral: The Benefits of Unsecured Loans

Pros and Cons of Car Collateral Loans

Like any other credit, loans with a car as collateral come with their perks and downsides. One needs to weigh in on the potential risks to make a thought-through financial decision.

Benefits of Car Title Loans

  • Quick access to additional funds. The car title loan application gets processed in no longer than 3 days. Once approved, the borrower instantly receives the loan.
  • No credit history requirement. A major benefit of this loan type is that you can get it even if you haven’t built a high credit score.
  • Higher credit score for the future. If you haven’t been able to achieve a good credit score, a car title loan can help you do that. Provided you make the payments responsibly, it can be a good start for you to slowly improve your credit history.
  • Lower interest rates. Collateral loans are secured by assets of value, i.e. lenders bear fewer financial risks handing them out. Since title loans are deemed less risky, lenders set lower interest rates compared with those of personal loans.
  • High loan amount. The sum you can borrow is proportionate to the vehicle’s market value. With more expensive cars, one can get a significant amount of extra funds.

Downsides of Car Title Loans

  1. Risk of vehicle forfeiture. If the borrower fails to make payments in due time, the lender can rightfully confiscate the car.
  2. Hidden fees for value assessment. To get pre-approved for a car title loan, the borrower needs to assess the market value of their car. Usually, the lenders carry out the appraisal to determine the loan amount, but they also charge for these services.
  3. Risk of low market appraisal. Not all lenders perform car appraisals in good faith. A borrower can find themselves in a situation where a lender would purposely assess the car at a lower price for their personal gain.
  4. Risk of undermining financial well-being. Getting yourself into debt is always risky. If you are not careful with your financial planning, you can lose your car and still owe on your loans.

Car loan collateral in Philippines

Where to Get Car Title Loans in the Philippines

To choose the best option available, you need to do research before committing to a car collateral loan. For your convenience, here is a side-by-side comparison of the five most popular car title loan providers in the Philippines:

Name  Terms  Loan value 
✅ Global Dominion (GDFI) (5)
  • 1.38% interest rate
  • repayment term of 3 to 36 months
up to 80% of the appraised value 
✅ Maybank Philippines (MPI) (6
  • 1.3-2% interest rate 
  • repayment term of up to 24 months
up to 60% of the appraised value 
✅ AsiaLink (7
  • 1.5% interest rate 
  • repayment term of up to 48 months 
up to 60% of the appraised value 
✅ Blend PH Auto-Sangla Loan (8)
  • 1.5%-3% interest rate depending on the risk type
  • repayment term of 6 to 36 months 
up to 60% of the appraised value 

Note there are additional charges applicable, such as a processing fee, a notarial fee and documentary stamps.

Where to Get
Motorcycle Loan in the Philippines

Car loan collateral

Tips to Consider Before Getting a Car Collateral Loan

Sourcing a loan is an important decision that can impact your financial well-being in the long run. Follow a simple checklist below to prepare for it properly:

  • Take care of your car’s condition. That will help you get a fair value assessment and secure a more significant loan from the lender.
  • Make a payment plan. Evaluate your income sources and assess your ability to pay the loan back realistically. Try to make a payment schedule and see if you can actually return the debt on time.
  • Compare the offers. It will give you a choice and decrease the chance of making an unfavorable decision under pressure.
  • Be sure to check the record track of your lender. Mind negligent business-runners in the market who tend to profit off of people in a complicated financial situation by assigning high interest rates and low appraisal values. You should be very careful when choosing a lender to entrust your property with.
  • Build a Good Credit History
    If possible, work on improving your credit score before applying for the loan. A higher credit score can lead to better loan terms and lower interest rates.

If your current credit score doesn’t match the bank’s required one, you can raise it by taking a quick online loan from Digido. Sourcing a short-term loan and paying it on time will improve your credit history making you a more desirable client for credit institutions. This way they will be happy to offer you more flexible and beneficial loan terms.

Where to Get
Online Loan No Requirements in the Philippines: with Minimum Documents

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* Interest payments are approximate. The final loan amount and interest rate must be confirmed in your loan agreement after loan approval.

What Else Can I Use as Collateral for a Loan

Collateral is defined by Forbes Adviser (9) as any valuable asset that can help the borrower secure their loan. Besides vehicles, there are three main possession categories you can pledge as collateral to secure your loan — real estate, cash, and investments. They include:

  • Mortgage on a house or an apartment
  • Real estate and home equity
  • Land
  • Secured credit cards
  • Savings account
  • Stock certificates
  • Business assets (equipment or investments)
  • Jewelry or precious metals
  • Expensive appliances
  • Fine art (only applies to private lenders or collectors specializing in art).

In the Philippines, people can also use farm animals and machinery as collateral to secure their loans.

Learn all about
The Ins and Outs of Home Equity Loans Philippines

Conclusion

Despite its potential risks, a car collateral loan can provide you with instant funds to pay for your necessities in times of financial turmoil. It will help you keep afloat while you are figuring your way out of the struggles. However, OR/CR loans are not meant for impulsive purchases. Think your decision through and draft a sustainable payment plan, or you might end up losing your property.

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Disclaimer: This article was written based on information available to the writer at the time of publication and the article was published for promotional, reference, and educational purposes only. Nothing in the articles published in the website is intended to constitute legal or financial advice and users are advised to seek counsel from legal and financial professionals.

Likewise, rates or offers published in the websites are promotional marketing offers only and do not constitute any binding contract between the Corporation and the website users.
While the writers and publishers of the articles in the website wrote the articles using credible information available to them at the time of publication, any changes or updates to the information presented in this article may not be reflected here.

Hence, users are enjoined to exercise appropriate diligence in using the data and information published in the website, and they are urged to study and compare it with other credible sources. Users understand that the writers, publisher, website owner and the Corporation are not liable for any damage or injury they sustained for their wrongful or erroneous use of the data or information written in the article and published in the website.

FAQ

  • What is the age limit to get a car collateral loan in the Philippines?
    You have to be 21 to 65 years of age to be considered eligible for a loan.
  • How much can I borrow with a car as collateral?
    The loan amount will depend on the car’s condition and value. Typically, the lender will give you 60% to 80% of your car’s current market worth.
  • What documents do I need to get a loan with a car as collateral?
    Existing programs in the Philippines typically require an applicant to provide a valid ID, a copy of their OR/CR, a proof of residence, and a proof of income.
  • Can I get a car title loan with a low credit score?
    Many people use the OR/CR loan option precisely for this advantage: besides the mandatory documents, no additional confirmation of a good credit history is required.
  • How long does it take to process a car collateral loan application?
    Usually, it takes no longer than 3 business days to process a car collateral loan application, including the vehicle assessment procedure.
  • What are the dangers of using a car as collateral for a loan?
    The lender becomes a new lienholder on the title, so If you fail to keep making stable payments, they may forfeit your car as compensation for their economic loss.
  • What happens to my car if I cannot repay the debt?
    If the borrower is unable to continue making payments, the lender has the right to repossess the vehicle. However, the lender is obliged to notify the borrower prior to that.
  • What is the LTV ratio in the Philippines?
    Understand the loan-to-value (LTV) ratio, which is the percentage of your car's value that the lender is willing to offer as a loan. A lower LTV ratio usually means a better loan offer.

Authors

Digido Financial Writers Team is a team of experts in the field of finance and credit, specializing in writing articles for Digido blogs.
Anatolii Sibrenko
Author pages:
Anatolii Sibrenko was the Head of Product Marketing at Digido, where he orchestrated the marketing dynamics from August 2021 until January 2024. Anatolii Sibrenko is the Head of Product Marketing at Digido, where he has been orchestrating the marketing dynamics since August 2021. With a knack for innovation in product sphere, business development, and marketing analytics, he crafts and executes strategies that bridge the market with Digido's offerings.

Digido Reviews

  • Rodrigo
    I've had several loans with my car as collateral, and I've used this app multiple times to make payments on them when I couldn't make it until payday. They provide small amounts, up to 25K, quickly, and sometimes it's just what you need. They approve loans quickly, but it's better to pay them off within 7 days! It's a good app!
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  • Juan
    I've used it several times, and they always come through when I'm short on cash. Fast approval, no need for a bunch of documents. Thumbs up!
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  • Jose
    Found myself short on funds for my car collateral loan repayment. I borrowed money here. The process loans is fast; money was in my account within 10 minutes, and easy application online here – just one ID. I highly recommend them!
    4
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