Attractive financing schemes boost auto, housing sectors
MANILA, Philippines—For many Filipinos, having their own home and car is the ultimate measure of fulfillment.
Fortunately for them, owning a home and a vehicle has become easier to accomplish, thanks in large part to the slew of financing schemes that banks are now offering.
Auto and housing loans have long been part of banks’ portfolio of services, but it has not always been easy for consumers to avail themselves of such loans. For one, not everyone has something to post as collateral. For another, it is not very easy to come up with all the documents that banks require. And even if one does cough up the collateral and the documents, having loans approved is not always a sure thing.
But these days, taking out a loan for a home or a car is easier, and cheaper, than ever. Banks are scrambling to get consumers on the loan bandwagon, offering 24-hour loan approval and large prompt payment discounts. Interest rates are relatively low and payment terms are flexible.
The country’s top banking groups—Banco de Oro, Metropolitan Bank and Trust Co. and Bank of the Philippine Islands—all offer attractive and easy-to-secure financing schemes and have long dominated the market. But recently, more players are battling for the consumer, including HSBC, East West Bank and Philippine National Bank.
Low rates, 24-hour approvals
Auto loans are relatively easy to secure and finance. Looking at the offerings of BDO, BPI, Metrobank, Metrobank subsidiary Philippine Savings Bank and Philippine National Bank, interest rates range from 4.21 percent for 12 monthly installments with one-month advance to 34.7 percent for 60 monthly payments.
Under its Metrocar loan program, Metrobank offers one of the lowest interest rates. Minimum loan amount is placed at P250,000, while the minimum downpayment required is 20 percent of the vehicle’s net selling price. Payment terms range from 12-60 months and amortization can be made through post-dated checks or an automatic debit arrangement from the deposit account. The bank also boasts “fast” approval and even provides assistance in sourcing vehicles. PSBank, while offering higher rates than its parent bank, lures consumers with its 24-hour loan approval and prompt-payment discounts.
BDO may not offer the lowest rates in the market, but it charges less than most commercial banks in the market. Loans can also be approved in as short as 24 hours and terms extend to as long as six years. Borrowers will also earn BDO Rewards points, which correspond to various perks and privileges, throughout the life of the loan.
The Ayalas’ BPI also offers flexible payment terms of up to six years, approval within 24 hours, and automatic debit arrangements, but restricts eligibility to individuals with a gross monthly income of P40,000. Its thrift bank unit, BPI Family Bank, has also been aggressive in its freebies, which can be anything from free insurance with an Act of God coverage or protection against externalities such as the Ondoy-induced flooding to global positioning system (GPS) navigator units. Freebies are given for loans of at least P700,000 with a minimum term of 36 months for brand-new cars meant for private use.
BPI Family has also been known for regularly holding the “Auto Madness” campaign, a model that PNB recently adopted with its own “Gear Up!” auto fair at the PNB Financial Center Parking Lot. Car loans with as low as 4.21-percent interest rate for a 12-month term are offered, but only to those who will come to the auto fair.
Nonbank financing
Even auto industry leader Toyota Motor Philippines Corp. is riding on the financing bandwagon through Toyota Financial Services Philippines (TFS). According to Toyota first vice president for vehicle operations Rommel Gutierrez, in-house financing schemes make it even easier for consumers to acquire brand-new vehicles.
“Toyota dealers and TFS collaborate to make sure Toyota customers get the best purchasing experience through its quick and convenient one-stop-shop financing service. Customers only need to talk to a Toyota dealer marketing professional who can assist them on all their vehicle purchase requirements,” he related.
Whether from banks or from auto companies themselves, Chamber of Automotive Manufacturers of the Philippines Inc. president Elizabeth Lee said these financing schemes provide a huge boost to the local auto sector as these make purchasing a vehicle easier for consumers.
“Having a healthy financing environment is a key factor that affects vehicle sales. Note the credit crunch and freeze that happened in the United States, which stifled car sales. Banks have been, and so far continue to be, aggressive with relatively low interest rates. Attractive financing packages (from banks and) auto players make buying a vehicle affordable and easy,” she said.
More affordable housing loans
Housing loans have also become easier to obtain, particularly with the surge in popularity of condominium buildings that cater to young professionals and upstart families.
In December 2007, the Bangko Sentral ng Pilipinas relaxed rules on real estate lending to spur the growth of the property industry. Prior to this move, from 2001 to 2007, outstanding real estate loans for acquisition of residential property grew by an average of 14 percent a year, according to real property website Global Property Guide.
At that time, few banks had housing loans on their roster of services and those who did imposed highly restrictive lending conditions. Interest rates were very high and loan approvals took a very long time.
Back then, major commercial banks charged an interest of around 9.5 percent for a one-year mortgage and as high as 11 percent for loans with rates fixed for at least five years.
Now, banks like EastWest Bank are offering home loan interest rates as low as 5.88 percent for the first year. HSBC, which created a lot of buzz when it introduced record-low interest rates last year, has further sweetened its offering with a housing loan with an interest rate of 5.75 percent for one-year repricing and 8.99 percent for five-year repricing.
In a study, CLSA Asia Pacific said market leaders BDO, Metrobank and BPI are cognizant of the moves of HSBC and East West but have no intention of matching those rates so far.
“Given the limited platform of HSBC (25 branches) and East West (89 branches), the big three believe that the target market and reach of these two banks may be limited,” the research said. “They are, however, monitoring things closely and would re-evaluate things in a couple of months if needed.”—With a report from Doris C. Dumlao
