What is Secondhand Car Refinancing?

If you don’t mind having a pre-loved car and there’s an urgent need to buy one, secondhand car refinancing can help you strip that out of your must-have list. What does it mean if you refinance a used car?

Secondhand car refinancing means paying your car loan through another loan. It can lower the interest rate or restructure the loan term, depending on your situation.

When you apply for an auto loan at a bank, the longest term you can get is five years, considering that the vehicle you intend to buy is from 2012 models. For newer models, it will be three years. When you apply at non-banks, a three-year term is given.

Used car loans overview

Here are the basic processes in applying for secondhand car loans:

1. Calculation of monthly payment

Make sure that you can allocate funds for your monthly car payments without hurting your finances. It’s recommended that the monthly cost is within one-third of your net income per month.

Remember that owning a car does not only entail loan payments but also maintenance and emergencies. Also, never forget about the interest rate, down payment, length of the loan, insurance fee, additional charges/fees, and sudden changes that may affect your budgeting.

2. Finding the most suitable lender

While dealership can process your loan application immediately, provided you are eligible, it comes with a high price. Ideally, it should be your last resort. Local banks and credit unions have the most affordable rates, which makes them the best options.

3. Setting the loan terms

This refers to the structure of your loan: how much you want to pay every month and how long you would the repayment last. Usually, a shorter-term loan has a higher amount of monthly payment and a longer-term loan has lower monthly payment. Setting the loan terms also includes provisions and procedures when there are changes to be made in the agreement.

4. Get the wheels

After your approval, better verify all the stipulations to avoid issues in the future. Then, when all is in order, it’s time for you to grab the keys drive away that car.

2nd Hand Car Loan Requirements


  • You must be 21 to 65 years of age
  • Good credit standing
  • Income requirement, which varies per loan provider


General documentary requirements:

  • Copy of Official Receipt or Certificate of Registration
  • Deed of Sale
  • Proof of Downpayment
  • Proof of Income
  • Proof of Billing
  • Two (2) valid IDs

For employed, additional requirements are:

  • Certificate of employment
  • Payslips
  • Company ID

For self-employed or business owners, additional requirements are:

  • Business permit
  • Bank statement for the last 3 months

For OFWs or Seafarers:

  • Contract of employment
  • Travel documents

Benefits of Getting Secondhand Cars

Getting a secondhand car favors practicality and purpose, and this is illustrated below:

Practical choice

It’s a no-brainer that secondhand cars are more affordable than brand-new ones – a practical choice for people who are in a budget. The original owner of the car had already taken the depreciation rate from 20% to 30% (it might have hit 50% when it’s owned for three years), which means that the second owner enjoys a lower cost of purchase. Also, the insurance premium for secondhand cars is lower than the brand-new ones.

First-time driving

If you are driving or owning a car for the first time, a secondhand car is practical to have in getting the experience on wheels. Learn how to drive, discover the directions and roads to go, and be immersed with all the laws attached to your driving license.

Because of your lack of experience, accidents may take place and imagine if you are driving the latest model. Car parts replacement and repair services usually go cheaper for used cars. Also, learning to drive a used car, especially if it doesn’t have the latest hi-tech features, transforms you into a skilled motorist – a preparation to have a brand-new car.

Uninterrupted travels

A second car is convenient car owners to be prepared against disruptive situations such as transport coding system or unforeseen emergency of your first car. It will also be helpful when a family member needs to borrow your vehicle in coincidence with your scheduled travel.

Vehicles for entrepreneurs

A second vehicle can be used for business. If you are an entrepreneur, you can get a car and utilize it for ride-sharing services such as Grab. It can also be used as a school service type or a delivery service for bulkier models.