Generally, there are three ways to own a car. If you have a fat bank account, paying in cash is practical since you can score a big discount. Go for bank financing if a down payment is all you can afford at the moment and you want a low, consistent interest rate for your amortization. Meanwhile, in-house financing suits those who want to get a car right away since it offers quick approvals.
But there’s a fourth option: pasalo or assuming the balance of an existing car loan. This may sound tricky, but if you have the right knowledge, this acquisition may work to your advantage.
Here’s everything you need to know about how to assume balance for a car in the Philippines.
What is Pasalo or Assume Balance for a Car?
Car loan assumption, better known as “pasalo” or “assume balance” in the Philippines, is the process of purchasing a car from its existing owner by paying off the auto loan’s remaining balance. Normally, the existing owner gives up the car because they can’t afford to pay for the loan anymore.
How Does Assume Balance for a Car Work in the Philippines?
To fully understand how assume balance for a car in the Philippines works, remember that there are always three parties involved. They are the buyer, the seller (the current owner of the car), and the lending institution, which is typically a bank.
The buyer and the seller discuss and negotiate the terms of the deal. But before this deal is laid out on the table, the seller should seek the permission of the lender or bank first. This is because loan agreements with banks usually have a condition that prevents the seller from passing the loan to a third party without the bank’s express consent.
If the bank doesn’t allow the seller to pass the car loan to a third party, the seller won’t be able to pass the car loan to you, thus no pasalo deal should be made. But if the seller proceeds to sell the car despite the bank’s prohibition, the bank will repossess the unit and foreclose the mortgage.
In a pasalo or assume car loan balance process, you’ll have to pay the seller a specific amount before gaining the right to continue paying for the car loan. Usually, that price is equal to the amount already covered by the seller, which includes the down payment and the past monthly installments.
Read more: Classic, Practical, Beautiful: 10 Best Sedans in the Philippines for 2023
Is Assume Balance for Car in the Philippines Safe and Legit?
An assume balance for car agreement in the Philippines is safe, legal, and legit only if the bank or the lender consents to such a transaction. Keeping this in mind, it’s your duty as a buyer to go over the original loan agreement before saying “Yes!” to the seller’s offer.
If done right, the assume car loan balance process is a win-win situation for all the parties involved. The seller gets rid of an asset they can’t afford or no longer need, the buyer gets an affordable car and a loan with a possibly reasonable interest rate, and the lender gets paid.
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What are the Advantages of Assume Balance for a Car in the Philippines?
Pasalo cars or assume balance procedure comes with attractive benefits, such as the following:
- Cheaper price – More often than not, sellers want to dispose of the car quickly, which is why they sell it at a lower or more flexible price. Some may even sell their car at a price that’s lower than the down payment and amortizations combined.
- Lower interest rate – You get a good deal if the car loan’s assumed interest rate happens to be lower than the current rates.
- Getting an almost brand-new car – This is a benefit you’ll enjoy if the seller is a careful car owner.
What are the Disadvantages of Assume Balance for Car in the Philippines?
An assume balance for car agreement in the Philippines is not without some drawbacks. Thankfully, you can avoid or minimize its risks by doing your due diligence as a buyer or seller.
- Scams – One scheme in the Philippines involves scammers buying cars from pasalo sellers without the intention to continue the amortization. Then, these scammers sell the cars to buyers using falsified documents.
- Car repossession – Some people sell their car even if it’s already on the verge of repossession. If you buy a car from such a seller, the bank will seize the car from you.
- Getting an overly used car – Not everyone is a meticulous car owner. You may end up getting a used car that has been misused and abused.
Read more: Upgrade Your Ride: 14 Best SUVs in the Philippines for Every Budget
How Does the Assume Balance for a Car Process Go?
The assume balance for a car process may sound complicated. Let this section make it easy to understand. Take note of the following:
- Scout for a seller. They can be a relative, friend, or friend of a friend. No matter who they are, you need to look into their background. After all, you’re shelling out a large amount of money.
- Check if the seller is allowed to sell the car. You can do this by asking the seller to show you the car loan contract. Make sure that it doesn’t have a clause or condition that keeps the owner from transferring the contract to a third party. Then ask the owner to show the written consent of the bank. Cross-check the document with the bank.
- Prepare your requirements. Some sellers want assurance that the buyer has the means to take over the car loan. With that, you may be asked to provide documents needed to assume balance for a car, such as your valid ID (e.g., passport, postal ID, UMID, etc.), NBI clearance, and proof of billing, among others.
- Pay the agreed price. You can pay in cash, bank transfer, or other legal methods. Make sure that you have a Deed of Sale of Motor Vehicle with Assumption of Mortgage. This document serves as evidence that the vehicle and the conditions that come with it are passed to you. You can find a deed of sale for a car with assume balance sample online.
You can own a car in an unconventional but legal way. The assume balance for a car in the Philippines is a great option for those who want to get a vehicle quickly at a possibly much lower price and interest rate.
But don’t go in blind. You’re technically buying a secondhand vehicle, so do your due diligence to protect yourself from shaky deals and scams.
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Note: This product is sold by Union Bank of the Philippines, using certain trademarks temporarily under license from Citigroup Inc. and related group entities.
Use the loan only for legitimate car purchases. Other than buying from a dealership, you can go for a secondhand unit as long as its loan is already fully paid. Should you decide to go the pasalo route, make sure that the bank or lender actually allows the seller to sell the car and pass the repayment obligation.
-  The Dos and Don’ts of Haggling: How to Negotiate a Better Price (Insider, 2021)
-  BSP Warns Public vs. Growing Prevalence of Auto Loan Scams (Inquirer.net, 2021)
-  Sample Deed of Motor Vehicle with Assumption of Mortgage