RE Promissory Note of Car Financing with Chattel Mortgage

[denis_8th]

Can someone explain to me the stipulations or different sections of the promissory note?

[Galactus]

What do you need to know?

The standard stipulations kasi are:

- You acknowledge that you have a loan with the bank/FI, and that you unconditionally, jointly and severally (with your co-maker/s), promise to pay it
- the loan amount, with the annualized interest rate, term and payment method
- loan default provisions
- loan purpose

Of course, there are other provisions, depende kung gaano kasipag yung in-house lawyer ng banko/FI. Pero most importantly, meron dapat disclosure statement, which is mandated by the Truth in Lending Act. Nakalagay dito in clear detail, lahat ng finance charges, payment scheme, annualized and effective interest rate and other deductions (insurance, doc. stamps, etc).

You can easily compute naman the interest scheme they used (straight-line, diminishing balance or rule of 78), by subtracting the loan's maturity value from the loan principal

[denis_8th]

What do you need to know?

The standard stipulations kasi are:

- You acknowledge that you have a loan with the bank/FI, and that you unconditionally, jointly and severally (with your co-maker/s), promise to pay it
- the loan amount, with the annualized interest rate, term and payment method
- loan default provisions
- loan purpose

Of course, there are other provisions, depende kung gaano kasipag yung in-house lawyer ng banko/FI. Pero most importantly, meron dapat disclosure statement, which is mandated by the Truth in Lending Act. Nakalagay dito in clear detail, lahat ng finance charges, payment scheme, annualized and effective interest rate and other deductions (insurance, doc. stamps, etc).

You can easily compute naman the interest scheme they used (straight-line, diminishing balance or rule of 78), by subtracting the loan's maturity value from the loan principal

Checking my promissory note, in the disclosure statement of loan, the only indicated amounts are the purchase price, downpayment, amount of loan and the monthly payments, number of months and total payments. Finance charges, interest rates and scheme are not indicated.

Although it is indicated in another section that prepayment balance is computed based on rule of 78. Ang question ko, ang rule of 78 na ba ang pinaka-common na scheme ngayon, may pagka-daya kase ito eh? What banks use the straight line and diminishing balance schemes for Auto Loan? I hope someone can answer this. This is from PSBank. I am looking at applying for a loan from BPI.

Talaga bang may right silang i-inspection yung kotse at anytime without notice?

Also, hindi ba dapat kung magkano talaga ang agreed monthly payment niyo with dealer, kahit in-house ang financing mo should be the amount na naka-indicated with this note?

[Galactus]

Usually, pag auto loans, talagang Rule of 78 ang gamit (AFAIK). Pero pareho lang naman ang interest ng Rule of 78 and straight-line, ang pinagkaiba lang nila is the allocation of payments.

For example: 100,000 loan, with a term of 1 year, at 12% interest.

For both types (straight-line and Rule of 78), pareho lang naman ang maturity value: P112,000.00 and amortization: P9,333.33

However, the payment allocation is different. Sa straight line, 1,000 per month ang nababayad sa interest from the 1st month until the last month (i.e. 8,333.33 for the principal and 1,000 for the interest), whereas sa Rule of 78, decreasing ang portion ng interest (1st month, for example, 1,000 ang sa interest; 8,333.33 for the principal; 2nd month, 950 for the interest and 8,383.33 for the principal and so on, until it is fully paid).

Lugi talaga ang borrower in case s/he wants to pre-term the loan kasi mas malaki pa ang principal na babayaran, pero for those who intend to follow the original term, it's not an issue.

I would be more concerned about the non-disclosure of the interest rates and other deductions. Violation kasi ito of the Truth in Lending Act, and the bank can be sued. Unang tatamaan ang compliance officer nila dito.

Re: right to inspect the vehicle, standard clause yan, but it's rarely done. And it should only be done during reasonable hours.

[denis_8th]

Usually, pag auto loans, talagang Rule of 78 ang gamit (AFAIK). Pero pareho lang naman ang interest ng Rule of 78 and straight-line, ang pinagkaiba lang nila is the allocation of payments.

For example: 100,000 loan, with a term of 1 year, at 12% interest.

For both types (straight-line and Rule of 78), pareho lang naman ang maturity value: P112,000.00 and amortization: P9,333.33

However, the payment allocation is different. Sa straight line, 1,000 per month ang nababayad sa interest from the 1st month until the last month (i.e. 8,333.33 for the principal and 1,000 for the interest), whereas sa Rule of 78, decreasing ang portion ng interest (1st month, for example, 1,000 ang sa interest; 8,333.33 for the principal; 2nd month, 950 for the interest and 8,383.33 for the principal and so on, until it is fully paid).

Lugi talaga ang borrower in case s/he wants to pre-term the loan kasi mas malaki pa ang principal na babayaran, pero for those who intend to follow the original term, it's not an issue.

I would be more concerned about the non-disclosure of the interest rates and other deductions. Violation kasi ito of the Truth in Lending Act, and the bank can be sued. Unang tatamaan ang compliance officer nila dito.

Re: right to inspect the vehicle, standard clause yan, but it's rarely done. And it should only be done during reasonable hours.

Yup, yung part no. 6, hindi naka-indicate yung interest rate pero nakaindicate yung total amount financed... Tapos sa no. 8, di nila kinompute yung effective interest rate. Tapos walang nakalagay sa additional charges (no. 10). Okey lang ba ito, please help.

Tapos say 9200 per month ang agreed monthly payments for 60 months, ang nakalagay ay 9800. Yung 600 times 60 = 36,000, nakalagay sa prompt payment discount (part 6.d).

Again, okey lang ba 'to?