Pasalo or assume balance is a term that has become popularized among those seeking to transfer ownership of cars, homes, and other properties through online platforms, especially in the Philippines.
But with this newfound popularity comes cautionary tales of fraudulent schemes and scams that have left many unsuspecting individuals in financial ruin. To help you make sound decisions, we’ll explain assume balance, its pros and cons, and why you should be careful if you’re considering it.
What is pasalo or assume balance?
Pasalo or assume balance is a term used in the Philippines when you transfer the remaining balance of a loan or installment plan to others willing to take over the payments. Basically, it’s like passing on the responsibility to someone else.
Say you purchased a new car. But due to an unexpected financial crisis, you cannot continue with the regular monthly payments. You can offer the remaining balance to someone else who wants to purchase the same model and brand. They’ll then assume and continue the payments.
How does pasalo or assume balance work?
In the case of cars, the buyer pays an upfront amount and assumes the remaining balance of the car loan, becoming the new debtor in the car loan.
It will benefit the buyer since the loan has already been processed, avoiding the lengthy process of obtaining a new car loan. Meanwhile, this is advantageous for the seller since they can transfer or sell their vehicle without settling the entire loan balance.
Assuming a balance in real estate is similar to that of a car. A buyer agrees to take over the payments of the seller’s outstanding balance on the property. The buyer assumes the remaining balance and decides to continue paying the monthly mortgage until the loan is fully paid.
While in a perfect world, both buyer and seller are happy with the transaction. But honestly, in reality, it’s more complex than you think. Let’s find out why.
Pros and cons of getting pasalo or assume balance car or property
- Lower down payment and monthly amortization — Assume balance
may require a smaller down payment than buying a brand new car or a property. The monthly amortization may also be lower since you only have to pay for the remaining balance instead of the full price. - Faster transaction — Assuming balance can be faster than applying for a new loan, which can take weeks or even months to process. For example, if buying a car, it’s already under an existing loan, the seller and buyer can agree on the payment terms or, better yet, settle payments in cash.
- Better chances of getting approved — Assuming balance offers a better chance of approval than getting a new loan. A buyer’s credit history, employment status, and other factors affect loan approval. With assume balance, you piggyback on the seller’s existing loan, avoiding a rigorous credit check.
- Opportunity to negotiate a better deal — Assuming balance allows buyers to negotiate a better deal since the seller is motivated to transfer the loan obligation to the buyer. The seller may offer a lower price, flexible payment terms, or other perks to convince the buyer to assume the balance.
- Possibility of acquiring a vehicle still under warranty — Assuming balance can be an advantage if the vehicle is still under warranty. The buyer can enjoy the remaining warranty period and may have the option to extend it depending on the manufacturer’s policy. This can save the buyer from expensive repairs and maintenance costs.
Assuming balance may not be for everyone, but it can be a viable option for those looking for a practical and affordable way to buy a car or property.
But it’s essential to do your due diligence, research, and thoroughly inspect the vehicle or property before making any commitments.
Or else you could experience one of the following cons below.
- Hidden fees — Many assume balance cars and properties sellers will not disclose all the costs involved in the assumption process. For example, you may need to pay a chattel mortgage fee, a transfer of ownership fee, and other legal fees. All these additional costs can add up quickly.
- Irregular payments — If you’re assuming a balance on a car or other item, you’ll pay the original owner, not a bank or financing company. This means the payment schedule can be erratic and unpredictable, affecting your budget planning.
- Risk of default — If the original owner stops paying for the car, you could have an asset you don’t legally own. It’s essential to verify the payments are current and that the seller is reliable before entering into an assume balance arrangement.
- High interest rates — Some sellers of assume balance cars charge interest rates higher than what you might find at a bank or financing company. This means you’ll pay more for the item or asset over time.
- Lack of warranty — When you assume balance on an item, you may lose the original warranty that came with it. It could mean you’ll have to pay for costly repairs and maintenance out of your pocket.
5 tips on how to deal with pasalo or assume balance
So, you know the basics of how assume balance works and the pros and cons. Let’s deep dive into these tips to help you navigate and deal with a pasalo transaction while protecting your interests.
1. Know your rights and responsibilities as a buyer or seller
Know your legal obligations and rights regarding pasalo or assume balance to avoid legal disputes. Sellers should ensure that the car or property is declared as it is. On the other hand, buyers should stay on top of the monthly amortization to avoid missed payments.
2. Conduct due diligence before deciding
Buyers must inspect the property before assuming the balance. It will help you identify issues or defects requiring repairs. Sellers must verify employment and information to ensure buyers can afford payments.
3. Seek professional advice and guidance from reliable sources
Consulting real estate professionals, such as agents, brokers, and lawyers, is vital. They can offer helpful guidance, ensure legal compliance, and safeguard your interests.
4. Negotiate terms and conditions that are favorable to both parties
Negotiating the terms and conditions of the sale is a crucial step when dealing with pasalo. The terms should be favorable to both parties, especially on the payment and transfer of ownership schedules.
Buyers should consider the total amortization cost, the monthly payments, and the interest rates, while sellers should ensure that the transfer of ownership is done legally and smoothly.
5. Secure all necessary documents and contracts
Make sure all necessary sale documents and contracts, including the deed of sale, transfer certificate of title, loan agreement, and other papers, are in order. This will ensure the transaction’s legitimacy and prevent fraud or scams.
You can go the extra mile by checking the validity and legitimacy of documents as you consult with your legal advisor or lawyer. Remember, printing and producing fake documents is easy — all can be done in Recto or a working computer.
Final thoughts
Pasalo or assume balance allows easy financing with a low downpayment, but thoroughly research all conditions before agreeing to the deal. Consider the time the property must be kept, its impact on your credit score, and the total cost.
In summary, tread carefully with pasalo-style transactions and always aim for a thorough understanding of all your options before making any decision.
Now we turn it over to you – would you consider a pasalo or assume balance transaction? Why or why not? We look forward to hearing from our readers in the comments section below.