When you’re living in Singapore, your life somehow revolves around loans. Well, if you want to buy a house or an advanced vehicle with your own money, it may take a lifetime!
Therefore, getting a loan to buy your dream car will be the wisest decision. And to help you with that, we’ve prepared this guide, Car Financing 101: what you need to know.
By the time you finish reading this, you can just go and grab a ride and drive off to the sunset! So without wasting much time, let’s get started right away!
How Does the Car Loan Work in Singapore?
Most Singaporeans buy vehicles through a loan for all the right reasons. As cars are pretty expensive in this country, taking a loan seems like the brightest idea.
You can either borrow your money from a finance company or a car dealer. While buying a vehicle, you need to fix the amount according to the car’s price.
Once you take a loan, you have to pay it monthly with interest; that’s the deal.
What Is Required for a Car Loan?
Getting a car loan is relatively easier than borrowing money to buy a house in Singapore. However, you still need some documents that you pledge to the finance company or the car dealer.
Here is the list of documents required for the loan application.
- Vehicle sales agreement
- Employment details including your monthly gross income, designation, company name, and length of service
- Details of any other financial commitments such as house loans, personal loans, and credit card bills
- Income documentation
- Identity proof
Most importantly, you have to be 21 years old or older. Furthermore, if you are a citizen of Singapore and a permanent resident, you need to have a monthly income of S$2,000. And when you are a foreigner, the monthly income needs to be at least S$4,000.
What Is the Maximum Amount of Loan money I Can Get?
First of all, you need to select your desired car and ensure you have enough money in your account to make the initial payment. And if you want a high-performance vehicle, this process will take longer than usual!
When you have the deposit in your hand, you should start to evaluate the mortgage amount. It will determine how much installment money you have to pay every month. Therefore, calculate the sum carefully and see if you are okay with spending those checks without any trouble.
Now the question is, what is the highest loan quantity you can get? Well, it is actually determined by various aspects.
Firstly, the highest loan amount is decided by the automobile’s Open Market Valuation (OMV). According to the present rules, you can take up to 70% of the vehicle’s cost if the OMV is lower than or equivalent to S$20,000.
And if the OMV is higher than that, you will be able to scrounge up to 60% of the automobile’s worth.
Other factors that can regulate your mortgage amount are your monthly earnings and credit scores. When your monthly revenue is high or your credit history says that you’ve always been a responsible debtor, you will get an enhanced loan amount.
Therefore, if you don’t have any unpaid credit card bills or you’ve always paid your installments on time, you are a gem! A clean credit score will allow you to borrow a more significant amount than usual, which is remarkable!
How Do You Get a Clean Credit Score?
A credit score is basically a number that financial organizations consider before approving or disapproving your loan request. When you submit an application to borrow money, they will collect all your payment history to check your records.
Well, it sounds kind of scary, but they got to do their job, right?
If you want to have a clean credit score, you should work on it since day one. In this way, you can apply for loans anytime you want, without the fear of getting rejected.
Here are a few tips that will help you to improve your score effortlessly.
- Firstly, take control over your spending habits and avoid all kinds of debts
- You should try to limit the number of credit facilities in different financial organizations
- Never avoid your bills; send the checks on time and pay the total amount at once
How Long Should My Car Loan Period Be?
You can easily get a car loan for up to 7 years. But you need to keep in mind that the more extended period you get, the more interest you will have to pay!
However, this tenure period will change if you buy a used car. Most financial institutes will offer you a loan for vehicles that are less than ten years old. And the age is being counted from the day when the car got its first registration.
For instance, if you buy a six years old vehicle, the highest loan period for that automobile will be four years only.
What Are the Car Financing Options in Singapore?
If you want to buy a car with loan money in Singapore, these are the options you have.
- In-house car loan from a Singaporean car dealer
- Arrange a bank loan through the car dealer
- Get a car loan from a bank or financial institutes
In-House Car Loan from a Singaporean Car Dealer
Getting an in-house car loan from the dealer is one of the most popular choices among Singaporeans. It is pretty convenient and effortless than any other option, to be honest.
While browsing for your desired automobile, you can settle down the loan amount with the dealer. In this case, you don’t have to go through any problematic loan submission whatsoever.
But before you make the deal, you should assess all your car loan options. Moreover, don’t decide anything after talking with just one car dealer. Maybe, something more unique is waiting ahead; you’ll never know!
So before you commit to an in-house loan, check out some other options. However, if you want to pick the easy way out, this is the one you should get!
Arrange a Bank Loan through the Car Dealer
When you are not an expert in taking loans or don’t have enough experience, you can ask the car dealer to help you with the loan. The car dealer will act as a mediator between you and the bank, making things less problematic for you.
Furthermore, if you choose to go with this option, you have the chance to get some freebies or special deals. Isn’t that impressive?
Get a Car Loan from Banks or Financial Institutes
When you are a self-sufficient person and love to make all the financial decisions yourself, you can apply for a loan from a reputed bank. In this case, there will be no mediator, and you can choose the best deal according to your preference.
Here are some details of the car loans available from major Singapore banks.
- UOB Car Loan
If you choose to go with a UOB car loan, it will be an excellent idea; there’s no doubt about that. It is one of the most reputed banks in Singapore, so you’ll have a fantastic experience!
You can apply here for loans to buy new or old vehicles. However, this facility is available for permanent Singaporean citizens only!
The whole application procedure will take you up to 10 minutes, and everything can be done online. So for a breezy experience, you can pick this one without any hesitation.
The loan rates of this bank depend on the loan period and whether you are getting a new or used vehicle. However, the rates with UOB vary from 2.68% to 2.78% per annum.
- OCBC CAR Loan
If you meet all the demands, you can get an OCBC car loan in a minute! Yes, it is that easy! And the maximum load period will be seven years, so you are getting all the benefits here.
The interest rate of this bank depends on the tenure period of your borrowed amount. And it also offers you an Eco-care car loan scheme with a lower interest rate to promote environmental safety.
The interest rate for electric vehicle purchases is 1.68% per annum. And this amount is fixed with an additional benefit such as 6-12 months of free charging.
For petrol or diesel cars, the interest rates from this bank start from 2.28% per annum, which is an average amount.
- DBS Car Loan
You can apply for a DBS car loan online, and the procedure will take only a minute or two. It will give you up to 60% to 70% loan of the car’s price. And you will get tenure up to 7 years.
Which Options Are the Cheapest for Car Loans in Singapore?
To be honest, you can’t really say which bank will offer you the cheapest interest rate. This amount varies depending on plenty of factors, so there is no definite answer!
First of all, it depends on the price of your car, how much money you’re getting and for how long and which financial institute you’re getting. But hopefully, after studying this article, you will have a clear idea about what you are getting into.
The Bottom Line
When it is about car financing, anyone can get a little overwhelmed. But if you live in Singapore, you should get familiar with these terms so you can live a breezy life.
Hopefully, after reading this guide, Car Financing 101: What you need to know, you can make the perfect decision without any stress. So just pick a car, get a loan and enjoy the ride of a lifetime!