TIP OF THE DAY
“Know your credit report: Before you apply for a car loan, it’s good to check your credit report. Any errors or inaccuracies in your credit report could hurt your credit profile and ultimately affect your chances of getting the best interest rate on your car loan. If you come across anything unusual in the report, get in touch with the relevant authorities to resolve the matter.”
Singapore is known for an efficient public transport system. With a well-connected network of trains and buses, getting around is quite feasible. But there are instances when public transportation might not be the best answer. Sure, you can get yourself a bike or a moped but then again it doesn’t provide you much protection from the elements of weather. Besides, it would be quite a feat to fit your entire family on a bike. Having a car becomes more of a necessity when you’re travelling in a group of more than 2 people. Be it carpooling to work or getting away for the weekend with your family and friends, owning a car comes with its own set of advantages and to some, serves more than just a mode of transportation.
But owning a car in Singapore can be an expensive affair. With cars costing a significant amount, not many people can afford to dip into their savings to purchase a car lest their savings dwindle down significantly. For that very reason, most people go in for a car loan to acquire the additional funds required to purchase the car. These car loans cater to new cars and used cars alike and offer competitive interest rates. Car loans typically require the borrower to borrow a minimum amount and don’t finance 100% of the cost of the vehicle.
These loans are provided by banks as well as finance companies. Finance companies work not only with banks but also insurance companies and car dealers alike to give borrowers affordable rates. In Singapore we typically see the following types of car loans:
These loans are the most typical loans sought-after by borrowers looking to purchase a new car. Almost all banks in Singapore offer car loans that allow customers to purchase a new car from the showroom of a car manufacturer or an authorized dealer. Tenures of such car loans vary from one to seven years and can be acquired quite easily subject to the borrower having a good credit score and meeting the required eligibility criteria.
As the name suggests, this car loan is often opted by borrowers looking to purchase a used car. Used cars come with certain drawbacks and used car loans usually carry with it a unique set of eligibility criteria pertaining to the age of the car. Used cars are, however, much cheaper than a brand new car and hence is a popular choice among those looking to purchase a car.
These loans are given out to those borrowers looking to purchase a car for commercial purposes. Cars intended to be used as taxicabs, company cars and even cars used for Uber can be purchased through this loan.
Car loan refinancing is akin to a balance transfer of a car loan. In this type of loan, borrowers with an existing car loan can switch from one bank to another for more affordable interest rates. Under this type of car loan, the new bank to which you transfer the loan will pay off 100% of the outstanding loan amount but will refinance the car on newly-agreed terms.
A car loan can help you get one step closer to owning your dream car. Let us take a look at some of the features and benefits of car loans in Singapore:
The most basic of needs, car loans serve to give borrowers the additional funds they need to purchase a car. Borrowers need to only provide a down payment of 30% of the car’s OMV or open market value as the car loans can finance up to 70% of the market price of the car.
Car loans have the added advantage of having longer tenures. The average tenure offered by a car loan ranges from one year to seven years with one year being the minimum tenure you can get a loan for. Longer tenures can result in lower installments but will result in the borrower having to pay more interest overall.
Car loans are affordable and offer lower interest rates than a typical personal loan. Most car loans offer interest rates in the range of 2.75% p.a. to 3.25% p.a. The lowered interest rates coupled with longer tenures make it easier to repay the loan.
Repayments for car loans are quite easy and borrowers can pay the monthly installments through a variety of modes such as GIRO, cheques, and auto-debit from a savings account, among others.
A car loan, in essence, is a secured loan. Unlike personal loans which require no collateral, car loans require collateral, which in this case, is the car itself which is pledged to the bank. But the risk of losing the car to the bank is very low provided the borrower continues making regular payments. Being a secured loan, it is also easier to acquire and most banks approve car loans. They also offer fast processing and disbursement times provided the borrower has a good credit score and meets the eligibility criteria.
DBS offers loans for both, new and used cars and can finance up to 70% of the car’s purchase price.
OCBC offers a car financing package that caters to borrowers looking for a new car, a used car, or even for car loan refinancing.
UOB offers packages for car loans ranging from the traditional car loan to the UOB HP50 car loan where you can pay half the installment amount and pay the remainder on the very last installment of the loan tenure. UOB also offers an attractive commercial vehicle financing package that can finance up to 90% of the purchase price of the vehicle.
The POSB Car Loan can be used to purchase both, new and used cars and can finance up to 70% of the car’s purchase price.
Maybank in Singapore offers a car financing package for borrowers that lets them get a loan for the purchase of a new or used car. It also offers them packages specifically designed for the purchase of their first car and also offers a Shariah-compliant car financing package.
The Standard Chartered Auto Financing Hire Purchase Plan offers loans for both, new and used cars, can finance up to 70% of the car’s purchase price, and offers attractive interest rates.
Hong Leong Bank in Singapore offers a comprehensive car financing package catering to borrowers looking to purchase a car. The bank also offers Floor Stock Financing and Block Discounting packages that cater specifically to motor traders.
A car loan can provide financing up to 70% of the purchase price of the car. But just because a car loan is a secured loan does not mean that any borrower can get a loan. They need to qualify for the loan by meeting certain eligibility criteria on car loan which are as follows:
During the time of application, banks will request borrowers for additional supporting documents. These documents range from mandatory documents required to check the borrower’s I.D. to documents that show the borrower’s income level and their capability to repay the loan. The supporting documents requested for car loans are as follows:
Interest rates for car loans are lower than that offered for personal loans. Most car loans have interest rates averaging around the 3% mark. The below table highlights car loan interest rates offered by the various banks in Singapore.
|Bank||Rate of interest|
|UOB||3.25% p.a. for new car loan and 3.875% p.a. for used car loan|
|OCBC||2.78% p.a. for new car loan and 2.98% p.a. for used car loan and 2.08% for car refinancing|
|Standard Chartered||2.70% p.a. for new car loan and 3% p.a. for used car loan|
|Hong Leong||2.78% p.a. for new car loan and 2.98% p.a. for used car loan|
Before a borrower applies for a car loan, it is necessary that they factor in what their monthly installment will amount to. This is important as they can figure out how much they can afford to borrow. There’s no point going in for a loan with which they’ll struggle to keep up with repayments. Car loan EMI calculators are available online for this very purpose and one can even find it on BankBazaar. Car loan EMI calculators can offer the following benefits:
Car loans can be easy to acquire and the lower interest rates coupled with longer tenures can allow for easy repayment. But at the end of the day, it still needs to be repaid. Borrowers might look to close a loan early and pay off the remainder after a year or more of taking up the loan but well before the actual tenure is up.
Early settlement of a car loan is actually quite a common practice. Not just because it allows borrowers to close open lines of credit but the fact that most borrowers would sell their car within 5 years. Since car loans cannot be transferred, most borrowers tend to settle the loan early prior to selling it.
However, early settlement of a car loan can turn out to be an expensive affair. Early settlement comes with a penalty that is calculated using Rule 78. Rule 78 is basically a method used to calculate the interest charged on a loan across the loan repayment period. Generally, a loan charges higher interest towards the start of the loan as compared to when the loan is nearing its tenure. In a bid to close existing loans quickly, borrowers might decide to settle early but this usually results in them paying more interest overall.
The early settlement penalty charged is usually around 20% of the unpaid interest. This penalty is charged for banks to make up for administrative costs and commission costs incurred by them. Banks also generally levy an additional early settlement fee as well.
Before applying for a car loan, there are certain factors one must consider which are as follows:
The Land Transport Authority (LTA) has reduced the quota for small cars by 7.3% from 3,360 to 3,115. The decision follows earlier announcements that indicated the government plans to halt the vehicle growth to expand road networks.
21st January 2018
Singapore’s Land Transport Authority has announced implementation of the new vehicle emissions scheme from 1 January 2018. The new scheme will put in place tighter vehicle emissions control system and will encourage buyers to choose greener vehicles.
27th December 2017
When you have a kid, owning a car becomes a necessity than luxury. When you become a parent, the more time you get to spend with your child the better it is for both you and your child. However, when you consider using public transport to commute to your child’s day care centre after your working hours, you are surely going to feel exhausted from your travel. The stress you undergo will hamper your family time to a great extent.
To avoid dealing with such daily mishaps, it is better to own a car, provided you have the required finances for it. It is always better to consider a few points before you buy a car especially when you have a child. Take a look at a few tips you can use:
• Finalize on a car model that has ample boot space so that you can carry your much-needed prams and strollers in your car conveniently. Make sure your car has enough space to put up with your child seats.
• In case you are planning to buy a car for short-term usage only, you need not necessarily go for a brand new car.
• Check for different kinds of car loans that are available in the Singaporean market. Finalise on a car loan depending on your budget.
• Sign up for a motor insurance only after checking with several other insurers and their respective insurance quotes.
• Keeping your child into consideration, you will need to buy some accessories for your car. Make a list of accessories you might need for your kid and check the prices online.
27th November 2017
• When you apply for a car loan, you might encounter several differing variables, such as varying rates of interest. To this end, it’s easier for armed forces to find better auto loan options. Lenders are often willing to pass a car loan for military programmes, as they have a stable revenue system. Moreover, armed forces personnel can access more flexible repayment terms, offered at better interest rates.
• You must also make efforts to ensure you find the best auto loan in the market. You can start by enlisting the assistance of an experienced auto finance specialist. This will not only help you in developing clarity about your credit history, but also help you understand eligibility criteria for acquiring a military car loan.
• You need to provide evidence by showing your military ID card. Another important aspect taken into consideration are income and employment status. Lenders usually check borrower’s financial status to ensure his ability to repay the auto loan.
• Banks could provide rapid military car loan to the armed forces personnel based on their robust income. However, they will evaluate your ability to repay the loan regularly based on the documents you provide. Besides, you can access early acceptance with a better deal by involving a creditworthy co-signer.
• The most ideal way to go about it would need you to identify lender with most economical quote to offer. You can do this by comprehensively comparing online quotes in the market. Besides, there’s a good chance that interest rates may also differ.
03rd November 2017
Are your car-related expenses really high? Do you feel your car-related expenses can be reduced? Are you unsure whether your car-related expenses are way too higher than required? Let us help you with a few tips that can help you decide whether your car payments are too high. Also, let us take a look at a few ways by which you can reduce your car expenses:
• You don’t pay attention to your road tax expiry
Keep a tab on your road tax expiry so that you’re not liable to pay any late fee.
• You have a car loan with a high interest rate
Most of the Singaporeans consider taking a car loan knowing the fact that cars are extremely expensive in Singapore. You can save quite a bit by opting to refinance your car loan at a much lower interest rate.
• You’re paying full price for petrol
Use a petrol credit card so that you can enjoy the rewards on your petrol expenses. A few credit cards also help you earn cashback or air miles with every petrol spend you make.
• Your car maintenance and servicing costs are high
You can cut down on your car servicing expenses by opting for a third-party workshop instead of an authorized distributor’s workshop.
31st October 2017
While it is possible to pay for a car without a loan, it is not usual. So we here are a few questions we think you should ask before you take on a loan to avoid paying too much.
• Do you even need a car? While we all know how comfortable and convenient it is to have your own vehicle, there are certain downsides to owning a vehicle. When you own a vehicle you pay for all kinds of things: from parking charges, road taxes, maintenance bills, loan payments, to fuel costs. We also need to remember that a car’s value decreases each year. In the age of affordable ride-sharing services, one needs to question themselves if they even need to buy a car.
• Are you buying the right car? If you do decide that it makes financial sense to buy a car, choose a sensible car instead of the flashier version. Calculate your monthly payment ability and choose a sensible and easily maintainable car.
• Are you choosing the right loan? Auto dealers not only get a bonus when they convince you to get a loan through an affiliated bank or credit company, but they end up charging an extra processing fee of S$500 to S$1,500 which they only disclose after all the papers have been signed. We recommend buying directly through the seller or going online to do a loan comparison and avowing the car dealers. This would allow you to not only avoid the payment of extra charges, it might also give you a fairly lower interest rate by comparison.
22nd September 2017
According to recent study conducted by the Credit Bureau of Singapore, the number of car loan defaulters has gone down, even as the number of buyers saw an increase along with a corresponding increase in the size of the car loans.
A study conducted late last year observed that car owners borrowed S$65,868 on an average to fund the purchase of both new and used vehicles. This is a steady increase of 22.5% from figures posted in May 2016, not to mention, car loan curbs were eased by the Monetary Authority of Singapore in the month of May last year.
The Monetary Authority of Singapore, in May 2016, brought in a piece of regulation that allowed vehicles with an Open Market Value of S$20,000 to be funded up to 70% of their price by financial institutions. Prior to 2013, car buyers could get up to 100% financing for their used or new vehicles.
For vehicles with OMV greater than S$20,000, 60% of the vehicle’s Open Market Value can be funded by financial institutions. Also, the tenure was increased from 5 years to 7 years, giving more room to avoid instances of defaults and delinquencies.
In the absence of economic distress, market, top level CBS executives predict a situation where loan balances will look healthier and delinquency will fall even further over time.
18th August 2017
After Monetary Authority Singapore (MAS) relaxed rules, the number of takers of car loans in Singapore has increased drastically. The rise came after the announcement that was made in May, 2016. According to a report released by the Credit Bureau Singapore, the loan amount is around $65,868 till last December. This amount was lent to people who wanted to buy new as well as used cars.
Last year, around $53,777 was lent to the same category. There has been a rise of 10.99% in the amount this year when one compares it to the figures of last year. The highest amount borrowed by an individual in the previous year was $8,37,135. This is touted to be the highest amount lent in the history of car loans.
Car buyers of open market value can get more than $20,000. One can also spot changes in the patterns of payment in the last seven years. It is being said that people from every age group can use this facility. The low rates also provide flexibility to the people borrowing the money.
20th February 2017
6th February 2017 The Monetary Authority of Singapore (MAS) made the terms of automobile loans more lenient in May 2016. The Credit Bureau of Singapore (CBS) has found that car buyers in the country opted for larger car loan amounts after this move.
CBS member banks revealed that people in Singapore took a total of 76,942 car loans in 2016, up 25.6% from the previous year. They took out loans to the tune of S$65,868 to buy cars - both new and used - in December last year. This is 22.5% higher than the S$53,777 borrowed in May and 10.9% more than the S$59,408 taken a year ago.
Restrictions were imposed on car loans in 2013 to reduce the number of car purchases, and bring down the demand for automobiles and Certificate of Entitlement premiums.
06th February 2017