A car is an object of necessity as it allows you to travel from one place to the other in comfort. You can save a lot of time, effort and money if you can travel to your workplace and any other place of important in your own car. However, buying a car will not be an easy task given that cars are very expensive these days and you may not have access to the required funds for purchasing the car. You can always opt for a car loan and get access to the money that you need for purchasing the car of your choice. Before you apply for a car loan with any of the bank or auto dealer, you need to understand if you are eligible for the car loan product that they offer.
Car Loan Eligibility Criteria
The eligibility criteria for car loans is different for different banks / financial institution / auto dealer and it depends on a variety of factors. Some of the common eligibility criteria are as follows:
- Your age – In order to apply for a car loan, you should be minimum 21 years of age. Unlike personal loans, car loans are not offered to minors and in fact the lenders make it a point that the loan is only offered to those applicants who are at least 21 years old but not older than 60. The loans are usually not offered to minors and people older than 60 because they do not usually have any steady source of income and so the banks feel that they may not be able to pay off the loan amount. Hence, they are regarded as high risk in terms of lending.
- Residency status – In most cases, you will need to be a Citizen of Singapore or a Permanent Resident of Singapore to apply for a car loan with any of the banks, financial institution or dealer that offers this product in the country. People who are the citizens or permanent residents of the city will be affected by bad credit and so they are most likely to make their payments on time in an effort to pay off the loan amount. However, there are a few lenders who will be willing to provide car loans to foreigners, provided they have a work permit that is valid and has a minimum validity of 1 year.
- Annual income – You should have an annual income of S$20,000 or more to be eligible for a car loan from most of the banks and financial institutions in the Lion City. The annual income is one of the most important criteria as it lets the bank determine if you will have access to the required money needed to pay off the loan instalments every month. In some cases, the banks might be willing to lend money to those with lower annual income but the interest charged for them can be very high. Hence, you should consider these factors before applying for a car loan with any bank.
- Employment status – You should have been employed for a substantial period of time with the current employer and you should not have been unemployed in the last couple of years to be eligible for a car loan. People who have been employed for a substantial amount of time have a steady source of income and so the banks and willing to offer them with car loans, personal loans and other forms of loans. In case you are self-employed, your business should have been operational for a minimum period of 1 year. You will be required to offer your Income Tax Statement of Assessment and other documents that will help in proving that your business has been profitable and that you have the required money to pay off the loan amount.
- Products held with the bank – If you already help different products with the bank such as credit cards, savings accounts, fixed deposits etc. you are more likely to be offered with a car loan by the same bank. As you have been a loyal customer of the bank, you will be able to convince them to offer you with a car loan. The bank might even be willing to offer you with a more attractive rate of interest in case you are one of the premier customers of the bank. Thus, it is advisable that you approach the bank that you held different types of banking products, when you need to apply for a car loan.
- Status of the car (used or new) – Most of the banks and financial institution in Singapore offer car loans for the purchase of both new and used cars. However, there are a few banks that offer loans for the purchase of new cars but not the purchase of new cars. In case you are planning to purchase a pre-owned or used vehicle, make sure that you contact the bank or financial institution and find out if they will finance the purchase of such a vehicle. Generally, the interest rates charged with car loan offered for the purchase of used car is relatively higher than the interest rates offered for the purchase of new cars.
Factors affecting car loan eligibility
There are a variety of factors that affect the eligibility for car loans in Singapore; some of these factors are listed below:
- Your credit history – Probably the first thing the banks will consider while processing your car loan application is your credit history and your credit score. If your credit history is positive and the credit score is high, you can be assured that the bank will be more than likely to offer you with a loan. However, if your credit history is not very positive and the credit score is low, the banks will not approve your loan application.
- Your overall financial profile – Your total amount of debts, the loans that you have taken before, payment history, outstanding debts and your overall financial profile will be evaluated before the lender decides whether or not they should approve your loan application. By evaluating these factors, the banks and financial institutions can determine if you are worthy of getting access to more credit in the form of a car loan.
- Age of the vehicle – The age of the vehicle will play a major role in determining if the lender should approve your loan application, especially when you apply for a loan to purchase a used vehicle. If the vehicle is too old, the lender will most likely not offer you with a loan and even if they do offer you with a loan the interest rates charged will be very high.
- Condition of the vehicle – The condition of the vehicle, especially in case of used car loans, will be considered by the lender before approving your loan application. If the vehicle is not in a good condition, there is a high possibility that the loan application will not be approved by the lender. Thus, if you decide to purchase a used or pre-owned vehicle, make sure that the vehicle is in good condition.
- The status of your work permit – In case you are a foreigner, you should have a valid work permit and it should be valid for a minimum period of 1 year. The lender will examine your work permit to make sure that it is valid and that you will stay in the country for a period long enough to pay off the borrowed amount. You should get your work permit renewed in case it is about to expire, before you apply for a car loan.
How to increase car loan eligibility in Singapore?
You can increase your eligibility for car loans in Singapore if you improve your credit score and also make sure that you have a steady income. Pay off your debts to improve your creditworthiness so that the banks will be more comfortable in approving your loan application.