Are you looking to purchase a car, but struggling to get the right car loan because of a poor credit history? If yes, do not fret, you still have hope as having a poor credit history does not imply that you will not get financing for your car at all. Regardless of your credit history, you will have to consider the various costs associated with owning a car such as Certificate of Entitlement (COE) charges, insurance premium, road tax, and more. So it is very important to choose your car wisely and rather than choosing a car based on style, you must pick one based on your need.
Factors that Will Help You Get a Car Loan
- The one major factor that may come to your rescue is the fact that “bad credit” has no specific range and it is an issue of outlook. Different lenders have different methods of evaluating your credit score. If one lender rejects your car loan stating that your credit history is poor, another lender might accept it by placing you in the subprime range.
- Do your research properly and shop around for car loans before settling on a decision. Find out which lenders are more reasonable and are not strict about an individual’s credit history. However, be careful about making too many enquiries as your credit score might take a hit. Ideally, try to apply for a loan two weeks after you enquired about the loan.
- Another factor that may help your chances of getting a car loan is the easing of rules on car loans. According to the Credit Bureau of Singapore or CBS, there has been an increase in Singaporeans borrowing money to purchase cars. This is a result of the Monetary Authority of Singapore allowing buyers to borrow up to 70% the purchase price of the vehicle from 60% for cars with an Open Market Value of S$20,000 or less in 2016. For cars with an Open Market Value of more than S$20,000, you can borrow up to 60% of the purchase price. Even the tenure of the loan has been raised from 5 to 7 years.
- In-house financing can also help people with bad credit history. There are various independent financial solution providers in Singapore who offer in-house car financing. This is an option taken often by people whose car loan applications are rejected by financial institutions and banks. With in-house financing, you will get a competitive car loan which is appropriate for your financial condition and budget. However, the interest rates applied will be considerably higher than what you will get with banks. Do note that the eligibility criteria and procedure followed to apply for in-house financing is different than applying for a bank’s car loan.
What You Should Do to Improve Your Chances of Getting a Loan
If you want to improve the chances of getting a car loan, you must take the following steps:
- Get a copy of your credit report: To get a copy of your credit report, you will have to get in touch with CBS. Once you receive a copy of your credit report, you must see that you do not fall in the poor scores bracket. If you are under the poor score bracket, keep calm and see if there are any discrepancies. Getting your credit report will help you in better planning.
- Fix the mistakes in your credit report: The lenders with whom you have taken loans before are the ones who record all your payment history. If you come across instances where lenders have failed to record your correct payments and have reported only the instances when you have not repaid on schedule, get in touch with CBS and inform them about it. CBS will post the dispute on your record and conduct an investigation. You will be kept in the loop about the investigation being conducted and once an adjustment is done, CBS will send you a modified copy of the statement and to all the organisations that asked for your credit record in the past three months.
- Compare the Annual Percentage Rate or APR for car loans: When shopping for a car loan, instead of looking only at the low monthly payments, you must compare the Annual Percentage Rate. Try to look at the bigger picture and find out whether you will be paying anything extra or how much more in the form of interest by choosing a longer car loan tenure or vice versa.
- Do not believe everything the auto dealership tells you: Most auto dealers in Singapore will not be forthright about your car’s financing and cost. So if you are opting for dealer financing, you must be careful about low monthly payment sales pitches which are commonly used by dealers to lure buyers to take loans with longer terms which increases their profits. You must also enquire about any fees or charges associated with paying off the loan early. When you go and meet the moneylender make sure you negotiate for the best rate and ask as many questions as possible about the loan.
Once your credit score improves make sure you continue to track your report and make sure that your payments are recorded properly and there are no mistakes. A poor credit record doesn’t mean that you have to give up owning a car as there are car loans for people with bad credit. You just have to do your research properly. And if you take all the necessary steps mentioned above and put in more work, your effort will pay off.