• Car Loan BYTES FROM OUR KITCHEN

    Best Used Car Loans in Singapore

    Buying a second-hand car is a wise idea if you are just starting out in life and need a means of transportation. After all, what you really need is to get from point A to point B in comfort. Most financial institutions will give you a loan to purchase a vehicle that is not more than 10 years old.

    In Singapore, there are several banks and financial institutions offering car loans with varying interest rates. Find out more about the auto loans these companies offer in detail.

    Banks Providing Car Loan for Used Cars

    Bank Interest Rate Tenure Finance Margin
    DBS 2.28% p.a. Up to 7 years Up to 70% of the purchase price
    Hong Leong Finance 2.78% p.a. Up to 7 years Up to 70% of the purchase price
    Standard Chartered Check with the bank Up to 7 years Up to 70% of the purchase price
    OCBC 2.98% p.a. Up to 7 years Up to 70% of the purchase price
    UOB 2.98% p.a. Up to 7 years Up to 70% of the purchase price

    How Interest Amount is Calculated: An Illustration

    Using DBS’ car loan interest rate as an example, you can see how much you will need to pay for a loan, the effective interest rate, and the instalments you would have to pay for the various tenures. For the sake of the example, the loan amount used is S$100,000.

    Loan amount Interest Rate (p.a.) Effective Interest Rate or EIR (p.a.) Tenure Instalment Amount
    S$100,000 2.28% 4.1971% 1 year S$8,524
    S$100,000 2.28% 4.3256% 2 years S$4,357
    S$100,000 2.28% 4.3501% 3 years S$2,968
    S$100,000 2.28% 4.3589% 4 years S$2,274
    S$100,000 2.28% 4.3392% 5 years S$1,857
    S$100,000 2.28% 4.3169% 6 years S$1,579
    S$100,000 2.28% 4.3058% 7 years S$1,381

    Used Car Loan EMI Calculator

    You can use the EMI calculator present on our website to calculate the EMI for your used car loan. You will need to provide the Loan Amount, the Rate of Interest and the Loan tenor to calculate your EMI within no time. By calculating your EMIS, you can better plan your budget and ensure that the payments are made on time.

    Who Can Get a Used Car Loan in Singapore?

    You can get a car loan if you are a citizen of Singapore, a PR holder, or a foreign worker. Foreign workers may need to provide their work permit to get a loan. You should also be 21 years old or older to be able to apply. In some cases, you may need a local person to act as your guarantor if you are a non-resident.

    Documents Required for Used Car Loans

    To get a pre-owned car loan, you will need to furnish certain documents. These include:

    • Copy of the COE card or registration.
    • Documents that show your income such as a payslip, notice of assessment, or an IR8A form.
    • A copy of your identification document (passport or NRIC).

    Benefits of Taking a Loan to Buy Pre-Owned Cars

    If you are just starting your first job, you may prefer to buy a refurbished car instead of a new vehicle. Financially, this would make more sense considering the significantly lower payments you will need to make.

    Taking a car loan to buy a pre-owned car will make it easier on you. You won’t have to cough up a huge lump sum to pay for your set of wheels. In 2016, the Monetary Authority of Singapore eased the tenure and borrowing level for car loans.

    As per the new guidelines, a vehicle with an open market value or OMV that is less than or equal to S$20,000 can get up to 70% of the vehicle’s value. Vehicles that cost more than S$20,000 could get financed up to 60%. Loan tenures that were previously 5 years were increased to 7 years.

    How Is a Used Car Loan Application Evaluated?

    As mentioned before, the loan you get will be dependent on the open market value or OMV of the vehicle. You can get a loan of up to 70% of the cost of the car, however, the actual amount may vary. You could be approved for an amount that is lower.

    The reason a bank or financial institution asks you for your income details is to assess how much you can repay. Your credit score also plays a part in determining your eligibility for a second-hand car loan.

    Things to Remember Before Applying For a Used Car Loan

    It is useful to know what is happening in general in the market for car loans. Normally you have two options as a customer when you want to apply for a used car loan: the first is to directly contact the dealer for the finance required to purchase the vehicle; the second is to apply for the loan independently from a bank or financial institution and then go to the dealer to purchase the vehicle.

    In the first case you will be dealing with a form of loan finalized by the dealer, which has entered into an agreement with one or more financial institutions to offer you with the financial support for purchasing the vehicle of your choice. In most cases, the dealer also receives a commission from the bank or financial institution as it provided them with more business. Hence, your overall cost of borrowing can be a little higher as the lender will also charge you for the commission paid to the dealer. If approved, the amount financed is paid directly by the lender to the dealer. Upon receipt of the sum the retailer is committed to delivering the vehicle, while the customer is committed to repaying the loan through installment payments to the lender institution.

    In the second case, you apply for the loan with a bank and then the bank evaluates your application based on your financial condition and credit history. The bank will most likely not contact the dealer and will ask you to provide your sale documents and other documents related to the purchase of the vehicle. Based on the same, your loan application will be processed and if it is approved the loan amount will be credited to your bank account directly. In the next step, you can then pay the dealer with the loan amount and take possession of your vehicle.

    Why is Interest Rate Higher for Used Cars

    In most cases, the interest rate charged for the purchase of a used car is higher than that charged for the purchase of a new car. This is because an used car loan is regarded as a high risk product by the bank. In case you default on your loan, there is a huge possibility that the value of the vehicle will depreciate dramatically within a short period of time. Hence, they charge a higher interest rate so that they can earn more money in a short period of time (during the tenor of the loan) and reduce their risk of lending.

    Do I Need to Provide Any Collateral Security?

    Typically the approval for a car loan is not subject to the presentation of collateral (i.e. rights of lien or mortgage on property owned by the applicant).

    However, in many cases the vehicle itself acts as collateral for the loan and in case the borrower is unable to pay off the loan amount the lender can take possession of the vehicle to recover the loan amount.

    In many cases a guarantor may be required for the loan application to be approved and the signature of a joint debtor or a third party guarantor will be required on the loan application. A guarantor is mainly required when the applicant does not meet the income criteria or does not have a good credit history. In such cases, the banks might ask for additional guarantor security to approve the loan application.

    Elements of the Loan Agreement or Contract

    The law states that a car loan agreement (both new car loans and used car loans) must contain the following elements:

    • The interest rate charged;
    • Any other price and condition applied, including higher costs in the event of default;
    • The amount and methods of financing;
    • The number, the amounts and maturity of each installment;
    • The annual percentage rate (APR);
    • Details of the analytical conditions under which the APR may be modified;
    • The amount and the purpose of the charges that are excluded from the calculation of the APR;
    • Any guarantees required;
    • Any insurance required and not included in the calculation of the APR.

    Failure to Pay EMIs

    The interruption of the repayment of the loan will result in immediate failure to comply with the loan agreement and the risk of unpleasant consequences:

    • The interest payable would be increased, with the application of a default;
    • It is likely that the name(s) of the borrower(s) will be listed as defaulters and/or reported to credit authorities for the protection of bad credit.
    • The credit reporting authorities will share the information with the entire banking and financial system. The result will be a deterioration in the creditworthiness of the borrower(s) and resulting in greater difficulty in obtaining credit in the future.

    Failure to make timely payment of even one installment authorizes Lending bank to unilaterally terminate the contract. The customer will be required to pay all bank charges as well as all costs incurred by the bank to recover the sums due, as well as a possible penalty.

    Early Termination or Repayment of the Loan

    • The rules state that you can always pay off the loan in advance of the deadline agreed.
    • The customer who chooses to exercise this option will be required to repay the remaining principal still due, increased by a penalty, which is usually not more than 2% of the loan.
    • If the contract does not specify what amount of remaining capital has to be considered for the loan, then it is to be understood that the remaining principal sum of the present value of all payments not yet due at the date of early repayment should be considered for calculating the early repayment fee.

    How is an Used Car Loan Application Evaluated

    Here are some of the factors that are utilized by the banks in evaluating car loan application:

    • Risk policies :Each Bank applies a policy of risk in the evaluation of the applications, based on the data that they receive (credit scores). This data constitute the tool that allows the Institute to keep insolvencies below a specified level.
    • Income level :Acceptance of applications is normally also subject to the assessment of the level of income of the applicant and the relationship between it and the installment amounts
    • Creditworthiness :Great importance is finally given to the creditworthiness of the applicant. Institutes are limited to estimate the level of risk associated with each request, on the basis of credit reports provided by the central credit bureaus. If the applicant's credit history has some "flaws" (delays in repayments of previous loans, unpaid, etc) the likelihood that the application is accepted is obviously lower. In some cases, the bank can consider the loan application of a customer even if he or she has a bad credit history, provided that they have deposit accounts and prior relationship with the bank.

    Things to Consider When Choosing a Used Car Loan

    When choosing between used car loans offered by different banks, it is good to consider the overall cost of borrowing associated with loans offered by each of these banks, but not limited to the assessment of single monthly payment. However, the transaction is sometimes not easy, as the items of expenditure associated with used car loans can be many (amount paid, interest, charges, any initial expenses, insurance costs) and are not easily measured in an immediate way.In general, the elements that you should consider before signing a loan agreement are:

    • Annual Rate of Interest (per annum rate) - It is the interest rate, expressed as a percentage and on an annual basis, applied to the principal amount. It is used to calculate the monthly instalment payments and the interest amount that has to be paid by the borrower to the lender bank.
    • APR (annual percentage rate) - The APR is a measure, expressed as a percentage, with two decimal places and on an annual basis, and it helps in calculating the total cost of the loan. Unlike the Annual Rate of Interest, the APR is inclusive of any additional charges, such as arrangement fees and insurance costs, which are borne by the customer.

    FAQs

    Q. How do I apply for a used car loan?

    A. You can either apply for the loan through the dealer you are purchasing the car from or directly with the bank. The bank may need additional information such as the vehicle’s electronic log card.

    Q. How much should I borrow?

    A. Before you decide to purchase a used car, you should find out what level of payment you are comfortable with. You already know that you get up to 70% of the vehicle’s price. That means you need to make a down payment for the remaining amount plus any fees or charges.

    Given that you can borrow money for up to 7 years, you can stretch out your payments a bit and lower your monthly instalment. So, in the end it all boils down to affordability.

    Q. What happens if I miss an instalment?

    A. This is something you should watch out for. If you do miss a payment, the fees and charges can be quite a lot. Some companies have charges to the tune of S$60 for a late payment. In addition, you might have to pay more interest for the payment you missed.

    Q. Can a pre-owned car loan be closed early?

    A. Yes, it can. There are, however, charges you need to pay. Banks usually charge you 20% of the interest that is outstanding plus a 1% charge on the outstanding principal amount.

    Q. How do I make monthly payments?

    A. The easiest way you can make monthly payments for your car is by setting up GIRO where your instalments will get deducted automatically before the due date. This way you never miss a payment. You also could visit a branch of the bank to make the payment in cash or drop a cheque in a cheque deposit box.

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