• Car Loan BYTES FROM OUR KITCHEN

    Variable Rate Vs Fixed Rate Car Loan

    Owning a car or any other vehicle is no longer a luxury and in today’s world people need to own a vehicle so that commute with ease. When you travel to your workplace in the morning to your children’s school to leave them there for their day’s lessons, you will not find it convenient to take the public transport. Travelling by busses, trains and other modes of public transport can be a very time taking process and so it is more convenient to own a car so that you can easily drive and reach your workplace or your children’s school with ease.

    If you have decided to purchase a new car, you can always take the help of a car loan and purchase the vehicle that you desire. Your savings may not be enough for you to purchase the car that you like and so it will be convenient for you to get a car loan and get the money that you need to purchase the vehicle that you desire. In Singapore, many of the banks and other lenders offer car loans to Citizens and Permanent Residents of Singapore and also to foreigners who live and work in the country. The loans are offered at attractive interest rates, flexible tenors and a range of other features.

    Variable Rate Car Loan

    A variable rate car loan (also known as floating rate car loan) is one in which the rate of interest charged for the loan amount changes during the tenor of the loan based on the benchmark rate used by the bank to determine rate of interest for its loan products. In Singapore the benchmarks are the Prime Rate (also known as the Bank Rate) and the Singapore Inter-bank Offered Rate which is set by ABS or the Association of Banks in Singapore. The SIBOR rate is very transparent and many of the home loans and mortgages offered in the country are linked to this rate. Some of the banks offer floating rate car loans in the island and the interest rate for these loans depend on the prime rate and other factors.

    In a variable rate car loan, the rate of interest will change from time to time and so will the monthly instalment payment. If the benchmark rate rises, the interest rate charged on the loan amount will increase and as a result then monthly instalment amount will increase as well. Similarly, if the benchmark rate decreases the monthly instalment amount will also decrease. It is more beneficial to apply for a variable rate loan when economy is growing and there are higher chances that interest rates are more likely to decrease with time. In such a scenario, the cost of borrowing will be lower for the customers as they will pay a lower amount as a monthly instalment payment.

    Fixed Rate Car Loan

    In a fixed rate car loan (also known as flat rate car loan), the interest rate charged on the loan amount remains constant during the tenor of the loan and so the monthly instalment payments for the customers also remain constant. The volatility of the market or any changes in interest rates does not affect such loans and so the consumers can be assured that their monthly instalments payments will remain the same during the repayment period of the loan. For example, if you get a loan with a fixed interest rate of 1.60 percent per annum for a tenor of 5 years, the rate will remain the same during all the 5 years of the loan tenor.

    Fixed Rate Vs Variable Rate Car Loan

    It is ideal to opt for a fixed rate loan when the interest rates are low and there are chances that it might increase in the future. In such a scenario, you can opt for a fixed or flat rate loan so that your monthly instalment payments will never increase and your total cost of borrowing will also be low. You will also have a fair idea of your monthly payments during the tenor of the loan and you can plan your purchases accordingly. However, if the interest rate decreases in the future, you will not be able to enjoy the benefits of a reduced interest rate. You also have to understand that a fixed rate loan will most likely come with a higher interest rate than a floating rate loan.

    If the financial conditions are very stable and if there are chances that the rate of interest will most likely decrease with time, you can opt for a variable or floating rate loan. Even if you pay a higher rate of interest at the moment, the rate might decrease in the future and so your instalment payments will also decrease. Thus, you will be able to save money in the future and your overall cost of borrowing will also be low. But if the rate ends up increasing in the future due to any reason, your monthly payments will increase and you might find it difficult to manage your financial responsibilities every month. Moreover, your total cost of borrowing might also increase.

    You should first try to understand the economic condition and the overall performance of the financial industry to decide about the type of loan you should opt for. You can follow news about the economy and also keep a track of the changes in interest rates in the country to understand what type of loan will be ideal for you. You can keep visiting our website and the different pages that we have for banks offering loans in Singapore. You can then compare the rates for a few months and then try to determine if the rates have been increasing or decreasing over a period of time. Such information will come in very handy when you try to make the right choice.

    Floating and Fixed Rate Loans in Singapore

    The different interest rates offered with car loan products in Singapore are given below.

    1. DBS Bank – The bank offers a fixed rate car loan at the moment and finances up to 60 percent of the market value of the vehicle.
    2. OCBC Bank – The bank offers a fixed rate with all the different types of auto loans that it provides in Singapore.
      Type of Loan Rate of Interest
      New Car Loan 2.78 percent per annum
      Used Car Loan 2.98 percent per annum
      Car refinancing 1.60 percent per annum
    3. UOB Bank – UOB offers various auto loan products with different types of interest rates.
      New Cars
      Used Cars (maximum 10 years old)
      Loan Tenor Rate of Interest Effective Rate of Interest Rate of Interest Effective Rate of Interest
      1 year 3.250 percent per annum 7.040 percent per annum 3.875 percent per annum 8.390 percent per annum
      2 years 3.250 percent per annum 6.670 percent per annum 3.875 percent per annum 7.920 percent per annum
      3 years 3.250 percent per annum 6.510 percent per annum 3.875 percent per annum 7.720 percent per annum
      4 years 3.250 percent per annum 6.400 percent per annum 3.875 percent per annum 7.580 percent per annum
      5 years 3.250 percent per annum 6.310 percent per annum 3.875 percent per annum 7.460 percent per annum
    4. CitibankCitibank Singapore offers different car loan products that come with both fixed and variable interest rates.

      Citi Direct – It comes with a floating rate and the rates are dependent on the tenor of the loan.

      Tenor of the Loan Interest Rate
      60 months 1.58 percent per annum
      48 months to 59 months 1.68 percent per annum
      36 months to 47 months 1.78 percent per annum
      24 months to 35 months 1.88 percent per annum
      12 months to 23 months 1.98 percent per annum

      Citi Classic – It comes with a fixed interest rate as given in the table below.

      Tenor of the loan Interest Rate Charged
      1 year to 5 years 2.28 percent per annum
    5. Maybank – Maybank Singapore offers flat rate car loans and the rates can be as low as 3.25 percent per annum.
    6. Standard Chartered Bank Singapore – The bank offers a flat interest rate of 3.5 percent per annum.
    7. HLF – HLF offers vehicle loans at fixed rates and the interest rate charged for used car are given below.
      Tenor of the loan Rate of Interest Effective Rate of Interest
      1 year 2.88 percent per annum 6.25 percent per annum
      2 years 2.88 percent per annum 5.92 percent per annum
      3 years 2.88 percent per annum 5.78 percent per annum
      4 years 2.88 percent per annum 5.69 percent per annum
      5 years 2.88 percent per annum 5.62 percent per annum
    8. SIFSIF car loans come with a fixed rate of interest but the effective interest rate is variable and it changes based on the tenor of the loan.

      The table below provides the flat interest rate charged for the car loan for new and used cards

      Tenor of the Loan Rate of Interest Effective Rate of Interest
      1 Year 2.80 percent per annum 6.07 percent per annum
      2 years 2.80 percent per annum 5.76 percent per annum
      3 years 2.80 percent per annum 5.63 percent per annum
      4 years 2.80 percent per annum 5.54 percent per annum
      5 years 2.80 percent per annum 5.47 percent per annum
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