4 Things To Consider Before Applying For A Car Loan

Monthly Installment Loan, Monthly Installment Loan SingaporeOwning a car is a convenience that many people wish to enjoy. However, due to the hefty costs of owning a car in Singapore, many struggle or hesitate to own one. This also explains the popularity of car loans in Singapore – loans you can get from a bank or licensed moneylender to finance the purchase of a car.

Planning to buy a car? Before you fork out all your hard-earned savings on this massive purchase, here are some things to note regarding the car loans you can get.

Loan limits

Prior to 2016, the total amount that you could borrow was 60 per cent of the purchase price if the Open Market Value of the car you chose was SGD20, 000 or less. Otherwise, you can only receive a maximum loan of 50 per cent of the car’s Open Market value.

However, these limits were increased in 2016 by the Monetary Authority of Singapore. Nowadays, your maximum loan eligibility is 70 percent for cars worth SGD20, 000 or less, and 60 percent on cars costing otherwise.

Interest rates

The interest rates on car loans go between 2.78% to 4%. To save on your purchase, make sure to shop around for the lowest rates before committing to any loan. One tip to get quoted a lower interest rate is to have a good credit score before applying. Thus, if you have plans to own a car in the foreseeable future, it is a good idea to start implementing good finance habits to maintain or boost your credit score.

Not sure what your current credit score is? You can find out how to apply for a copy of your credit report from the Singapore Credit Bureau.

Tenure length

The loan’s tenure is the amount of time you are given to pay back the loan’s amount. Thus, a shorter loan tenure would mean a higher monthly installment loan payment. Most banks cap their car loan tenures at 7 years. Don’t forget to consider this when you are applying for the loan. While a loan can help you offset the costs of purchasing a car, you need to ensure you have the ability to keep up with regular payments to avoid racking up penalty fees.

Recall also that you have interest fees to account for. Although you may pay less each month for a longer tenure length, you may end up paying more in interest fees over time.

Plan for your finances

A car loan is a significant commitment, or as some may call it – a financial burden. It’s worthwhile to also plan out other significant planned expenditures for your lifestage, which may include education or a new home. If a car isn’t the only big thing you will be spending on, make sure to plan your finances around your other big-ticket spending needs as well.

If you find it a challenge to commit to a car loan at the moment, consider other alternatives for the time being, like renting a car only when necessary, or riding on the car-sharing wave.

Conclusion

Getting a car loan is a major decision, and it shouldn’t be taken lightly. Instead of rushing into it, it’s best to take the time to compare prices and find the plan that works best for you. Don’t limit yourself to looking at banks, too – you can find a list of licensed moneylenders in Singapore that also provide loan products for vehicle purchases and other general purposes.

Bookmark the permalink.

Comments are closed