Earlier this year, the Monetary Authority of Singapore announced (much to the delight of drivers islandwide) that the borrowing limit and loan tenures will be increased to ease the process of car financing. Especially with the exorbitant price tag that comes with purchasing a vehicle in Singapore, taking a loan to finance your new vehicle seems like a popular option amongst most drivers. So, here’s what you need to know to make the best out of your car loans!
Important Tips on Car Loans
1. How much can I borrow?
According to the new regulations, cars with an open market value (OMV) of $20,000 or less, buyers can borrow up to 70% of the purchase price, up from 60%. Buyers of cars with OMVs of more than $20,000 can now borrow up to 60% of the purchase price, up from 50%. The loan tenure has also been raised to seven years, from five.
2. What documents do I require to take out a loan?
Firstly, you must be able to show proof of your income. This can be easily obtained with a notice of assessment from the IRAS showing your taxable income and computerised payslips. Alternatively, you can also provide proof with a letter from your employer.
Next, you should also have on hand proof of your identification, such as your NRIC, passport, work permit or your driver’s license. Further paperwork may also be required depending on the bank or agency you choose to take out your loan with, but that’s settled later.
3. What is the best way to finance my car?
The annual percentage rate (APR) is the quickest and easiest way to compare loans, and essential in working out how much the loan on your car will cost you over its lifetime. However, it is also important to note that the headline rate isn’t necessarily what you’ll get; it can vary, depending on your credit-worthiness.
It is always tempting to go for longer loan periods because that means smaller monthly instalments, but this also means that you are susceptible to paying a lot more through interest. Be as disciplined as you can about keeping the loan term as short as possible.
Research is extremely crucial because dealers will leverage on the inexperience of buyers who have not done their research to squeeze out as much profit as possible. Ensure that you are obtaining the best possible loan rates that suit your financing needs.
4. Am I entitled to any amount I want for car loans?
A lot of how much you will be able to borrow depends on your creditworthiness. This is determined by your monthly credit card payment and current income. Before you are granted your loan, it is imperative that you are fit to borrow and have provided sufficient evidence of being able to repay your loan.
Car loans usually take 2-3 working days to approve. Although the process may seem intimidating at first, rest assured that our Car Heroes will meticulously guide you along every step of financing your car should you choose to purchase your next vehicle with us!
Also, read this guide on affordable car loans!