Car loans in Singapore are fairly easy to get, given that you have a good credit score, are of legal eligible age and can afford the payments. Let us guide you while you choose a good car loan.

What are car loans?

A car loan is a type of loan you take in order to finance the purchase of a car. Not everybody in Singapore wants to own a vehicle due to the well-structured public transport system, but those who do want to own one can generally get a car loan to finance up to 70% of their expenditure.

Car loans in Singapore are costly, have minimum borrowing thresholds and do not fully cover the cost of a vehicle. The borrowing capacity will depend on the credit score and total debt servicing ratio of the borrower.

Choosing the right car loan for the right use

You will need to choose different loans based on your paying capacity, the type of car, and the type of lender. If you can pay larger instalments, a loan with smaller tenure is recommended as it would allow you to pay less interest over the loan tenure. The type of car you buy will change the type of loan that is offered by different lenders. Consider all your choices and make an informed decision.

The type of interest package selected by you will also change the monthly instalment values. If you choose a fixed interest loan, the interest rate will remain the same over the tenure of the loan independent of the market value; and if you choose the flexible interest rate, the interest will change depending on the market conditions value of the loan.

Understanding fees and charges for car loans

The fees and charges associated with a loan depend largely on the type of loan taken and the type of payment planning. Since loans in Singapore can be taken through banks as well as financial companies, the interest rates are largely competitive in nature. The interest rates range from 2.75% p.a. to 3.25% p.a. depending on the borrower, the payment plan, and the lender.

As in the case of other loans, there is a difference between the Annual Interest Rate (AIR) and Effective Interest Rate (EIR) of a car loan. EIR is computed by adding all the extra charges and costs to the flat interest rate. EIR determines the affordability of the total loan.

The interests and fees tend to be higher for used cars. One should also take into consideration that owning a car has other costs in Singapore too such as the maintenance costs, road taxes, cost of the certificate of entitlement, etc.

Payment methods

The biggest thing a borrower should do before finalising a loan is to determine if the monthly instalments are affordable and can be paid every month realistically. There are many monthly instalment calculators online that allow you to estimate instalments, and thus help you plan for your loan repayment.

An instalment amount is calculated by adding the interest and other charges to the portion of the principal amount due back in that month.

Finding the best car loans

Best loans can be found by comparing the available loans that fit your need. In order to get the best interest rates, you might need to do some research. Since car loans are secured loans, the cars are collateral for the loan. If the payments are not made as directed, the car can be taken back by the lender.

Your credit score will determine your interest rate as well because it allows banks and lenders to gauge your credibility. You can also choose to take a loan with a shorter tenure to pay less money over the duration of the loan.

A few car loans offered online in Singapore as as follows:

• POSB Car Loan at the AIR 1.99% p.a. (EIR 3.77% p.a.) for a 7 year tenure.
• DBS Car Loan starts at AIR 2.18% p.a. (EIR 4.11% p.a.) for loans of tenure longer than 2 years.
• OCBC Car refinancing starts at AIR 2.08% p.a. (EIR 4.03% p.a.) for a 7 year tenure.

We advise comparing different car loans and making an educated decision.