If you plan to own a car in Singapore, you need to be earning at least $8,850. You will be required to pay the COE (Certificate of Entitlement), ARF (Additional Registration Fee), GST (Goods and Services Tax), and car insurance upon purchase.
Unless you have the ability to pay the entire amount in cash, most owners will take a car loan in order to finance their vehicles.
Is Credit Score Important For A Car Loan?
Yes, your credit score is important for a car loan. When you are applying for a car loan, it is important that you check your credit report. Auto loan dealers tend to advertise brilliant interest rates on new cars; they can be 2.9%, 1.9%, and sometimes even as low as 0%.
However, you should be careful when it comes to the fine print. Details are important when you are applying for loans, so do not get excited by just reading the overview. Make sure that you understand everything in depth before making a decision about car loans.
Most of the amazing rates are only for those car buyers who have the best credit – for instance, people with a score of 750 or more can avail to these opportunities. However, dealers and banks may still give you a car loan even if you have a bad credit score, but that is because they know that they can make a surplus amount of interest through you. So, a good credit score can come in handy when you are buying a car.
Buyers who have a credit score that stands at the lower digits of 700 can still obtain a decent interest rate, however, even they will not be qualified for the best promotions. The car rates exceed swiftly for those who have a score below the margin of 700.
If you are taking a loan with a credit score of less than 650, then you may even have to pay an interest of 10% or more.
How Much Money Can I Borrow?
Firstly, you need to sit back and evaluate the cash that you need to set aside for the down payment. So, make sure that you have an adequate amount of cash for that process. After this is done, you can work on other things for buying your dream car.
When it comes to a loan, assess the amount that you need to apply for. Applying for a loan means that you would get a chance to choose your monthly instalments. You should be mindful of the fact that the monthly instalments should be an amount that you can comfortably pay. It should not be too hefty that it gets hard for you to make both ends meet. Nor should it be so low that you spend a long time getting it sorted out.
The maximum amount of loan that you can borrow depends on different factors.
The main factor to the maximum amount of loan is the Open Market Valuation (OMV). As per the current regulations, you can take a loan of 70% on the price of the car purchase if the Open Market Valuation or OMV is lesser than or equal to $20,000.
However, if the Open Market Valuation or OMV is higher than $20,000, then you will be eligible for a loan of 60% of the price of the car purchase.
What Is The Maximum Period Of Car Loan?
The maximum period for a car loan is seven years. However, it is crucial that you know where used cars are concerned, the maximum loan period is further regulated by the date of registration of the vehicle.
Some car loans are only available for cars that are comparatively newer and do not go past ten years – and this is calculated from the original date of registration.
For instance, if you want to buy a used car that was previously registered in 2016 (6 years old), the maximum time span to pay off the loan would be four years. So, you would have a comparatively shorter length of time to pay off the loan in this example.
What Are The Requirements For a Loan?
There are different requirements for taking a loan.
- The first thing is that you should be at least 21 years old to apply for a loan.
- Your monthly income should exceed S$2,000 for locals and S$4,000 for foreigners.
- Questions will be asked about income, employment, and financial commitments, and other documents will also be required.
Make sure that you have these requirements fulfilled. Some of the documents required for a loan by Singaporean/ Permanent Residents are mentioned below:
Income Documents
- Computerized Payslip of the latest month
- Or the latest IRAS Notice of Assessment
- Or the latest 12 months Contribution History Statement or CPF
- If you are a person who is self-employed, then the last two years of the IRAS Notice of Assessment shall be needed
- LTA Vehicle Log Card Details
- A copy of the tenancy agreement along with any of the income documents above (this is if you would like them to consider your rental income). Front and back of NRIC
Final Thoughts
If you want to apply for a car loan, these are the things that you should keep in mind. Make sure that you have sufficient information about the process before you get into it. Take your time to understand things and gather information before making a decision.
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