The 7 Benefits Of Getting A Car Loan In Singapore 2020 And How It Can Bring You One Step Closer To Your Dream Car
The convenience of having a car cannot be overstated. Imagine going grocery shopping, carrying bags after bags of heavy groceries and boarding a bus or train packed with people. It’s probably going to be very frustrating. How nice would it be to be driving in the comfort of your own car and not jostling among people.
Added to that, you’ll get to save time on the road, and the time saved can be put to better use. More importantly, with a car, you’ll get to enjoy the freedom and independence that a car brings.
With all the benefits that owning a car affords, buying a car is considered a big step for many. It requires a substantial financial investment. You can either use savings or choose to take out a car loan instead.
While it is better to save over time and purchase the car through monthly installments, there may be instances where the money you have painstakingly saved to purchase a car gets used up for other personal emergencies. That said, you might wish to consider applying for a car loan to help you finance your car purchase.
Why Should I Consider Getting A Car Loan
A car loan can be your timely and reliable source of financial need. There are many reasons why you can consider getting a car loan in Singapore including:
1. High Car Costs
We all know that car prices on our sunny island are extremely expensive. The COE (Certificate of Entitlement) is the primary reason for this. COE is a legal document issued by the Singaporean government that enables you to own, register, and drive a car in the city-state for either 5 or 10 years.
The COE was introduced to curb the number of vehicles on Singapore roads given that 12% of the landmass is already occupied by loads. There are a cap on the number of COEs available each year and you bid for them in an auction. COEs cost around $40,000 currently, but this cost fluctuates depending on market demand.
Other reasons for the high motor vehicle costs in Singapore are the high Additional Registration Fee (ARF) rate, which is a tax that is a percentage of the Open Market Value (OMV), and which is always more than double the OMV, and the exercise duty which stands at 20% of the OMV.
Others are the Goods & Services Tax (GST) which is currently 7% but which is set to rise to 9% soon, the Carbon Emissions-Based Vehicle Scheme (CEVS), road tax, and special tax for cars that run of diesel.
2. Low Interest Rates
Interest rates from car loans are lower than normal personal loans, mostly because you will be using the car you purchase as collateral.
Different lenders have different rates, but these rates don’t vary too much. At Katong Credit, we aim to keep our interest rates as low as possible to ensure that you will be able to borrow the sufficient funds you need to purchase your car.
To illustrate this, if you wish to buy an entry-level car worth $100,000 that has an OMV of $20,000 and your credit score, income, and other factors that lenders consider check out, you will be required to pay $30,000 as your down payment and you can get financing for the rest ($70,000) for a maximum period of 7 years.
In the current car loan market, you will get interest rates of between 2.68% p.a. to 2.99% p.a. with monthly installments of about $580 per month from the leading banks if you go for a tenure period of 5 years. Note that these interest rates change from time to time.
Note that some banks do not give car loans for COE cars (cars that are over 10 years old) and for China-made cars.
3. Strong Regulatory Environment
In Singapore, car loans are regulated by the Monetary Authority of Singapore (MAS).
MAS determines the loan quantum which restricts your monthly debt repayments to less than 60% of your gross monthly income, the TDSR (Total Debt Servicing Ratio) which is currently 30% for vehicles valued under $20,000 and 40% for vehicles valued over $20,000 and the maximum loan tenure which is currently 7 years.
The Hire-Purchase (Motor Vehicles) Regulations 2013 stipulates the minimum deposit amount which is 30% of the cost of the car.
MAS requires that all car loan lenders abide by these regulations to the latter and it takes punitive action on those that don’t follow them. The strong regulatory environment is the main reason for the few delinquent debtors. In a recent Credit Bureau Singapore (CBS) study, despite an increased loan uptake of 25.6% in 2017 compared to 2016, only 1.3% of loan holders had installments that were overdue by more than a month in December 2016.
4. Avoiding In-house Financing
These costs explain why most Singaporeans rely on car financing to buy their cars.
You should, however, not be so quick to accept your car dealer’s in-house financing option because such financing is usually more expensive. As an example, car dealers often offer a sweetener called “overtrade”, where you borrow 70% (instead of 60%) even for a car whose OMV is greater than $20,000 and which means you will have paid a down payment of 30% instead of 40%.
As such, you might wish to consider apply for a car loan instead. Our low interest rates and flexible repayment terms ensure that you are getting the best possible deal out of a car loan.
5. Better Car Than You Can Afford
If you have been saving for a car and your savings are currently $100,000, you can only buy a car worth that much.
However, with a car loan, you’ll be able to buy a car worth $150,000 simply by taking a low-interest loan of $50,000 payable through our flexible loan tenures. Saving up $100,000 might be an uphill task, especially when we have other personal expenses and medical emergencies to take into consideration. This is where car loans can come in handy.
A new car is more prestigious and will cost you less on repairs. Newer cars also tend to have better fuel efficiency.
6. Financial Flexibility
Our flexible loan tenure coupled with the low car loan interest rates allows you to comfortably repay your loan without compromising on other things.
That said, if your financial situation enables you to repay the loan quickly, it is advisable that you get the least loan tenure possible as this will grant you financial freedom quicker.
7. Greater Application Success Rate
It is usually easier to apply for a car loan compared to a standard personal loan from the various financial institutions.
Even if your credit score is not impressive, most lenders will still grant you with a car loan. This is mostly because the lender will be using your car as collateral.
Financing The Cost Of Your Car With Katong Credit
With a car brings about an added convenience and the liberty to travel as and where you wish. However, there may be instances where you require a sum of money on top of your savings in order to make the purchase.
As a fully licensed moneylender operating under a stringent set of guidelines by the Ministry Of Law, our Car Loan is specifically designed to bring you one step closer to your dream car.
By applying for a Car Loan with Katong Credit, you’ll be able to enjoy additional perks such as a shorter processing time, less stringent application process and flexible loan tenures. You simply have to fill out our online loan application form and one of our friendly loan officers will be in touch with you shortly. Alternatively, you can also speak to us to find out more about what our car loan has to offer.
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