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First Car Loans

Your guide to getting financing for your first car

There’s a lot to consider when buying your first car— the colour, the model, the accessories — but one thing many people fail to properly plan for is how they will finance it.

There are a lot of costs that can add up beyond the car price, from interest rates to insurance, so if you are looking at getting a loan it’s important to research your financing options and find a loan that will work for you.

How can you pay for your first car?

There are three distinct types of car finance in Singapore that offer different options and terms. Depending on what kind of car you’re buying and your own personal financial situation, look at all the alternatives available and decide which one is right for your personal situation.

  • Fixed rate financing. Car loans in Singapore charge “flat” interest rates, meaning that the monthly interest payment is the same over the entire loan term. For example, a 2% flat rate for a $50,000 loan over five years will incur $1000 in interest every year.
  • In-house financing. If you just started working and unable to meet the eligibility criteria when requesting a car loan from traditional banking channels, some finance companies or dealerships may offer in-house loans that they have already secured from the banks. To put it simply, the dealers borrow a large sum of money from banks and then offer portions of it to buyers having difficulties securing loans. Such financing normally incurs significantly higher interest rates.
  • Balloon financing. A balloon payment scheme works by excluding the minimum PARF rebate portion of your car loan in the instalments, lowering the monthly payments compared to that in a conventional car loan. For example, if your car loan is $50,000 and your car’s minimum PARF is $10,000, you only need to pay instalments based on $40,000. However, such financing comes with higher interest rates and early-repayment penalties. Learn more about balloon financing here.

Comparing your options can help you find the right loan

When looking at financing options for your first car, it’s important to know how to compare loans to make sure you choose the right one for you. When comparing, keep the following points in mind:

  • What fees will you be charged? There are a few different fees you may be charged for a car loan and it’s important to be aware of them all. Some dealerships charge a one-off ‘administration fee’. Other types of fees may include early repayment fees, balloon payments etc.
  • What is the interest rate? The most important factor when finding the right loan is the interest rate and the tenure. Interest rates from banks in Singapore is usually 2.70%.
  • How much can you borrow and how long do you have to repay? These are aspects that are sometimes overlooked, but they are important considerations when choosing a loan to meet your borrowing needs. Check the minimum and maximum loan amounts and calculate the loan’s affordability.

Is there anything else to consider?

Before you apply for a loan for your first car, do your research and compare your loan options. This loan may be with you for a few years and you’ll be glad that you spent some time finding the right loan for you. You should not only look at the interest rate on offer but also the fees and charges you may incur over the life of the loan. Calculate your repayments and make sure they will be manageable on your budget.

How you can apply for your first car loan

Compare your options using the comparison table above. Once you have found a loan you are happy with, click the “Go to site” button to be securely transferred to the lender’s website. You will generally need to be over the age of 21 and be a citizen or permanent resident of Singapore. You will also need to provide the following details:

  • Personal details including NRIC and residential address
  • Financial details including income, income tax notice of assessment, debts and liabilities
  • Information about the car including make, model and value

Buying your first car? Make sure you compare your options

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