How To Choose the Right Car Loan?

Choosing the car loan in Singapore is not an easy choice, given the many solutions available on the market these days. It is however possible to choose the most advantageous and convenient car loan by evaluating the features of the loan and the details of the contract offered by the lender. Car loan or auto loan is a form of financing offered for the purchase of a car and it has the same characteristics of a traditional loan although with some distinctions. In most cases, such loans for purchasing a vehicle are offered not just by the financial institutions but also by car dealers around the globe.

Car dealers do not finance the vehicle for you on their own and instead they take the help of a 3rd party vehicle financer. The 3rd party vehicle financer pays the dealer the amount for the vehicle, and then the customer has to make instalment payment for the loan directly to the financer. However, the interest rate offered may not be fixed for a loan provided by a dealer and the customers may not be offered with other features and benefits that are offered with a traditional car loan. The advantage of such a loan is that the customers are offered with customized loan packages based on their choice of car and other needs.

Before selecting a car loan offered by any particular bank or financial institution, you need to decide whether you want to purchase a new or a used vehicle. The amount offered as a loan and other features offered by the lender will differ based on your choice. Based on your budget you can decide whether you want to purchase a new or a used vehicle. However, you should remember that for a used vehicle you can avail maximum 60 – 70 percent of the value of the vehicle as a loan and the interest rate will be higher as well. On the other hand, for a new vehicle you can avail up to 85 percent of the price of the vehicle as a loan.

While choosing the ideal car loan based on your needs, you should consider the following factors:

1. Loan amount – You want to purchase the car of your desires but you do not have the required savings to pay for it. Hence, you decide to opt for a car loan and so it is important that you opt for a bank/ financial institution that will offer you as a higher amount as a loan. You should be able to get at least 80% of the value of the vehicle as a loan. For example, if the vehicle you are going to purchase costs S$ 50,000, you should be able to get minimum S$ 40,000 as a loan so that you will not have any difficulty in purchasing it.

2. Tenure of the loan – You sure want to get the required finances for purchasing the vehicle of your choice. However, if the monthly instalments are too high for the auto loan, you will find it very difficult to make your payments on time. In fact, you might even be behind on paying your bills and so it is important that you opt for a loan that comes with a flexible tenure. Make sure that you choose the tenure wisely and opt for one which is neither too long nor too short. If the tenure is too short, your monthly instalment payments will be too high, whereas if it is too long your car loan interest rate will be too high.

3. Interest rate – Although you want to borrow money for purchasing the vehicle of your choice, you sure don’t want to pay an awful amount of money as an interest on the borrowed amount. Hence, you need to make sure that you only opt for a car loan that comes with attractive interest rate. Explore all the available options and also make sure that your credit score is on the higher side so that the lenders will be more than willing to offer you with a loan at a very attractive interest rate. If possible, opt for a shorter tenure so that the interest rate offered to you will be competitively low.

4. Payment Options – It may sound a tad lame to worry about payment options while applying for a car loan. However, the truth is that you cannot ignore them as factor as they can have an impact your credit score. If the payments options offered are very limited, you will find it difficult to pay off the loan amount and in the process your credit score will be affected. You should be allowed to opt for auto-debits so that the EMI amount can be debited directly from your bank account every month. You should also be allowed to pay off the loan amount before it tenure ends without having to pay a lot of penalties.

5. Refinancing options – Yes, the bank/ financial institution should also offer you with refinancing options so that you will be able to avail more money for your vehicle. This will help you to maintain your vehicle and also get extra cash in your hand. There are many banks that offer car loans with the option of easy refinancing. However, make sure that you will not have to pay a hefty amount of money as a fee to avail the option of vehicle refinancing.

6. Application procedure – Finally, the procedure of applying for a car loan should be simple and you should not have to submit numerous documents to apply for the loan. You should be able to easily check your eligibility online and also apply for it without having to submit many documents. You should only need to submit essential documents such as income proof, address proof, NRIC etc. The bank should offer you with a simple process of applying for the loan online and the application should be processed within a couple of working days. No one has the time to wait forever, for a car loan application to be approved.