Are you looking forward to buying a car in Singapore but the money you have is not enough? There is no need to worry because you can use a car loan. However, most borrowers find car loans applications challenging because they have to deal with a lot of things, including complicated calculations for both interest rates and repayable amount.
This post takes a deeper look at car loans in Singapore to help you understand how they work, and help you determine whether they are a good idea or not.
The Main Car Financing Options in Singapore
There are two main car financing options in Singapore; bank loans (direct lending) and car dealer financing.
Direct lending involves getting a loan from a bank of choice to purchase the car you want. The main advantage of this option is that you are able to compare lenders and their terms and conditions. The primary objective is to identify the lender with the lowest interest rates and no hidden costs.
If you opt for car dealer financing, it means that the car seller handles the bulk of the financing details on your behalf. The lovely thing about it is that car dealers in Singapore work with a network of lenders so that you can pick the one with the best interest rates.
Although convenient, using a car dealership is likely to be more expensive compared to direct lending because most dealers get paid a commission for introducing clients to lenders.
Whether you prefer direct financing or using a dealership, it is important to comprehensively compare the lenders, and Lendela can come in handy to assist with this.
What to Think About when Applying for a Loan in Singapore
Now that you know the main options for car financing in Singapore, we will now identify the main things to think about before signing the loan agreement.
Personal Credit Score
Credit score is an indicator of a person’s creditworthiness and is used by Singapore lenders to determine the interest rate to fix on loans. If you have a good credit score, close to 2000, it implies you are considered a low-risk party, and the interest rate will be lower. Therefore, it is advisable to try and improve your score (if it is poor) before making an application.
The interest rate charged on a car loan determines the overall amount you will pay at the end of the loan term. To get a clearer picture of the cost of the loan, it is advisable to look at the Annual Percentage Rate (APR) as opposed to only considering the monthly rate. When looking at the interest rates, make sure to also factor in the loan term because the longer it is, the higher the amount payable.
Before lenders can approve a car loan, they want to have the assurance that you can comfortably repay. Therefore, it will be a great idea to start by looking at your personal repayment capability.
This means having a steady income to meet the repayment amount over the entire loan term.
When considering personal repayment ability, we recommend that you only commit a small amount of personal income to repay the loan. Therefore, try to imagine the car loan as part of other debts. Then, commit the money that will not significantly disrupt your life, such as the ability to pay rent and food-related expenses.
Apply for Car Financing through Lendela
The process of identifying a good lender can be very challenging. From identifying the preferred lender to comparing the interest rates and other loan conditions, things can be complex, especially for first-time borrowers. This is where Lendela comes in.
Lendela is designed to help simplify the process of applying for a car loan for borrowers. You only need to open an account with Lendela, fill an application form, provide the required documents, and wait. Then, they will help you to identify the best lenders and loan deals.