Buying a car is a big decision to make, from choosing the right car down to ensuring the numbers match and is within your capability. There are various ways you can finance a car in Singapore and a car loan is the most common one. Hence, we bring you a one-stop guide to car loans and car insurance.
Car loans are amounts of money that car buyers borrow in order to purchase a car. Knowing which car financing option suitable for you is vital before embarking on one. Here are a few considerations:
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Understanding Your Credit Score
How well or bad you fare on your credit score does not decide if you will be able to obtain a loan. The only difference is the loan amount and level of interest rates. This makes your credit report one of the most important as banks utilise it to access your repayment ability, and it allows you to use it to your bargaining advantage in negotiating terms.
The length of your loan tenure determines how much monthly payment and interest rates you have to pay. Logically, a shorter term may be better as it translates to lower interest rates to be paid but with a higher monthly payment. Though the current loan tenure in Singapore is a maximum of 7 years and it may be tempting to stretch out the payment time frame, a longer term will mean higher interest rates and a lower monthly payment. The ‘right’ loan tenure will depend on what you can afford to pay comfortably every month so doing your calculations beforehand is vital.
Loan From Bank Or Car Dealer?
Definitely a common debated question for car buyers – Should I loan from the bank or car dealer? Car dealers have their in-house financing packages which are attractive and convenient for car buyers. This means that you do not need to visit the various banks to inquire about the rates for their car loans.
Bank loans on the other hand could offer you more options which you can easily assess given the availability of online sites which have done car loan comparisons. The downside of getting loans from a bank is that certain banks may not have loan packages for all car types. Be sure to also check out the foreclosure penalty for bank loans, which is charged when repayment of the loan is done before the actual period due.
It is advisable for you to pay off miscellaneous expenses involved in the vehicle purchase, such as sales tax, registration fees and documentation fees. Although car dealers are able to allow you to include these fees into the financing package, it will only add on to the car loan amount.
Upon settling your car loan, you will require comprehensive insurance coverage. To ensure you obtain the best deal, be sure to compare the rates across car dealers and financial institutions for the type of car you are interested in.
With a budget in mind and sufficient preparation, financing your car is a great way to purchase your preferred vehicle without too much of a sacrifice. Always trust the numbers and calculate costs before readily agreeing to attractive deals. The process may be time-consuming but we will bet it is rewarding!