
Despite Singapore having excellent public transportation services, some people will always want to settle with a car of their own. This may be due to differing reasons; no matter how costly buying and enduring monthly payments for a car is, a lot of people are willing.
However, if you need or want a car and you do not have savings, a car loan will be the answer for you. In this article, we cover as much as possible as the only guide before you make your application.
What is a car loan?
It is very similar, if not exactly the same, as a motorcycle loan. This is in which one applies for a lump-sum amount of money from a lender to purchase a car. As commonly known, one is expected and bonded with the loan tenure that you have applied for repayments.
Permissible amount for a loan
On the basis of Open Market Value (OMV), if your dream car costs up to $20,000, the maximum amount you can apply to borrow is 70% of the overall purchase. Moreover, if your car costs more than that, you will only be allowed to apply for a car loan that covers 60% of your whole purchase. Nonetheless, figures presented are the maximum.
Lenders will take more factors into their consideration before approving your loan such as your net monthly income, your already existing commitments as well as your credit score.
In Singapore particularly, an official regulation that is applicable to your car loan is called Total Debt Servicing Ratio, in which you are not able to use more than 60% of your net income to repay the loans.
With that being said, if you have a background of paying a housing instalment and missed credit card repayments, you may not get the full 70%. Another thing be sure that you are properly ready for the 30% of down payment when making your purchase which needs to be done there and then.
Supposed car loan tenure period
For all that we know these years passed, a car loan is borrowable for up to 7 years, you may have it longer. Though, more years you agree to repay your loan, more of your money ends up paying for the interest rate.
This is why some people opt to pay more for the down payment, so that they lessen their on-road monthly commitment. With personal loans especially, skip the risk and ensure that you agree to a repayment period that is the shortest that you can afford. Plan beforehand your monetary expenses.

Average car loan costs
Conventionally, car loans are dissected into three main classes, which are:
- Loans for a new car
- Loans for used cars
- Loans for refinancing
There are varied lenders that provide services for such loans; banks, finance and leasing companies as well as money lenders. Based on our knowledge, the average amount for new car loans cost approximately about 2.92% of 12-months interest rate.
To add, used car loans would cost probably around 3.34% of annual interest rate. The figures may seem confusing because the used car costs more. This is due to the general perceptions of lenders toward those who apply for a used car loan. Applicants of a used car loan are considered as risky applicants, probably because of monthly income.
Applicants’ eligibility
Anybody at least 21 years of age and above with their credit score on a satisfactory level and an income. If you have the criteria, this automatically makes you eligible to apply for a loan.
While banks necessitate a yearly income of $24,000 to meet the requirements for a car loan, some lenders will entail an annual income of up to $30,000.
Car loan additional costs
There are 3 types of common additional fees when applying for a car loan that is important for you to know. This is so that you know where will your every penny go and help you in being more manageable with your repayments and other commitments. Those are:
- Processing or administrative fees – It will cost you around $200. Although, this fee is usually disregarded if the amount you applied for is more than $20,000.
- Early settlement fees – It is at the very least 1% of your outstanding loan. It is a type of fee that you must bear when you settle your loan early, holding down the outstanding loan money.
- Unpaid interest fees – it usually is 20% of your unpaid interest. It adds up to your early settlement fees.
Now… How do I apply for a car loan?
After researching, not only about the cars you want to buy, but also about the car loan that is the most suitable for you as well as lenders that you trust – it is time to apply for your loan.
Normally, if you would like to directly go to the lenders on your own, be it for an online application or a face-to-face visit to their office building, these are the documents that you will need to bring along:
- Vehicle Sales Agreement (if you own)
- Proof of income e.g. job payslip, income tax statement
- Proof of existing financial commitments e.g. other loans
- Employment details e.g. employer name, nett monthly income
With that said, if you are on the search for a licensed moneylender in Singapore to aid you in your car loan, look nowhere else – Raffles Credit is ready at your service. You may visit their office building, call them up for further inquiries or visit their website here.