Thinking of purchasing a car? Many times, buyers spend a long time deliberating on the ‘right’ car, while not giving much thought to their car loan. Fret not, we’re here to give a crash course on your car loan to make sure you don’t end up having to pay more than you ought to. So what should you consider when applying for a car loan?
How much can I borrow?
First, work out your sums to ensure that you have sufficient cash on hand for the down payment. If you started a savings fund for your dream car, this would be the perfect time to give yourself a pat on the back. Then, assess the loan amount that you would like to apply for. This will in turn determine your monthly instalments, which should be a number you’re comfortable paying monthly.
The maximum amount you can borrow is dependent on several factors.
Other considerations that will affect how much you can borrow are your monthly income and current financial commitments such as your housing loan, personal loan, credit cards, or another car loan. These, along with indicators like your repayment habits, in turn add to your credit score. As the math goes, a better credit score will entitle you to a higher loan amount.
What is the maximum loan period?
That being said, it is important to note that for used cars, your maximum loan period is determined by the registration date of the car. DBS car loans are only available for cars less than 10 years old, calculated from the original date of registration. For example, if you intend to purchase a used car that was registered in 2011 (6 years old), the maximum loan period for that car is 4 years.
What do I need to apply?
All ready for your dream car? Not quite yet. Before you start your application, ensure that you have these details on hand:
- Vehicle Sales Agreement (if applicable)
- Employment details including company name, designation, length of service and monthly gross income
- Details of existing financial commitments e.g. housing loan, personal loan, credit cards
- Income documentation such as salary credited to your DBS/POSB account, computerised payslip, or IRAS Notice of Assessment. If your length of employment is less than 1 year, your latest CPF Contribution history statement would be required