For most people, owning a car can be deemed as a necessity. True enough, having your own car for you to go around the city is convenient and is also a much faster alternative. However, it goes without saying that buying a car is definitely not cheap as it is often considered as one of the most expensive types of purchase that a person will make in their lives.
For that reason, there are many factors to consider when you are planning to buy a car. These questions may include: What kind of car should I buy? Which brand should I look into? Honda? Toyota? Nissan?
But let us stop you there, before you proceed with all these questions, ask yourself the biggest question! “What can I afford?”. So, how much can you afford to spend?
Before you set out to buy a car, figure out your financial limits so that you can make informed decisions. If you are short on cash and are planning to take up a car loan, there are a few things that you need to be aware of. This includes the monthly instalments, interest payments, as well as the fees between the lender and the borrower. Be sure you know what you are signing up for as taking up a car loan is definitely not a small decision to make.
What is COE Singapore?
Well, COE or the Certificate of Entitlement is the quota licence which grants the legal right where the holder can register, own, and use a vehicle in Singapore for a 10 years period. Simply put, if anyone wants to register for a new vehicle in Singapore, they must first retrieve COE. This is what makes the car prices in Singapore so expensive. Next, COE isn’t the only thing that increases the car price in Singapore, OMV is also an important factor to put into consideration.
Why do I need to know about OMV?
Open Market value or OMV is the actual price paid or payable when a vehicle is imported into Singapore after being assessed by the Singapore Customs. In simpler terms, it is the real purchase price of the car which excludes the mandatory taxed in Singapore like COE. So you can get a clue of the actual price of the car prior being taxed.
If you are planning to get financing, the amount that you can borrow is based on the OMV instead of the total sum of the car (this includes COE).
A simple breakdown of how much you can borrow for a car loan is that if the OMV of the car is $20,000 or below, the loan limit is 70% of the purchase price. Meanwhile, if a car’s OMV exceeds $20,000, the maximum amount you can borrow is below 60%.
Do note that this figure is only the loan limit. The amount that will actually be approved for your car loan may be lower as your financial information like your monthly income and credit score will be assessed.
Now that you get a clue of how much you can borrow, the next question is, for how long?
The usual duration that you can borrow money is up to 7 years. However, it’s important to remember that you have to pay higher interest if you take up a longer loan tenure. It’s best if you go for the shortest period when taking up a car loan if you don’t want to be stuck in debt for a long time.
These are a few things to remember, as COE is set up for cars in Singapore, you might be able to get a car loan for a much shorter period. As the period of a car to be registered legally is 10 years and needs renewal afterwards, it might be tricky if you buy a used car with a car loan. For instance, if the car has already been used for 6 years, you will only get a loan tenure period with a maximum of 4 years. If the car has already been used for a longer period than 10 years, and thus needs a COE renewal, getting a car loan to buy the car will be much more difficult.
So, with all said and done, it’s imperative for you to make sure that you have a good credit score. Having a bad credit score will definitely affect your car loan applications. If you have good credit grades, this will help to give a clue of how good of a payer you are and how ease your way into getting a car loan.
Here’s a few tips on how you can improve your credit score:
Review your credit score
You need to always keep in check of how you are doing in your credit ratings. Do remember that you can get a free credit rating report yearly, so make sure you review the report closely to understand why you have the current credit score. Check any errors and if you have a bad credit score, you will know what needs fixing. With this awareness, you can improve your credit score as soon as possible.
Have a payment reminder
Set up a payment reminder so that you will never forget when you should do your payments. You can write down the deadlines for any bills to be paid in your planner or even do so on free apps online. By paying your bills on time, this can help to increase your credit score gradually.
Keep old accounts open
If you have any unused credit card accounts, do not close them down. The longer credit cards history, the more it can appeal to the lenders. If you do have to close any of them down, you should close the newer credit card accounts instead.
Getting a car is a big decision to make. Whether you decide to take up a personal loan or not, you can always seek further consultation with Bugis Credit, a reliable licensed moneylender. Head over to their website for further enquiries.