Gaining access to a luxurious ride can be a make-or-break moment in your life. But you may wonder if a personal loan can help you get behind the wheel. Let’s go further and scrutinize if it suits your financial aspirations.
What is a personal loan?
Essentially, personal loans are financial lifelines that individuals can avail themselves of to fund their personal aspirations. Whether it’s to bankroll a luxurious wedding or to finally go on that long overdue vacation, a personal loan can provide the financial support necessary to make it happen.
Unlike traditional loans that require collateral, personal loans are often unsecured. This means that borrowers are not required to pledge any assets or properties to guarantee the repayment of the loan.
What is a car loan?
Car loans, or auto loans, enable you to turn your car-buying aspirations into reality by providing financial assistance for purchasing new or used cars, trucks, or SUVs. Unlike unsecured personal loans, car loans require you to use your vehicle as collateral, providing assurance to both you and the lender throughout the lending process.
Defaulting on your car loan means the lender can legally repossess your vehicle to recover their losses. Conversely, timely and consistent payments will enable you to relish the driving experience in your new car while gradually repaying the loan.
The Distinction Between Personal Loans and Auto Loans
The main difference between these two types of loans is the requirement for collateral. Auto loans mandate the purchased vehicle as collateral, giving lenders the power to seize the car if the borrower fails to repay the loan. In contrast, personal loans are not secured and rely on the borrower’s creditworthiness for loan approval.
This collateral requirement significantly influences the interest rates and repayment terms offered by lenders. Since auto loans are secured, lenders generally offer lower interest rates and more extended repayment periods. Conversely, personal loans, being unsecured, are deemed more precarious by lenders, resulting in higher interest rates and shorter repayment periods.
Financing a Car Purchase in Singapore: Is a Personal Loan a Viable Option?
Getting a personal loan from a Singaporean bank might make buying a vehicle feasible. The complete loan amount will be put into a specified account after the application has been approved, and may then be used to pay for the car. One must bear in mind that the interest rates applied to personal loans are primarily based on the borrower’s credit score, should they decide to pursue financing for vehicle acquisition.
What other factors to keep in mind when financing a car with a personal loan?
Interest rate
Personal loans, being unsecured, often come with a hefty price tag in the form of high-interest rates. To secure the best deal for you, it’s wise to search for a loan that offers affordable rates diligently. Visit at least 3 to 5 lenders, compare the interest rates, and choose the one that provides the rate you desire.
Loan amount
When pursuing a loan, the size of your loan is primarily determined by your income. The more significant your earnings, the larger the loan amount you can acquire. However, it’s crucial to consider the full cost of the asset you plan to purchase with the loan. This will aid in accurately assessing the amount you should borrow to meet your financial needs adequately.
Repayment Period
Another factor to consider is the repayment period which has an effect on the amount of interest you’ll pay off the loan. In Singapore, some financial institutions offer a repayment period between 1 to 7 years, while others offer shorter repayment periods of no more than 12 months. Choose a repayment period that fits your financial capacity.
Credit Score
A strong credit score greatly increases your chances of securing a personal loan. However, if your credit score is between 1000 and 1723, it means you have bad credit. And your loan application may be rejected, as you have been deemed a high-risk applicant.
To increase your chances of loan approval, you have to build up your credit to near the score of 2000. Achieving this goal might take time and effort, so paying on time and regularly monitoring your credit history is advisable. If you get an excellent credit score, you’ll get a loan approval with attractive terms and rates.
Thoughts
Most people are thrilled by the idea of purchasing their own car. In Singapore, securing a personal loan to purchase a vehicle is a viable option. Yet, prior to making this significant commitment, it is wise to thoroughly consider the car’s pricing, your credit standing, income, and a well-crafted strategy for loan repayment. By doing so, you can simplify the repayment process and fully reap the rewards of vehicle ownership.
Responsible Money Lender – Accredit Moneylender
If you’re looking for financing options, Accredit Moneylender can provide a valuable solution. By collaborating with Accredit Licensed ML, you can secure a personal loan in Singapore with peace of mind. Our commitment to complete transparency means you won’t encounter any hidden fees, and our interest rates are highly competitive. Take action now and select Accredit Moneylender as your responsible partner for lending.
Apply today and experience the benefits of working with a trustworthy money lender.
