Published on May 9, 2021

How to ensure you qualify for a car loan: 5 tips

In-House Used Car FinanceNew Car FinanceUsed Car Loan Finance

For most Singaporeans, not only does a car provide convenience when commuting around the island, but it is also a sign of success. This can be attributed to the fact that Singapore is one of the most expensive countries in the world to own a car. For instance, the price of a family sedan

starts from approximately S$110,000! Thus it comes as no surprise that almost anyone in Singapore who owns a car, needs new or used car financing plans. 

While getting a new car can be exciting for many, it may also take some time before you can drive away with it due to the car loan process. Here are five tips to ensure that you qualify for a car loan and speed up the process of loan approval.

1. Check your credit score

Since 2016, the Monetary Authority of Singapore (MAS) raised the loan limits by 10% across the board, bringing the maximum loan quantum up to 70% of the purchase price if the OMV of your car is worth S$20,000 or less. The maximum loan quantum is 60% if your car’s OMV is more than S$20,000.

But this does not mean that it is a requirement from the bank to give you the maximum loan quantum. There is a possibility that the bank may lower your loan quantum if you have a poor credit score. There is also an increased risk of the bank rejecting your loan application altogether should your credit report reflect serious issues such as having a credit grade of ‘C’, or any statement of default. Hence, it is recommended that you build a good credit score before thinking about finance plans for your new car or even loan for a used car purchase. 

Some factors contributing to a lower credit score include late repayments of credit card bills, multiple loan applications within a short period of time. If you do not have a credit history at all, you can always build one by signing for a credit card or take up small loans that you are confident with paying back in full. 

2. Secure other major loans

It is recommended that you avoid taking on new or used car loan finance plans if you have not secured the  major ones such as house or business loans. Your credit background will be checked when you make a property or business loan application. By securing a car loan before your property or business loans can negatively impact your Total Debt Servicing Ratio (TDSR). 

Under the TDSR, all loan repayments are capped at 60% of your monthly income, and this also factors in all of your loan obligations such as credit cards, personal loans, business loans, etc.

3. Have sufficient emergency funds

Build Up an Emergency Fund
Build Up an Emergency Fund

Besides having a stable job and source of income, you should also have an emergency fund of at least six times your monthly income before being ready to finance your new car. Having an emergency fund provides you with a safety net in cases like retrenchment, allowing you to continue paying off your monthly car loans.

4. Understand how car financing works

Car loan approvals take into account factors like your current debts and monthly income. Most car payments take between 20 to 40% of your monthly income, thus you should find out what payment percentage is applicable to you, before applying for a loan that you can afford.

Furthermore, you also need to work out the expense ratio of your car, and ensure that the monthly costs such as road tax, maintenance as well as car insurance do not exceed 20% of your monthly income. This amount should include your loan as well.

5. Decide on a car financing

Car Finance Providers
Car Finance Providers

Now that you have identified your budget and ideal loan term, you are now ready to shortlist a finance provider. You can either take on a direct bank loan, your dealer’s in-house financing plans, or with the help of a trusted finance company.

Bank loans tend to have lower interest rates since there is no need for a middleman fee as compared to going through a dealer. The downside of this is that the approval process tends to be stricter, with non-negotiable loan terms.


Owning a car in Singapore may be expensive but it is certainly not something unachievable. Getting a car loan from finance companies like Swee Seng Credit provides you with a hassle-free loan experience and attractive interest rates.


From in-house used car financing plans to new car loans, and more, Swee Seng Credit’s vehicle finance solutions lets you enjoy more financial freedom with your dream drive! Find out more about our finance solutions today.