What does it mean to refinance your car loan in Singapore?Posted on: March 11, 2019, by : Ari Kaka
Driving in Singapore is a big expense not only because COE and other taxes exist but because car prices are higher than in other countries. Most people who desperately need a car, and can’t lose time in public transport reach the moment for a car loan. Unfortunately, not always car loans have the best interest rates and terms so refinancing them is a common practice. Refinancing any loan is a serious task so calculating properly different interest rates and different taxes is essential. We made a guide on how to refinance your car loan in Singapore without losing your mind in terms and clauses.
Why I should go through the whole process of refinancing when I already have a car loan?
You don’t have to do it but if you want to reduce the final sum you are going to pay it is a good idea to look for possible options. There are many companies, like Accord Motoring, where you can refinance your car loan in Singapore with better interest rates and lower taxes. The reason is hiding in a few possible benefits:
- New car loan means new lender with better discounts or rebates on other products. Although this sounds like an insignificant improvement, people always love to have something free of charge;
- The biggest reason for refinancing car loan is reducing repayments. This is possible when the interest rate is lower and additional taxes are the same or lower. No matter how small the difference is – it will be a significant change when you sum it up for the whole period;
- Extended balloon payment – additional benefit if you have to pay the lump sum;
- The last benefit is that you can change your LTA classification – most people take advantage of that and convert it to drive for Grab right after they finish their primal loan.
How can I refinance my car loan in Singapore?
Mature behaviour requires scrutiny. The loan market is a big one so everyone needs to do deep research which offer is the best one in his case. However, there are some main points that people should look for:
- What will be the interest rate? Lower interest doesn’t always mean a lower sum in the end. Be careful and read carefully all papers;
- For how long will you have to pay the interest rate? Some interest rates are lower simply because you should pay them for a longer period;
- Repayments should be less;
- Make sure there is no penalty interest if you repay your loan earlier;
- Make sure there is an insurance product included;
- Choose a legal lender. This is good advice for every loan you take from a new place. Checking if a lender is licensed is an easy task so don’t ignore it.
Except for the interest rate, you have to check what is the maximum loan amount. Have in mind that different lenders offer different amounts so you have to compare them carefully. Check what additional fees are because they might be higher and your loan won’t be profitable. Don’t forget that the idea of refinancing is to pay less, not pay more for taxes and fees.
What could go wrong?
If you don’t do your homework, the chance to pay more is a real danger. Extending the loan term and decreasing interest rates don’t always is the best thing and you have to calculate the difference. Otherwise, you won’t take a wise financial decision.
Another thing that might go wrong is paying extra in taxes for paying early your first car loan. Make sure that you don’t have such a clause in your loan contract.
Compare all available options and choose the best three of them. When you are ready, compare the terms and conditions of your loan with available options. When you are ready – apply for the loan, then pay the old one, and don’t forget to close the account because you might have month taxes.