In the market for a new set of wheels? You’ll be glad to know that you can now get your car loan approved before you even step into the showroom, bypassing days of waiting and pages of paperwork in the process.

This is thanks to online car loan applications offered by UOB, DBS and earlier this year, OCBC.

Such pre-approved car loan packages offer greater convenience and certainty, but are they the best option for all drivers? 

Let’s find out. 

What’s the interest rate for pre-approved car loans (vs traditional car loans)

Pre-approved car loans offer competitive interest rates

In the table above, we compare the interest rates for pre-approved car loans from DBS, UOB and OCBC against three other financial situations that also offer car loans.

With interest ranging from 1.68 per cent to 2.78 per cent per annum, pre-approved car loans are priced similarly to car loans from other providers. 

Hence, there’s no strong deterring reason not to at least check out these pre-approved loans.

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Electric cars get the best rate (with OCBC)

If the car you’re eyeing is an electric vehicle, know that you can avail yourself of an unbeatable rate of 1.68 per cent for a pre-approved car loan from OCBC. 

This is a whole 0.6 percentage point lower than the rate for a car that runs on petrol or diesel. While it may not seem like much on paper, given the high prices of electric vehicles in Singapore, you could end up with significant savings.

How do pre-approved car loans work?

Pre-approved car loans work the same way as other types of loans. You can apply online at your chosen bank. 

Once approved, you will be informed of the maximum amount you can borrow, which gives you greater clarity on the actual car make and model you can buy.

Your bank will honour up to the maximum amount indicated.

In contrast, traditional car loans are only applied after you have chosen the car you want to buy.

Your dealer will help you with the application, but you will need to fill out some paperwork, which could be a lengthy process. 

Then, your application will be sent for processing, which usually takes a few days. During this time you will not know whether your loan will be approved, which leaves your car purchase hanging.

How do I sign up for a pre-approved car loan in Singapore?

To sign up for a pre-approved car loan, start by going to the relevant pages on DBS, UOB or OCBC websites. 

Follow the instructions on the page to fill in your application. You can also use MyInfo for automatic retrieval of your personal details, which shortens the process further. 

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How much can I borrow using a pre-approved car loan, and for how long?

As per prevailing regulations, you may borrow up to 60 per cent or 70 per cent of the car’s purchase price or valuation price, depending on it’s OMV.

The maximum tenure of a car loan is seven years. 

Do note that the limits above are subject to debt-control regulatory schemes, including Total Debt Servicing Ratio (all debt must not exceed 60 per cent of monthly income) and credit rating.  

Can I use pre-approved car loans with all dealers in Singapore? 

Well, pretty much. OCBC is said to cover 11 authorised distributorships on the island, which account for the majority of car purchases here. 

For UOB, companies like Audi, Mazda, Cycle and Carriage, Nissan, Subaru and Performance Motors are among its list of partners for pre-approved car loans.

Meanwhile, DBS’s pre-approved loans can be used with the DBS Car Marketplace.

Between the three, there’s a high chance that you can make use of a pre-approved car loan to finance the purchase of your ideal car.  

This article was first published in SingSaver.com.sg.