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Bank vs In-House Car Loan: Which Is Better?

Man agreeing after a tough decision on bank loan or car dealer in-house car loan
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The main difference between bank loan and car dealer’s loan is that it is more convenient because they don’t require credit checks, they will do full-fledged paperwork handling, and the turnaround time is much faster than banks. However, th interest might be higher than bank at 4.8% on average.

If you need financing, you can find it conveniently in Singapore. Banks have the friendliest rates and have unbeatable promotions allowing you to save so much during your first paying years. Financial institutions and licensed moneylenders can provide borrowers with alternatives. In-house car financing options, especially for car purchases, are available too.

Truthfully, numerous options are great for finding the best, money-saving, and value-adding choice perfect for your needs. However, it can make you think so much of your choices, you’ll never make one.

To help you quickly decide, here is a guide to help you compare the pros and cons of both bank loans and in-house car loan Singapore. Plus, we’ll give you insight on alternative funding options too.

In House Loans

Car manufacturers and distributors prioritize giving customers an excellent time using their in-house car financing service. Truthfully, this is convenient. They have no credit checks, and it’s a secure loan because your car is the collateral.

Additionally, borrowers benefit from in-house car loan because of their fixed interest rates and friendlier faces. Some Singaporean car dealers design in-house loans to be completely compatible with their borrower’s income and current financial situation. This flexibility is unavailable with most banks and financial institutions.

Loan Amount

Your maximum in-house car loan amount is 100% of the vehicle’s total value. However, some car dealers might reduce this amount to 80-90%, especially if you’re planning to buy pre-owned vehicles. Many pre-used vehicles in Singapore are still in good condition because of the Certificate of Entitlement’s (COE) five-year validity, discouraging many Singaporeans to prolong their vehicle ownership.

Be aware that in-house loans will have terms and conditions different from banks. Most financial institutions have streamlined loan and financing procedures. These differences might be beneficial or troublesome for borrowers, so read them carefully. One example is the total debt servicing ratio (TDSR), which in-house car loans does not consider to the advantage (or otherwise) of borrowers.

Interest Rate

For most car dealerships in Singapore, the average interest rate can reach about 2-5% for in-house car loans. Interest rates can be higher for used vehicles because of their fast-decreasing value.

In-house car loans will not use credit scores. However, if your income is too low to accommodate their minimum payments, you might see your interest rates peak higher at 5%. Additionally, this means that your EIR might be higher than banks.


You can expect your trusty dealer to handle the entire process with minimal requests on your part. Furthermore, with the relatively low certificate of entitlement bidding minimum of SGD 28,000 in 2020, their focus is to make a convenient and hassle-free process for their borrowers.

However, in-house car loan will ask an administrative fee capable of reaching up to SGD 500- SGD 600 on average. If you’re buying higher-priced vehicles, such as premium vehicles, the administrative costs, as dealers often label them, can reach up to 1% of your total financing costs or SGD 1,200, whichever is greater.

Turnaround Time

Car dealers in Singapore work faster if you compare their sale-chasing perseverance to other countries. Once you’ve learned your car loan interest rate relative to your purchase price, you can drive out your new or used car in one to two days.

Most car financing services available from a car dealer will typically take you about 1-7 years to pay the entire financing. Remember: you’ll be paying a fixed-interest loan per annum. A car dealer offering a 4.8% interest, SGD 84,000 loan on a 7-year maximum period has you pay SGD 1,336 per month. In doing so, you’ll pay a maximum of SGD 28,224 added interest.

Financing TypeLoan AmountInterest RateServiceTurnaround Time
In-HouseTotal Vehicle OMV4.8 on averageFull-fledged paperwork handling with SGD 500-800 (or 1% of total loan) administrative costs1-2 days
BanksDepends on borrower’s credit history, financial standing, and other bank requirements2.5-3.5% fluctuating on annum (depending on bank)Bank paperwork only. Borrowers will handle all vehicle ownership paperwork2-3 weeks (or more)

Bank Loans

Banks and financial institutions will always provide their car loans and other offers at affordable prices than car dealerships. They continue to adapt and serve borrowers with good credit in the best way possible. Truthfully, a bank will consider your total debt servicing ratio before they decide positively on your financing.

Additionally, you can take advantage of the lower yearly interests banks have over car dealer financing. For example, if car dealers give you a 4.8% fixed yearly interest, banks can offer you 2.8-3.6% interest rates fluctuating between those figures per year. Once again, this can work to the advantage or disadvantage of buyers.

Loan Amount

With the deepest pockets available nationwide, you can expect banks to cover new or used car costs regardless of range. However, your financial standing and credit score will affect the total loan amount you’ll receive from banks. It goes without saying that any borrower with poor credit scores will highly likely have lower loan amounts available.

Truthfully, a bank car loan works best for individuals with great credit scores and good TDSR range. Otherwise, a in house car loan is the best option borrowers have.

Interest Rate

Bank loan interest rates can fluctuate between 2.7-3.5%. Therefore, if you’re paying for a vehicle with an open market vehicle cost of SGD 84,000, you’ll be paying SGD 1,189 per month. If your loan term extends up to seven years, you’ve paid a total of SGD 15,876 by the time you finish.

However, keep this in mind: seven-year loan terms are sometimes impractical because Singapore’s government will ask you to go through a COE renewal within 5 years. If you fail, you’ll still pay the remaining vehicle balance for two years.


You can expect banks to handle paperwork on their end with minimal effort on your part. They’ll review your eligibility and supporting documents. On average, you can receive an all-clear notification and loan release date within 2-3 weeks, which is longer if you compare an in-house car loan team’s 1-2 day servicing period.

Additionally, you’ll contend with paperwork on your own. While car dealer staff will assist you at this point, the paperwork’s bulk immensely rests on your shoulders. In some cases, banks will ask you to use their preferred car dealerships, which might limit your vehicle options.

Turnaround Time

The government of Singapore heavily regulates banking activities, which explains their lengthy review and approval period than in-house loan provider services for new or used cars. Truthfully, this might discourage you from pushing through with car financing.

Fortunately, you can see average interest rates, loan limits, and other comparative data conveniently using comparison website search filters and algorithms. For example, you can conveniently check out the latest car loan rates and limits.

Criteria for Finding the Most Compatible Loan

Each Singaporean borrower has a respective set of conveniences, loan limits, and appetite for hassle, making it impossible to create an all-encompassing criteria to find the perfect loan. However, we believe these three to be the best way to find a car loan that effectively works for all your needs.

Affordable Car Loan

With loan comparison websites, such as Loan Advisor, you can quickly find competitive rates on par or lower than in-house financing and bank offers. However, if you find an offer that isn’t the lowest rate but offers a wide range of conveniences, then go for it.

Efficient Service

In-house financing and car loans are convenient because staff will handle the paperwork. But, you’ll be surprised with the enormous administrative fee charged against you afterward. On the other hand, banks won’t highly charge you for processing, but you’re going to handle the entire administrative process on your own. At this point, it’s up to you to pick which poison can work well for your needs.

Fast Approval of Loan Application

Banks are sluggish in loan application approvals and with good reason. Their activities are heavily regulated. On the other hand, in-house financing is fast, but costly.

Other Car Loan Funding Options

If you’re wondering about any easy way to finance vehicles in Singapore, it’s not entirely impossible. Some personal loans, even those that licensed moneylenders can offer you, have decent loan tenure allowing you to quickly pay for a vehicle.

Personal Loans

A licensed moneylender personal loan services have minimum requirements. Additionally, you’ll receive the following perks.

  • Your loan application will have approval within hours if you submit all necessary requirements
  • You can borrow up to six times your monthly salary, which is sufficient to pay an average open-market vehicle price
  • Licensed moneylenders can only charge up to 4% interest

Don’t Overthink Your Final Decision

You might think the Singapore government made it difficult to get car financing and own new or used cars on purpose to prevent vehicle overpopulation in a country with limited land. While this might be true, it’s not impossible to pay and find the perfect vehicle financing that’s fast, hassle-free, and effective.

If you’re looking for the best financing options, you can always count on Loan Advisor to provide you with the best options. Visit our website today and find the perfect deal for you.

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