How To Calculate Car Loan Interest: A Complete Guide To Managing Car Loan Payments In Singapore

Personal Finance

How To Calculate Car Loan Interest: A Complete Guide To Managing Car Loan Payments In Singapore

September 11, 2023

Acquiring knowledge of car loan payments is the first stride towards making a wise decision in selecting the most optimal car loan option. Irrespective of one’s preference for purchasing a secondhand or brand-new vehicle, one must possess the knowledge and skills necessary to know the method of calculating the vehicle loan interest accurately.

This step will prove advantageous when conducting a comprehensive analysis and comparison of the various vehicle loan options accessible in Singapore. Moreover, knowing the overall and monthly expenses relating to your auto loan enables you to practice effective budgeting while evaluating your financial position critically.

Continue reading to discover the fundamental aspects of automobile loans, car loan computation, strategies for minimising one’s loan burden, and potential charges applicable in Singapore.

Fundamentals Of Car Loans In Singapore

Before learning how to calculate car loan interest, it is crucial to understand the fundamentals of car loans in Singapore. But first things first, let us define what interest is.

The financial institution offering you credit remains the car’s legal owner until you completely repay the loan. As a result, you must pay interest, the amount the lender assesses to allow you to utilise their funds to finance your vehicle.

Determining The Maximum Car Loan One Can Obtain In Singapore

The highest percentage of your vehicle’s open market value (OMV) that you can borrow is 60% or 70%:

  • The maximum loan-to-value (LTV) ratio for the vehicle with an open market value (OMV) of less than or equal to $20,000 is 70%.
  • The maximum loan-to-value (LTV) ratio for motor vehicles with an open market value (OMV) exceeding $20,000 is 60%.

Thus, they may approve or deny your loan amount. Before determining the eligible amount for a car loan, your bank or lender will consider your existing debt and capacity to repay. Additionally, your auto loan must adhere to the regulations set forth by the Total Debt Servicing Ratio laws.

Working Out Car Loan Computation In Singapore

Working Out Car Loan Computation In Singapore

To effectively utilise a calculator for vehicle loan instalment or manually calculate your auto loan payment, you need to know the following:

  • Loan sum
  • Loan duration
  • Interest rate

It is necessary to utilise the car loan calculator specifically designed for Singapore. The tool is efficient and user-friendly, making it ideal for anyone who avoids somewhat complex numerical calculations.

Mathematical Approach To Work Out Car Loan Payments

Are you in the mood for some mental workout? Use the calculation I = T x R x P to determine your interest rate and payment schedule.

‘I’ represents the interest rate.

‘P’ stands for ‘principal,’ or the initial loan amount.

‘R’ denotes the interest rate.

‘T’ stands for tenure or the loan’s period.

If you want your math to work out correctly, use the same time units to measure the loan term (T) and the interest (R).

For instance, if you’re employing an annualised rate, you’ll need to figure out how long your loan will last in years (say, seven) rather than months (84).

Once you know how much you must pay in interest, you can calculate your average loan payment. Then, incorporate the initial vehicle loan sum into the interest rate.

Divide the loan with the remaining months when calculating the monthly car loan repayment sum. Easy as pie.

Crucial Points To Consider

Understanding the monthly instalment amount and interest accompanying a car loan is advisable. However, it is essential to consider the potential fees and charges that may also apply to the automobile loan, like:

  • Administrative fees
  • Processing fees.
  • Fees for repaying early.
  • Penalties for repaying late.
  • Interests for late repayments.

Comparing and contrasting car loans accessible in Singapore is essential. In addition, it is crucial to consider including car insurance expenses within one’s budgetary considerations while acquiring a vehicle.

The possession of car insurance is vital for those who wish to operate a motor vehicle inside the confines of Singapore. Similar to researching auto loans, comparing car insurance quotes thoroughly is advisable. Carefully evaluating the extent of coverage and additional benefits provided by each insurer.

Calculations Regarding Vehicle Loan Payments

Employing the data you acquire from Car Loan Payment Calculations is advantageous. Engaging in comparative analysis and repeating the calculation procedure for each distinct automobile loan option under consideration is advisable.

It is imperative to carefully evaluate the loan payment sum to choose the most cost-effective option. Focusing on the vehicle loan having the least monthly repayment instalments without considering the total loan payment sum or loan duration would be unwise.

Ready to take the next step and secure the best car loan deal in Singapore? Explore loan options and competitive rates available at Credit Thirty3. Our team of experts is here to guide you through the process, ensuring you get the ideal financing solution that suits your needs. Don’t miss out on your dream car. Click here to start your car loan application now!

Strategies To Reduce Car Loan Payments

In addition to shopping around for a low-interest vehicle loan, these are some more reliable techniques for reducing your monthly instalment:

  • Decreasing the amount of money you borrow
  • Reducing the length of your loan
  • Buying a cheaper vehicle

You shouldn’t underestimate the value of preparation. Check your budget to see whether the monthly payments are affordable, and evaluate if you can obtain one with a shorter repayment period. When paying off a loan, the longer the term, the higher the interest will accrue.

Frequently Asked Questions

What Should Be The Monthly Repayment For A Car Loan Amounting To $30,000?

Let us consider the scenario in which you opt for a car loan, with 1.68% as the annual rate. With a loan term of 5 years and the sum of $30,000, the monthly instalment will be around $542.

Is 6% A Favourable Interest Rate For An Automobile Loan?

Actually, no. Typically, prominent financial institutions in Singapore provide automobile loans with competitive interest rates, falling from 2% to 3% per annum. They are significantly more affordable than what vehicle dealerships provide, with annual rates often falling between 3.7% and 4.5%.

Hence, a 6% per annum interest rate is not ideal despite its seemingly insignificant disparity on the surface. However, with careful calculation, it becomes evident that this relatively small difference can considerably amplify the whole borrowing cost.

Is It Advisable To Go For A Vehicle Loan Lasting For 72 Months?

Most car purchasers in Singapore prefer taking the 72-month car loan. Individuals are commonly eligible to obtain loans for seven years, equivalent to 84 months, to reduce the monthly instalments payback obligations.

There is no universally applicable guideline on the optimal loan duration one should select. It is important to note that an extended loan tenure will result in more interest paid.

It is imperative to guarantee that the monthly instalment sum works for you. You should also ensure that you anticipate no difficulties repaying this loan every month during the forthcoming years.

Is A Car Loan For Five Years Unduly Lengthy?

In view of the high price of automobiles in Singapore, it would be prudent for drivers to contemplate a car loan lasting for five years as a viable option, assuming they possess the financial means to comfortably meet their monthly repayment obligations. In the long run, the less time you spend paying off your auto loan, the less money you will spend on interest.

In addition to reducing the total interest paid, a shorter loan period facilitates a more rapid accumulation of equity in the vehicle. Equity allows individuals to exercise various options, such as trading in or selling their vehicle, while minimising potential losses, primarily due to the depreciation costs relating to the car.

Preferably, individuals should select the vehicle loan length that is the shortest. However, it is essential to consider that individuals may possess varying priorities, thus necessitating cautious deliberation before choosing the most suitable car financing alternative.

What Are The Implications Of A $0 Deposit On Vehicles In Singapore?

Although acquiring a new car without any initial payment may appear highly desirable, the reality of $0 down payment car acquisitions is considerably different.

Financial institutions providing such offers generate profits by imposing outrageous interest rates, which are already intricately part of the price they quote prospective clients. Evaluating such an offer before committing to such an agreement is advisable.

Click here: Get a car loan with flexible repayment terms and conditions today at Credit Thirty3 in Singapore.


To assist you in comprehending more fully the amount you will incur in monthly payments and total interest for different interest rates on loans of a specific size, you can use a car loan interest calculator.

These tools can additionally facilitate the comparison of interest rates on any particular loan, thereby enabling a comprehensive understanding of potential savings resulting from an interest rate reduction.