Buyer beware - Loan rates in Singapore

[Puny]

Re: Buyer beware - Loan rates in Singapore

Can someone explain to me rule of 78?
This is some sort of prepayment penalty right?

Kuvesh, this is quite straightforward - banks will impose a 20% penalty on forgone/unearned interest due to early settlement.

Upon full settlement, bank takes 20% of outstanding interest, for e.g. 2K, based on 20% of $10,000. This penalty is usually more severe in the earlier parts of the loan and due to the loan structure (i.e. more interest rather than principal repayment).

 

[thetuffmouth]

Re: Buyer beware - Loan rates in Singapore

Can someone explain to me rule of 78?

This is some sort of prepayment penalty right?

Click on the link and scroll to bottom of the page for explanation + calculations on rule of 78. Pretty straightforward.

DBS Singapore | Personal Banking | Loans & Mortgages | Auto Loan

 

[Jedi R]

Re: Buyer beware - Loan rates in Singapore

It has being like that for a long time. Rule of thumb to calculate the effective interest rate is to multiple by 2 the interest rate that the dealer quote you. So if he/she said the rate is 2.5%. You just x 2 to get 5%.

 

[MTM_Racing]

Re: Buyer beware - Loan rates in Singapore

Good info., but I guess that has to be the case if you need to take loan

 

[proscar]

Re: Buyer beware - Loan rates in Singapore

Occasionally may work to your advantage.

I took a $30k loan for my Sti, repay over 1 year to qualify for loan discount of $1.5k. Interest for that 1 year only works out to about $600 at their 1.98% interest rate. So I still earn $900, not to mention the essentially interest free loan for a year.

They refuse to give me the discount if I don't take the loan, but min repay period is 1 year, so works well

 

[bmwers]

Re: Buyer beware - Loan rates in Singapore

if you have cash, its better not to loan .

know a guy who prefers to pay for 10 years installment who believes that if any unfortune happened to him, his family still have the cash and the loan coy will not go after his family...

told him more economical to save the interest by reducing loan and buy life insurance from the savings...

he is a bankrupt now.....

think he is a smart ass or stupid F?

 

[bimmerguy]

Re: Buyer beware - Loan rates in Singapore

BTW, so far at BMW / Volvo / Toyota / Honda, if you dun take up the in-house loan and insurance, I have told that there will be an additional $1000-$2000 on top of the list price.

In fact, some SEs will only give out freebies if you take up certain amt of loan. In my case, apparently the total interest incurred is more than covered the freebies amt. So I told the SE that what is diff?! If it is freebie, why am I paying for it indirectly! She managed to work out something, based on the lower loan amt I agree to sign up. But I know I have been screwed somewhere still.......buying car in SG is a liabliity, no matter what

 

[vd383]

Re: Buyer beware - Loan rates in Singapore

just sold my car.....

total interest for a 40k loan over 36 months = $3420
total int i paid incl surcharges after 16 months [out of 36 months] = $3224 !!!!

blood suckers!

Maybank - not only rule of 78
but also 20% surcharge
& 1% of principal ($400)
[plus $1500 if settled within first 12 months!!!]

hence.... if i had continued paying for the car.... my interest would have been $196 for 20 months!!

 

[kickboxer]

Re: Buyer beware - Loan rates in Singapore

so cool! i am sgrean residing in bkk and thinking of getting a loan to finance my 523i bmw. thanks for the insight!

 

[sting936]

Re: Buyer beware - Loan rates in Singapore

I think the real fact is most people are unwilling to fork out the lump sum cash upfront, and also there are many who do not have that much cash to pay for a car.

Most people are living on borrowed monies - or living on future earnings to put it nicely.

 

[Singapore Brummie]

Re: Buyer beware - Loan rates in Singapore

I think the real fact is most people are unwilling to fork out the lump sum cash upfront, and also there are many who do not have that much cash to pay for a car.

Most people are living on borrowed monies - or living on future earnings to put it nicely.

I call this living beyond your means.

Unfortunately, most people do this, spending more than they can afford and it is a viscious cycle of surviving whilst maintaining a comfortable life style. You become a slave to money.

This is contrarian to those wealth guru's who say you should save as much as possible and make that money work for you. Compound interest is a beautiful tool once you build up a sizeable balance. You cannot do that if your spare cash (or savings) is used to finance a loan for a new car.

 

[sting936]

Re: Buyer beware - Loan rates in Singapore

I believe probably 80% to 90% of us are living beyond our means given the fact that many of us will need to take up a loan to service our house. Moreover it is worst when many has to take a loan for 25 to 30 years in order to pay for a house including our so called "Affordable" HDB!

But of course taking a loan to service a house is slighlty better at least it is an "Asset" that may potentially appreciates while a car is a depreciating item.

 

[Jedi R]

Re: Buyer beware - Loan rates in Singapore

Totally agreed with you... A lot of people are highly geared... Most of them do not know how to do their sums. They just work out what they need to pay monthly and then decide whether to go for it.

They simple ignored the amount of interest they have to pay which is alot !!!!!!

A lot of them do not plan for their future like retirement. They simply spent as long as its within their monthly salary. Very risky assumption.

 

[mike211]

Re: Buyer beware - Loan rates in Singapore

hi ...about your calculation is not wrong but what satines sais is very true... all the while singapore is using this method for car loan... Maybe you are advising people not to take too much loan if you have the CASH...Anyway, u did a good job to enlightenment us in the loan scheme

 

[gotham88]

Re: Buyer beware - Loan rates in Singapore

Hi guys - so for the many who have to take a loan (myself included) - can the kakis here share which bank or finance company is offering the lowest rate that you know? This would benefit many who are about to take a loan.

 

[8NINER]

Re: Buyer beware - Loan rates in Singapore

does buying used car avoid rule 78?

 

[gtr_Gtti]

Re: Buyer beware - Loan rates in Singapore

new car current rate is 2.65, but some banks still offer 2.35 with min 30K loan for 6 years. However, rumours of increasing rates are coming soon.

used car has rule78 as well, but some finance companies do not practice that

 

[shawn.t]

Re: Buyer beware - Loan rates in Singapore

thanks for the info

 

[Bee]

Re: Buyer beware - Loan rates in Singapore

Hi all,

Firstly, i do not work for any banks or money lender.....(i am also looking to change my car! and needed loan! sigh...)
But I look at it objectively....

From the lenders perspective....if i were to loan say 200k to new car owner...what are my risk? Worst case senario....1) he may not be able to pay? 2) he may declare bankrupt?. What happen to my 200K? All i can get back is the car which is a liability.
Unlike Housing which is an asset, i would rather loan the 200k to a new house owner then a new car owner.
Therefore, i believe this could be 1 reason car loans have rocket high interest rate compare to housing loans which is 1 of the lowest lending rates....

Banks knows they could earn big money by doing car loans, and more if they start lowering their benchmark for car owners. And also giving big commissions for their salesman to sell carloans....we could see a sub carloan (aka subprime) crisis here in Singapore.....

 

[peng_cheng22]

Re: Buyer beware - Loan rates in Singapore

Hi

thanks for the cool info


But just to check

any idea what is the lowest Interest rate now?

Btw if you are shopping for car,i previosuly placed a S$10,000 deposit with PML but currently have to delay my purchase of new BMW. I am looking to let it go the deposit at a cheaper price. You can purchase any model that you like and use this 10k deposit.

I am currently willing to start my offer at selling my deposit at S$7500-S$8000 but i am prepared to accept lower and sincere offers. Please call/sms me if you are interested @98387353.


MK
98387353