Frequently Asked Questions

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Car Financing

1. What is the difference between “Flat interest rate” and “Effective interest?
2. What are the different types of Hire Purchase (HP) Agreements?
3. How do I calculate the total interest payable and the monthly instalment for the car financing?
4. What is the minimum age to qualify for taking up car financing?

Question1: What is the difference between “Flat interest rate” and “Effective interest?
Answer: “Flat interest rate” is the rate of interest that is determined at the time of application and is fixed for the duration of the Hire Purchase (HP). “Effective interest rate” is the actual interest rate you pay as a hirer on your car financing over a specific tenor.

Question2: What are the different types of Hire Purchase (HP) Agreements?
Answer: There are 2 types of HP Agreements namely:
(a) HP Agreement (governed by the Singapore Hire Purchase Act) - Applicable to hire purchase financing of motor vehicle not exceedingly S$55,000 in value (excluding cost of COE)
(b) HP Agreement (not governed by the Singapore Hire Purchase Act) - Applicable to hire purchase financing of motor vehicle exceeding S$55,000 in value (excluding cost of COE)

Question3: How do I calculate the total interest payable and the monthly instalment for the car financing?
Answer: For example if you are interested in taking up car financing of S$100,000 over a period of 10 years for a new passenger car, the total interest payable and the monthly instalment will be computed as :
Principal: S$100,000
Tenor: 10 years (120 mths)
Interest Rate: 3.50%
Total Interest Payable over 10 years = S$100,000 X 3.50% X 10 years = S$35,000
Monthly Instalment = (S$100,000 + S$35,000)/120 mths = $1,125

Question4: What is the minimum age to qualify for taking up car financing?
Answer: An applicant must be at least 21 years of age and no more than 65 years at time of maturity of the financing.

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