We hope this helps those who are considering refinancing your vehicle or vehicles, because yes, it can be done. And it is way better than taking a loan from a licensed money lender for several reasons, not least because the interest rates are just so much lower than those offered by money lenders.
Here are some common questions we can asked, but if you have a question that is not answered here, please feel free to contact us using the form on the right of this page, or call or WhatsApp 92782880. We are happy to be of assistance.
Why refinance your car?
Common misconception: People refinance to save money. This may work for a housing loan, but in our experience, the differences in overall interest from a market rate adjustment on vehicle loans is minor, because the loan amount is much smaller than the astronomical amounts for housing. This rules out refinancing your current car loan for savings when interest rates have gone down – you will hardly benefit as there are administrative fees involved. So why should you refinance and which situations benefit the most?
Most customers refiance for cash flow – whether used in business, investments or other purposes such as a home renovation project. This is because the interest rates for unsecured business or SME loans or home renovations are higher than from vehicle financing. The banks charge higher for unsecured loans as these are generally riskier! A car loan is a secured loan as the car is your collateral.
So if business expansion or investment opportunity is what you are looking at, yes, financing through your car can save you interest. Take a car loan instead of an unsecured loan, either way you will free up some cash flow, but you can free it up at a lower interest rate!
These conditions make it possible to get cash from financing your car:
- You paid for your car in cash and there is no loan on it currently
- You paid a high down payment for the car and the loan amount is below it’s current market value
Any other reasons to refinance a car?
Yes, we have encountered customers with various other reasons to refinance, some are not financial at all. Some of these include
- To improve overall Total Debt Servicing Ration (TDSR) for other loans such as housing loans
- To satisfy workplace requirements
- Unhappy with current finance and their practices – such as fees for late charges and other reasons
- Using funds from car finance to pay off other loan commitments which have a higher interest rate – personal loans, renovation loans and others
TDSR can be lowered by paying down some of the loan amount and refinancing with another finance institution, or by choosing to lengthen the loan repayment period (subject to a maximum of the COE lifespan). The lengthening of the loan reduces the monthly payment requirement and hence makes your TDSR better.
Is there any disadvantages to refinancing your car loan?
When refinancing your car, contact us for a sit down discussion to look through the sums before going ahead. As there will be situations where the fees involved may outweigh the interest difference of changing from one car loan to anther car loan. We will guide you through the process and lead you to understand the situation fully before you commit.
How do I avoid hurting my credit score when refinancing my car loan?
Refinancing does not hurt your credit ratings at all provided you are always on time with your payments. Here are some things that do hurt your ability to get other loans at a future date when you need to, these are reflected in the credit bureau score that everyone has:
- Late payments for loans and or credit cards
- Getting into a protracted argument with a financing institution (e.g.: banks and credit card interest)
- Others making a legal claim against you – an outstanding lawsuit
- Getting loans from licensed money lenders
A legal case remains under your name for a long time and may never be expunged from the record. Don’t be quick to escalate arguments to court, settle by negotiation and out of court, it is always less costly and will not result in any long term record. When a legal matter is settled, please do obtain a letter of conclusion from the legal firm representing the opposite party, it will assist to explain to banks that you are no longer entangled in a lawsuit and which means you may receive a loan from the banks, subject to other factors such as your proof of income being sufficient.
Am I eligible for the car loan? Can I refinance a commercial vehicle such as a van?
- Both commercial and private vehicles can be refinanced
- Minimum loan is $20,000 from most banks, in-house loan subject to case by case assessment if less than $20,000
- Minimum monthly income of $2,000 or above
- 21 years old and above
If you have further queries, do feel free to contact us using the form on the right.