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Thougt i start this on loans now and to monitor as well rates for vehicles and perhaps houses. One thing that got me thinking is that loans form a core business with the legal ah longs...er banks. One post i rem jamesc posted is that one ahs and shd be considerdd prett high on the list to be given a loan. Criteria? Choco can u elaborate? how does the bank deem if one is worthy or not? Lets keep tis academic and focussed so ppl can discern n think of their own ability or liability before taking a loan.

Is the HDB housing loan a reducing balance loan? If so, how is the monthly instalment amount calculated? I understand that if the monthly instalment is X, then X = Y+Z where Y goes toward principal and Z toward interest. Over time, X remains constant but Y and Z will change. How is X determined? How are the proportions of Y and Z determined? attached: example using CPF website calculator

CITIBANK is upending the traditional vehicle financing model here by pre-qualifying customers for car loans - thus bypassing the motor industry, which could lose millions of dollars in finance commissions if this practice is eventually adopted by other banks - PHOTO: AFP 18 Oct5:50 AM Singapore CITIBANK is upending the traditional vehicle financing model here by pre-qualifying customers for car loans - thus bypassing the motor industry, which could lose millions of dollars in finance commissions if this practice is eventually adopted by other banks. Under the Citi Direct Car Loan model, customers apply online for vehicle financing and those who are successful receive in-principle approval. With this conditional approval for a loan of a specified amount, a prospective car buyer can shop for a car knowing he or she has already qualified for financing. This is different from the current model where a new car buyer submits a loan application through the car company for the bank's approval. If the application is approved, the car company receives a finance commission from the bank, which can range from 1-2.5 per cent of the loan amount, depending on the quantum and tenure. Say, the average commission is 1.5 per cent and the average loan amount is S$100,000. For a top dealership selling 5,000 cars a year, with perhaps half of those purchases involving financing, the total commission could come to nearly S$4 million. To make its loan scheme more attractive, Citibank is offering flat interest rates of between 1.48 and 1.88 per cent per annum - much less than the prevailing market rate of about 2.28-2.68 per cent. Citi says its Direct Car Loan is a "no-frills service with no involvement of intermediaries, which in turn gives you the advantage of enjoying lower rates". At the same time, it is understood that the bank believes it is a more efficient and productive way of applying for vehicle financing. If the Citi model catches on with other financial institutions, it could spell the end of a longstanding relationship with motor distributors as well as finance income. But some car companies doubt that will happen. "Most distributors have a panel of banks they work with," says the managing director of a luxury dealership. "There are advantages to such tie-ups, the most important of which is customer convenience." He explains that car salesmen take care of the nitty-gritty for the buyer - something the latter won't get if a bank wants to be independent and go direct to the customer. "The salesman provides one-stop shopping," he adds. "If he doesn't do it, someone else will have to. So whatever is saved in commission may have to be paid out elsewhere." The sales director of another luxury dealership agrees: "It is part and parcel of buying a car. Of course, the salesman gets a commission but the emphasis is on customer service. Certain processes are involved; it's not as straightforward as it looks." Another factor working against the direct model is in-house financing, provided by the financial services arm of the manufacturer - something which all the German brands here have access to. "The dealer can easily take advantage of this alternative to keep financing in-house," the sales director says. He speculates that Citibank is rolling out this scheme because it wants to increase market share. The American bank is currently a small player in the vehicle financing market here, with DBS, OCBC and Hong Leong among the heavyweights. The latter three have tie-ups with most of the best-selling brands. "It's a good idea but, ultimately, it will be difficult to dictate terms to motor dealers." http://www.businesstimes.com.sg/transport/shake-up-ahead-for-car-loans

This was brought up a few days ago, in the "President" 's policy suggestions... Instead of stopping people using their CPF to pay for their mortgages, why not reduce the prices if HDB flats and not peg them to market prices with land prices? Then Singaporeans will have more money to save with lower HDB flats prices. What Would Happen if You Couldn't Use Your CPF Savings to Buy a Home? https://sg.finance.yahoo.com/news/happen-couldn-apos-t-cpf-213202807.html In response to President Halimah's call for policy suggestions, economist Walter Theseira suggested disallowing the use of CPF savings for home purchases. The measure was proposed in order to address inadequate retirement saving. This could be a logical concern, as putting a significant amount of one's retirement into home may leave them with too few remaining assets to retire comfortably, especially given the uncertainties around the 99-year HDB lease. This proposal would likely have a massive impact on the housing market—over the past decade, around S$82 billion was withdrawn from CPF accounts in order to purchase HDB flats. Given the scale of this proposal, it is worth asking: how would homeowners and prospective homebuyers be affected? How Does The Current System Work? Currently, the Public Housing Scheme (PHS) allows individuals to use their CPF Ordinary Account to pay for a part of their HDB flat purchase. However, homebuyers are limited in the amount that they can withdraw from their CPF savings for the purchase of a HDB lease. Limits are based on the number of years remaining in the lease at the time it is purchased. How Would This Proposal Affect the Real Estate Market? In the short-term, we expect that housing prices would drop as result of proposed rule. The rule will likely prevent many prospective homeowners from being able to afford to purchase homes, as they would have significantly less money to contribute to the purchase. The decreased ability to buy a property should lead to a decline in market demand, which should in turn cause a decrease home prices. For example, we can approximate the scale of change with some basic calculations. In 2017, $7.4 billion was withdrawn for the purpose of purchasing new and resale HDB flats. There were 22,077 resale applications and approximately 17,500 new units in 2017. Assuming average resale values of S$450,000 and average BTO prices of S$310,000, the S$7.4 billion withdrawn in 2017 represents about half (48%) of the total HDB market transactions (S$15.4 billion). Although these are rough estimates, roughly 20% of this might be supporting the actual home value, while the other 30% is being used to pay interest on home loans. In the long run, it seems reasonable to expect that HDB prices could drop by 10-20% as developers acquiesce to consumers' reduced purchasing power while prospective buyers take longer to build enough savings to buy a flat. Good News for Prospective Home Buyers? Overall, this proposal appears that it would be a net-neutral event for prospective home buyers. On one hand, these individuals may have to save longer in order to purchase a home since they will not be able to access their CPF savings. On the other hand, a drop in housing prices could offset their reduced ability to purchase homes. Additionally, these individuals will benefit from having additional retirement savings since their CPF will be able to compound untouched over a long period of time. Bad News for Existing Homeowners However, this proposal definitely could have a negative impact for current property owners. If all buyers in the market are less able to afford current real estate prices, the market forces tend to adjust the prices lower until people can afford flats without the help of their CPF accounts. This would ultimately mean a reduction of wealth for those who already own HDB flats. Additionally, current homeowners may face another negative consequence. Currently, individuals re-selling their HDB flats must refund their CPF account based the principal amount withdrawn for their HDB flat purchase, as well as the amount of accrued interest that the savings would have earned if they had not withdrawn from the CPF account initially. If property values drop significantly, these homeowners will have much more difficult time meeting this refund requirement. How to Make a Smooth Transition The proposal would certainly incentivize increased personal savings and promote wealthier retirement, which could be a financially responsible goal. In order to make this transition easier, however, there are a few concepts to consider. First, because existing homeowners must refund their CPF account based on the amount withdrawn for purchasing a home, declining home prices could put them at significant financial risk. One way to make the proposed rule more palatable would be to decrease the refund requirements for current homeowners. Additionally, if HDB leases were extended, policy makers might be able to both buoy short-term home prices as well as mend a long-term structural issue related to HDBs. It could also help the owners of older flats, whose retirement savings could benefit from increased resale value if leases were easily extended beyond 99 years. ____________________________________________________________________________________________________________ The truth behind proposal to prevent CPF for housing https://sg.finance.yahoo.com/news/truth-behind-proposal-prevent-cpf-065043359.html An academic’s suggestion which seemed to propose that the Central Provident Fund (CPF) monies no longer be allowed to be used to buy residential properties, has in recent days stirred the hornet’s nest. Walter Theseira, professor of Economics at UniSIM, made that suggestion in responding to President Halimah’s call for policy suggestions. Prof Dr Theseira said that the use of CPF savings for housing should be curbed in a bid to prevent the people from over-investing their savings on housing. He noted that people typically over-invest on housing as a way of “unlocking their CPF funds” and that installing measures to limit the use of CPF monies for housing could help the people conserve their savings for retirement and health. He said: “My view is that the CPF system tries to do a little too much, and we should consider focusing CPF on retirement and health…I do believe there is some over-investment in housing, which creates retirement risks if housing values do not grow, and this over-investment is because Singaporeans see housing as a way of unlocking their CPF funds.” One such measure the authorities could instate is slashing CPF contribution rates, Theseira suggested. This would mean that workers would receive more take-home pay that they could allocate to housing. “A CPF system focused on retirement and health would require lower contribution rates, and allow people more choices in using their higher take-home income on housing, investments, business, and family.” While Theseira advocated for a redesign of the CPF system “so that people no longer need to pay for housing out of CPF, by cutting contribution rates to focus on retirement and health,” he added that he is unsure what the right contribution rate should be. His views on the redesign of the CPF system drew sharp criticisms from the members of the public. Some were initially even confused that it was President Halimah who had made that suggestion in her call that there were ‘no sacred cows’. After the public uproar, the professor took to his Facebook to clarify that he did not argue for CPF to be removed completely or even for the housing component of CPF to be removed completely – since it may help people save for their first home. Theseira said: “What the right contribution rate should be, I cannot say. Perhaps some housing component remains important to help people save for their first home. Nor would I argue to remove CPF, because mandating retirement savings remains important, even for (especially for?) people who believe they can do a better job on their own. But this is a topic for another day.” Elaborating, the economist asked: “What choices would we make if a different policy was in place? What trade-offs would we accept if we designed policy? It’s easy to make fun of policymakers, and it’s also easy to critique policy. Finding workable solutions that promote the public interest is a lot harder, but more than ever, we need to work together to help improve policy in Singapore.” Prominent commentator on economic policies, Chris Kuan, said that Theseira’s views on CPF usage are generally sound. Kuan explained: “This bring Singapore back to normality in terms of what social security is used for and will go a long way to minimise the large trade-off between paying for housing and saving for retirement and healthcare. It will also reduce the known tendency of Singaporeans of over-extending housing affordability and hence driving up prices because of the instant gratification they received over CPF being released to pay for property when that gratification can only otherwise be realised decades into the future.” Kuan added that the trade-off between CPF being used for housing and retirement is a complex one, to which there are no easy answers. “There is always that easy argument that the whole problem of the trade-off between housing and retirement is due to HDB affordability and that tiresome mantra that all it takes is just make HDB affordable. Well, making HDB affordable from this point forward is the easy part. The difficult part is how to make HDB affordable without destroying the housing equity and hence retirement proposition of current HDB owners. That is the intractable part of the problem.” “I always held that the huge increase in CPF assets due to the high contribution rates are too much of a temptation for the government,” Kuan, a former international banker, said. Adding: “What better way to use it up than let public housing prices rise – it increases the government reserves which is essentially a very large transfer of wealth from households to the state and slow down the accumulation of government indebtedness.” Although highly unlikely, if Theseira’s proposal was accepted by the Government, it would mean that housing prices will drop drastically. This is because without CPF, many home buyers will be deterred by the large out-of-pocket down-payment that they would have to pay for their prospective homes. This would in turn lead to a decline in demand in the residential property market, driving down prices significantly. A scenario which would be prevented from happening at all costs by policymakers who have vested interests in a healthy real estate market. ____________________________________________________________________________________________________________ What the forefathers has given Singaporeans the flexibility to buy homes with their CPF money in the past, and now these people are thinking of removing this scheme? https://www.cpf.gov.sg/Members/AboutUs/about-us-info/history-of-cpf The evolution of CPF a) CPF and housing – the twin pillars of retirement adequacy To help workers save for retirement, the CPF was established on 1 July 1955. Workers contributed part of their monthly income to their CPF to build up their retirement savings. In 1968, the government introduced the Public Housing Scheme, allowing Singaporeans to pay for the mortgages of their HDB flats using their CPF savings instead of having to use their take-home pay. This increased the affordability of housing and provided many Singaporeans with a home. Home ownership became a key pillar of retirement security as it relieves Singaporeans from having to pay rental fees out of their retirement funds during their senior years.

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OK, so I guess most people already know how a car loan of 2% HP rate equals to easily over 5% APR over a few years. But for mortgage loans in Singapore, the rate which the bank advertises, is the 'nominal' APR and not the effective APR correct? e.g. I understand most banks use the 'daily rest' method to compound mortgages? (correct me if I am wrong, which banks here use monthly rest?). So for a loan at nominal 5% APR but with daily compounding, it would say work out to about 5.13% effective APR. Am I right to say the APR quoted by the banks here for mortgages is the nominal and not the effective APR? Is there any MAS rules that says we can ask for the effective APR from the banks?

In USA, the car loan company is able to disable the car if the car instalment is not paid on time. Coming here soon? I think not likely . . . http://seattletimes.com/html/localnews/2024625051_carpaymentsxml.html The thermometer showed a 103.5-degree fever, and her 10-year-old’s asthma was flaring up. Mary Bolender, who lives in Las Vegas, needed to get her daughter to an emergency room, but her 2005 Chrysler van would not start. The cause was not a mechanical problem — it was her lender. Bolender was three days behind on her monthly car payment. Her lender, C.A.G. Acceptance of Mesa, Arizona, remotely activated a device in her car’s dashboard that prevented her car from starting. Before she could get back on the road, she had to pay more than $389, money she did not have that morning in March. “I felt absolutely helpless,” said Bolender, a single mother who stopped working to care for her daughter. It was not the only time this happened: Her car was shut down that March, once in April and again in June. This new technology is bringing auto loans — and Wall Street’s version of Big Brother — into the lives of people with credit scores battered by the financial downturn. Auto loans to borrowers considered subprime, those with credit scores at or below 640, have spiked in the last five years. The jump has been driven in large part by the demand among investors for securities backed by the loans, which offer high returns at a time of low interest rates. Roughly 25 percent of all new auto loans made last year were subprime, and the volume of subprime auto loans reached more than $145 billion in the first three months of this year. But before they can drive off the lot, many subprime borrowers like Bolender must have their car outfitted with a so-called starter interrupt device, which allows lenders to remotely disable the ignition. Using the GPS technology on the devices, the lenders can also track the cars’ location and movements. The devices, which have been installed in about 2 million vehicles, are helping feed the subprime boom by enabling more high-risk borrowers to get loans. But there is a big catch. By simply clicking a mouse or tapping a smartphone, lenders retain the ultimate control. Borrowers must stay current with their payments, or lose access to their vehicle. “I have disabled a car while I was shopping at Wal-Mart,” said Lionel M. Vead Jr., the head of collections at First Castle Federal Credit Union in Covington, Louisiana. Roughly 30 percent of customers with an auto loan at the credit union have starter interrupt devices. Now used in about one-quarter of subprime auto loans nationwide, the devices are reshaping the dynamics of auto lending by making timely payments as vital to driving a car as gasoline. Seizing on such technological advances, lenders are reaching deeper and deeper into the ranks of Americans on the financial margins, with interest rates on some of the loans exceeding 29 percent. Concerns raised by regulators and some rating firms about loose lending standards have disturbing echoes of the subprime-mortgage crisis. As the ignition devices proliferate, so have complaints from troubled borrowers, many of whom are finding that credit comes at a steep price to their privacy and, at times, their dignity, according to interviews with state and federal regulators, borrowers and consumer lawyers. Some borrowers say their cars were disabled when they were only a few days behind on their payments, leaving them stranded in dangerous neighborhoods. Others said their cars were shut down while idling at stoplights. Some described how they could not take their children to school or to doctor’s appointments. One woman in Nevada said her car was shut down while she was driving on the freeway. Beyond the ability to disable a vehicle, the devices have tracking capabilities that allow lenders and others to know the movements of borrowers, a major concern for privacy advocates. And the warnings the devices emit — beeps that become more persistent as the due date for the loan payment approaches — are seen by some borrowers as more degrading than helpful. “No middle-class person would ever be hounded for being a day late,” said Robert Swearingen, a lawyer with Legal Services of Eastern Missouri, in St. Louis. “But for poor people, there is a debt collector right there in the car with them.” Lenders and manufacturers of the technology say borrowers consent to having these devices installed in their cars. And without them, they say, millions of Americans might not qualify for a car loan at all. A virtual repo man From his office outside New Orleans, Vead can monitor the movements of about 880 subprime borrowers on a computerized map that shows the location of their cars with a red marker. Vead can spot drivers who have fallen behind on their payments and remotely disable their vehicles on his computer or mobile phone. The devices are reshaping how people like Vead collect on debts. He can quickly locate the collateral without relying on a repo man to hunt down delinquent borrowers. Vead says that first, he tries reaching a delinquent borrower on the phone or in person. Then, only after at least 30 days of missed payments, he typically shuts down cars when they are parked at the borrower’s house or workplace. If there is an emergency, he says, he will turn a car back on. None of the borrowers or consumer lawyers interviewed by The New York Times raised concerns about the way Vead’s credit union uses the devices. But other lenders, they said, were not as considerate, marooning drivers in far-flung places and often giving no advance notice of a shut-off. Lenders say that they exercise caution when disabling vehicles and that the devices enable them to extend more credit. Without the use of such devices, said John Pena, general manager of C.A.G. Acceptance, “we would be unable to extend loans because of the high-risk nature of the loans.” A leading device maker, PassTime of Littleton, Colorado, says its technology has reduced late payments to roughly 7 percent from nearly 29 percent. Spireon, which offers a GPS device called the Talon, has a tool on its website where lenders can calculate their return on capital.

http://www.channelnewsasia.com/news/singap...oan/661792.html "We have about 37 units of those ex-stocks. We have cleared (most of them), left with two units only. So it has turned out to be not only good, it's fantastic. When borrowing restrictions revert next month, the Singapore Vehicle Traders Association expects times to be tougher. It said used car dealers are likely to be more careful about stockpiling second-hand vehicles."

About 69 per cent of used cars eligible for full loans have been sold as of 27 May since authorities lifted borrowing limits for buying those cars for 60 days. This concession will last till Tuesday. Motor firms are bracing for uncertainty thereafter. Dealers whom Channel NewsAsia spoke with expect the market to be even quieter, with car loan curbs in full force. To help used car dealers clear old stock acquired before new borrowing restrictions were introduced, a two-month concession was given. This meant that buyers could continue taking up to 100 per cent loan for vehicle purchases. The concession applied to some 7,000 used cars. Over 4,800 have been sold so far. Classic Credit had around 180 vehicles from old stock. About 170 have been sold, but customers remain cautious. Andy Ong, sales consultant at Classic Credit, said: "It all depends, you see, on the customer preference - what they want. Because mostly for used cars, they are going for those budget cars. Talking about high-end, they should rather go for the new cars right? Because those people are those well-to-do families." Prospective car buyer Clarence Pang said: "Actually, I'm just checking out the cars, just looking at the value

SINGAPORE

MAS Imposes Financing Restrictions on Motor Vehicle Loans http://www.mas.gov.sg/en/News-and-Publicat...icle-Loans.aspx Singapore, 25 February 2013

I've been pondering over this and would appreciate your views on this. Assuming I have a sum of money sufficient for me to fully redeem my car loan. In light of the high inflation during this period, would it be wiser: 1. Hold onto the money and continue the loan till its full term since the real value of the instalments that you are paying to the bank will decrease over the years due to inflation. 2. Fully redeem the car and enjoy the interest rebate (after discounting any early redemption penalties). Any advice? Thanks!

MCFers are definitely not the average car buyers as here all buy cars with cash. MORE and more premium-brand customers are taking vehicle loans as car prices rise but there does not appear to be much change among buyers of mass-market makes, say some motor distributors. They refuse to be named or give details, citing confidentiality, but say their numbers prove it. "We have seen more buyers taking financing over the last three to six months," said the general manager of a small high-end make. He added that the average loan quantum taken is 80 per cent of the car price, or $120,000 to $130,000, to be repaid over eight to nine years. "Traditionally, the loan quantum goes up with the car price for our brand, that is to say, the average loan quantum was about $10,000 lower three months ago," he explained. For a loan of $100,000 repayable over 10 years, the rough guide is that a $10,000 increase in loan quantum translates into an extra $100 in monthly instalments. "It's not that painful when it is spread out over 10 years as it only costs slightly more each month," he explained. "Most Singaporeans are not getting richer, so they have to survive by taking bigger loans." But the sales manager of a mass-market make says that the hire-purchase situation over the past half year has not changed for his so-called bread-and-butter models, the majority of which have 1,600 cc engines or smaller. "Most of them are still applying for 100 per cent loans over 10 years," he says. Over at a big luxury brand, however, a senior manager said that his company's "loan penetration rate" has climbed in the last three months. "Our average quantum has gone up by about $20K to $180,000 in the last quarter," he revealed. "And the number of people requiring vehicle financing has increased by 3 or 4 per cent." Today, about eight out of 10 customers take a car loan. A manager at a sports car dealership also affirms the rising trend for financing but offers a different view of things. "It is true that in the last three to six months, our loan business has increased by 15 to 20 per cent," he says. "One year ago, about 30 to 40 per cent of my customers took up a loan. Now, it's 50 to 60 per cent." But he says the real reason is not the increase in car prices. "A $20,000 to $30,000 difference in COE premium is not significant for my customer profile," he said, pointing to his line-up of models, which range from about $300,000 to $800,000, including COE. "Rather, it is because the cost of borrowing is at an all-time low of 1.88 per cent." According to him, the interest rate a couple of years ago used to be 2.5 per cent or higher. As for the increase in loan quantum, he said that bank promotions with attractive rebates have been instrumental in getting more of his customers to sign up for financing. "They probably want to keep more cash for investments," he added.

From ST Forum: http://www.straitstimes.com/STForum/Story/...ory_694341.html Anti-competitive 'Almost all car dealers insist buyers take up motor loans and insurance from companies they have tied up with.' MR LEONG SZE HIAN: 'I bought a new car recently and was told by the manufacturer's sole agent that I must take up its motor insurance policy with an insurance company. This was despite the fact that I could get a cheaper net motor insurance premium and a lower claims excess from another insurance company. This is clearly anti-competitive behaviour, which I understand is prevalent in the motor industry here. Thus, is it any wonder that motor insurance premiums have been going up in recent years, when consumers are forced to take up more expensive policies with less benefits in the event of a claim? My understanding is that almost all car dealers insist buyers take up motor loans and insurance from companies they have tied up with. What this means is that even if the buyer can obtain a car loan with better terms, he cannot do so.'

http://www.channelnewsasia.com/stories/sin...1177383/1/.html SINGAPORE : Finance Minister Tharman Shanmugaratnam has said that not allowing banks to finance Certificate of Entitlement (COE) prices will not be effective in moderating the rise in premiums. Responding to a call by MP for Pasir Ris-Punggol GRC Gan Thiam Poh to set loan limits in order to moderate COE prices, Mr Tharman said people can turn to other borrowing avenues like car dealers and leasing companies to get around bank rules. He said other factors play a bigger role in influencing COE prices. "The more fundamental factors which impact on COE premiums include the economic outlook which shapes demand and the supply of COEs which is determined by the allowable vehicle growth. And by car owners' decisions on their own part to de-register, whether they decide to de-register their cars," said Mr Tharman. He added: "Car loans granted by financial institutions do not pose threats to financial stability. These loans form a very small proportion of total loans in the financial system, or even of total consumer loans. And the proportion of car loans that are non-performing loans is low, extremely low." - CNA/ms

CNA Motorists taking bigger loans as COE prices surge SINGAPORE: As car prices rise, motorists in Singapore are chalking up bigger debt on their motor vehicle financing, according to latest figures released by Credit Bureau Singapore (CBS). The average loan quantum in July 2011 increased by 38 per cent, compared to the same period two years ago. Motorists now take loans with an average principal amount of $85,105, compared to $61,511 two years ago, and $74,399 a year ago. Despite the heavier debt commitment, delinquency rates for motor vehicle loans are on the decline. Only 2.49 per cent of car loan holders had an instalment that was overdue by more than 30 days in July 2011, compared to 2010's figure of 2.65 per cent, indicating that consumers are managing their payments well. William Lim, Executive Director of CBS, said the figures do not come as a surprise. He said: "It is unsurprising that loan quantum has surged given that COEs premiums, and consequently car prices have soared in the last two years. At the same time, premium cars have also overtaken mass market brands in sales, and luxury and sports cars have also hit new highs." CBS' data also show that as a result of high car prices, the demand for new motor vehicle loans continue to fall. From January to July this year, consumers took up 36,911 car loans, compared to 38,913 and 43,119 in the same period in 2010 and 2009, respectively - these include loans for new and second-hand cars. The CBS study also further revealed the effects of gender and age on motor vehicle loan trends. The age group of 40-44 borrowed the highest loan quantum, which stood at $99,411 in July 2011. Conversely, those aged 21-29 borrowed the lowest loan quantum of $57,857. Senior consumers above 54 years old bore the heaviest brunt of the steep increase in loan quantum, experiencing the highest increase of 53 per cent in their principle amounts in July 2011 compared to two years ago. Consumers aged 35-39 made up 19 per cent or almost one-fifth of new car loan holders, making them the top customer segment for these loans, according to the snapshot in July 2011. Young motorists exhibit the highest delinquency rate of 3.66 per cent, while consumers above 54 years old have the lowest delinquency rate of 2.02 per cent. CBS said the trend is consistent with other loan products. Male motorists tend to take bigger loans than female motorists. They also make up 75 per cent of new loan holders, outnumbering female loan holders by three to one. Lui Su Kian, Head of Deposits and Secured Lending, DBS Bank, said: "The average loan amount for car loans with DBS have increased by more than 10 per cent year-on-year. However, affordability remains healthy as customers seeking maximum financing have remained stable. "As we see more wealth being created in Asia, we have also observed that the financing of cars priced at more than $200,000 have doubled compared to 2010." CBS said it will continue to monitor the delinquency rate for motor vehicle loans, encouraging motorists to assess the affordability of their car loan carefully and practise responsible borrowing. - CNA /ls

I heard from the radio Banks & Finance company have a 40% rejection rate for car loans even for those earning >3k a month? Maybe they reject 100% loans & overtrades? If true then it explains why 2nd hand car prices r dropping like rocks and COE is at multi year low.

Hello All Just trying my luck here. I work in a headhunting firm and looking out for someone who has manged and marketed auto loans. This position requires someone with 2 to 4 years relevant experience and able to market the loans to PI and Used car dealers. For confidential discussion please PM me . Thank you very much and cheers

Interest-only loans: the pros and cons They make sense to short-term investors and individuals who are high income earners and in high tax brackets. Ben Fok CONSUMERS are constantly bombarded with offers of loans, overdrafts, credit cards and instalment plans that promise instant gratification. We cannot avoid debt entirely, especially when it comes to acquiring the big ticket items, and not all debt is bad. But those who borrow must be prudent and know that they can make the repayments. Even high net worth individuals (HNWI) go to financial institutions for loans, which might seem strange since they are presumably cash-rich. But there are situations where it is worthwhile for the HNWI to borrow instead of paying with their own cash. Some financial institutions offer interest-only loans targeted at the HNWIs. With such loans, you only repay the interest, not the principal, so the loan balance remains unchanged. Most interest-only loans offered by financial institutions are associated with the purchase of property. Interest-only loans make sense to individuals who are high income earners and in high tax brackets. The benefit comes from being able to save on tax on rental income. That's because the interest portion of loan instalments for rental properties is tax deductible. This package also works well for short-term investors. By repaying only the interest, investors fork out less cash each month, until they sell the property. As a result, they may be able to invest in two properties instead of one. But interest-only loans are not for the long term, because at the end of the loan period, the payment is raised to the fully amortising level. If you're still in your home at the end of the interest-only period, you'll have to start paying off the principal. The payments will be considerably larger because they'll be amortised over a shorter period. For example, if your interest-only option lasts for five years and you have a 30-year loan, your principal payments will be calculated on a 25-year term. Drawbacks of interest-only mortgages: - You could experience payment shock. As mentioned earlier, your monthly payment will go up - sometimes by 30 per cent or more - when you start paying off the principal. And if the end of your interest-only period coincides with an upward adjustment in your mortgage rate, you could face an even sharper hike in monthly payments. - You're more vulnerable if your home value declines. Many borrowers with interest-only loans assume home price appreciation will help them build equity in their homes. In recent years, that's been a good bet. But rising interest rates could deflate real estate values in some high-cost areas. It's best to get a reputable financial institution to run the numbers for you and spell out the worst-case scenarios. Equity provides a cushion against falling home values. Without it, you could find yourself owing more on your mortgage than your home is worth. If you sell, the proceeds won't cover your loan balance, which means you'll have to come up with money from another source. One way to avoid this problem is to make a good-sized downpayment on your mortgage. Advantages of interest-only mortgages: - You have more flexibility. Some interest-only borrowers can afford a larger mortgage payment but their priority is to beef up their retirement nestegg or build up their emergency funds. Once they've accomplished those goals, they often decide to increase their mortgage payments. Increasing your monthly payments will build equity and lessen payment shock when you're required to start paying off the principal. If you're interested in this option, make sure your loan doesn't contain pre-payment penalties. Interest-only mortgages are complicated, so make sure you understand the pitfalls before you sign anything. And don't rely on the financial institutions to figure out how much you can afford to borrow. A lender may not take into account all of your future expenses, such as child's university fees or support of an elderly parent. What worries me is Singaporeans taking two or more mortgages in a rising market. As property prices rise, the dollar amount also rises in line with higher selling prices. Affordability becomes an issue. You're in the best position to know what your financial obligations are, so get a mortgage you can afford. How much should one borrow? There are two ratios that financial advisers commonly use: - Debt to asset ratio which is total debt/total assets. This ratio should be 50 per cent or less; - Debt servicing ratio which is total monthly loan repayment/monthly take-home pay. This ratio should be 35 per cent or less. After all, wealth equals assets less debt. It is built up over the years by accumulating assets and paying down debt, especially mortgage debt. When you pay down the balance of your mortgage, you are increasing your wealth by reducing debt. But an interest-only mortgage does not increase wealth in that way. Of course, you may be increasing your wealth by accumulating assets instead. If that's your plan and you have determined that it is more effective in building wealth during the interest-only period than paying down mortgage debt, fine. But paying down mortgage debt is the most effective way to build wealth, especially in today's financial environment. Four dangers related to borrowing too much: - It can become a habit; - It takes away money from other important needs; - Your credit rating will be damaged if you don't pay the bills; - It can lead to high interest payments that are harder to make. Three situations where it's better to avoid borrowing: - Paying your everyday expenses; - Covering optional spending; - Borrowing when you know you can't afford the payments It's not a good idea to borrow a lot thinking that you will just pay the minimum back each month. It may take a long time to get out of debt and you'll end up paying a lot of interest. Also, if you have one late payment, your credit rating may suffer and you'll be charged penalties. At the end of the day, paying down a loan is the best option, because once it's paid it remains paid. Ben Fok is CEO, Grandtag Financial Consultancy (Singapore) Pte Lt. He can be reached at [email protected]

Still see so many cars despite govt's attempt to discourage driving.. Mostly OPCs..

if provide loan, those ppl better be careful cos their assets will be confiscate by AIG/AIA to repay debts...especially car owners will park their car at a remote place to prevent repoman tow away

IT has scored some stunning successes in developing countries such as Bangladesh, China and Indonesia. Microcredit, which gives small loans to the poor, has helped them and the illiterate escape the poverty cycle. It gives them much-needed access to credit to set up their own businesses. The Asia-Pacific Regional Microcredit Summit ends today. Can microcredit work in first-world Singapore? How microcredit works MICROCREDIT, also called poverty lending, provides small loans to the very poor. These loans can start from as little as US$20 ($27) to US$100 for first-time borrowers, and are usually used to start small businesses. In most cases, no collateral is needed. However, money tend to be directed at a group - ranging from five people to a whole village - in which members are accountable for one another. So, when someone in the group defaults his repayment, the whole group will have problems getting further loans. Under peer pressure to repay, borrowers default less. Loans made by Grameen Bank, a Bangladeshi bank which pioneered microcredit, have a repayment rate of 98 per cent. The 25-year-old bank has 7.5 million borrowers in its home country. It earned US$15.85 million in 2005, and its founder Muhammad Yunus won the Nobel Peace Prize in 2006, for 'efforts to create economic and social development from below'. YES, it can work here... GIVE small loans to Singaporeans to set up hawker and pasar malam stalls, Mr Ang Mong Seng had said The Member of Parliament for Hong Kah GRC had suggested that the microcredit system be adopted in Singapore during the Budget debate in February. Give or lend money to the enterprising poor at low interest, so they can start simple businesses and be self-reliant, he had said. He noted then that the Government gave $100 to $200 a month to the poor through Community Development Councils. But a bigger amount of $800 to $1,000 could be offered instead for them to start a business, he argued. Mr Ang told The New Paper that there are ways the Government can help microcredit programmes succeed here. First, it can subsidise the loans. However, he said Singapore should first test the viability of any microcredit programme by allowing experienced lenders such as Grameen Bank to run them without state help. Second, the Government can set up low-rental marketplaces to provide microcredit borrowers with a cheap way to start a business. United Overseas Bank economist Suan Teck Kin said microcredit can be used to help the poor start low-tech businesses, such as producing handicraft work, from home. Ms Wong Chia Lee, a Singaporean independent consultant who has been working with microbanks in South-east Asia for the past 10 years, pointed out that religious and other self-help groups here could well be the closely-knit communities needed for microcredit to work. These groups could be given loans in a way that makes their members accountable to one another - the same way microcredit loans are administered in other countries. NO, it won't work here... THE costs of running a business in Singapore are too high, financial experts said. Mr Ben Fok, CEO of Grandtag Financial Consultancy, said: 'Our costs of living and services is one of the highest in Asia. 'That will make it harder to find a successful microcredit model.' Agreeing, Mr Suan Teck Kin of United Overseas Bank singled out rental costs as one of the biggest obstacles for someone looking to set up a small business. Another problem, consultant Wong Chia Lee pointed out, is the high level of regulation in Singapore. In the microcredit programmes that she has helped set up in East Timor, people can immediately start using the money to sell kueh (cakes) or cosmetics door-to-door, or to sell vegetables on the streets. 'But the first thing someone in Singapore has to think of is the need to get a licence,' she said. Ms Wong also said Singaporeans are not as entrepreneurial as people in some of the neighbouring countries. 'For microcredit to be successful,' she said, 'the borrowers need to have an idea of what they are going to do with the money first. 'But in Singapore, we virtually have entrepreneurship genetically engineered out of us.' She recalled how a community support group asked for her advice on obtaining credit a few years ago. When she met the group, she realised they did not have any idea what they wanted to do once they had the money. This was in stark contrast to the microcredit borrowers she has worked with in the Philippines, Indonesia, and East Timor, who knew exactly what kind of businesses they wanted to do.

Paying off car loans early to hurt less A more even spread of interest charges over period of loan proposed By Kelvin Wong? AN OUTDATED way of calculating interest payments on car loans, which penalises borrowers for paying off loans promptly, looks set to be replaced. In its place is likely to be a fairer repayment method that spreads interest charges more evenly over the loan period. This has been recommended by a task force set up to review the 35-year-old Hire Purchase Act. Task force member Ng Yuen, a lawyer, who chairs the Consumers Association of Singapore education committee, told The Straits Times yesterday that a proposal will be sent to the Ministry of Trade and Industry (MTI) in about a month's time. The existing Act governs cars that cost up to $55,000 (without a certificate of entitlement), and the task force wants a 'statutory rebate' clause to be abolished. Known in the industry as the Rule of 78, this formula builds in a disproportionately large amount of interest into the early years of repayments. For example, someone who takes a 10-year loan of $100,000 and pays it off in four years, gets a rebate on the remaining six years' interest. When calculated according to the Rule of 78, it means that the rebate for interest charges incurred in the remaining six-year period is less than if the interest had simply been pro-rated. This is because more of the instalments were used to service interest payments than in lowering the principal sum owed. The proposed new method is fairer because it spreads out interest more evenly. It means that borrowers will end up with smaller outstanding balances if they pay off the loan before it is due. According to figures from DBS Bank, a car buyer who terminates his loan after four years will still owe $65,831, after taking into account interest and the rebate, going by the current market interest rate of 2.45 per cent for a 10-year loan. For 10 years, that interest comes to $24,500. This is worked into the instalments such that much of the initial repayments do not reduce the principal but just pay the interest. The task force recommends calculating interest each month based on what's left of the sum borrowed. This would result in the buyer owing some $422 less. No rebate would apply since the buyer pays interest only up to the point when he terminates the loan. With interest rates so low now, the difference may not seem like much. But if interest rates rise, the change will make more difference. Also, if borrowers are not penalised for terminating car loans early, they may be prompted to refinance with banks or finance companies which offer them better deals. Whether the change will create a buzz in the industry remains to be seen. 'Demand for cars is more or less still controlled by the quota, not so much on car loan packages,' said Mr Jeremy Soo, DBS' managing director for consumer banking (secured loans). MTI said, when contacted, that it would put up the task force's proposed amendments for public consultation. It plans to table amendments in Parliament before the end of the year. http://straitstimes.asia1.com.sg/topstorie...,250625,00.html? - Link Good news for car buyers?

It has come to my notice that the latest car loans in the market has some forms of penalty cluases for early redemption/settlement. This is in addition to the Rule of 78 in calculating interest rebate when you do an early redemption/settlement, which is effectively already by itself a penalty. It was a big suprise for me as my last loan 2 years ago does not has such clauses. There was a big discussion not too long ago about Rule 78 which is deemed an outdated rule and unfair to consumers and now in additional to Rule 78 there is these penalty clauses. The banks/finance/leasing companies are really capitalising on consumers' habit of changing cars 'frequently'. While most only concern about the interest rate, please do not believe that the lowest interest rate gives you the best deal. The penalty clauses can make a huge difference, it can be in the quantum of hundreds to thousands of dollars difference depending on the clauses, loan amount and when you do an early settlement.

From ST Forum: Feb 22, 2008 Bank's client rebate for car loans: Whose is it? I BOUGHT a car for $55,998 from a parallel importer last Sunday at Turf City. The company also gave me a menu of car loan packages offered by several banks from which to choose, which I did. A staff member from the company submitted the loan application to the bank on my behalf. Three days later, my car loan was approved and the bank informed me that I was entitled to a cash rebate of $5,607. The rebate was one of the incentives linked to the successful application of the car loan. However, I received only part of the rebate - $2,607. When I questioned the parallel importer, I was told that the bulk of the rebate, that is, $3,000, belonged to his company. The $3,000 was the referral fee the importer received from the bank. I am helpless because the bank releases all monies linked to the loan, including the cash rebate, to the parallel importer. He then decides how much of the rebate I am entitled to. The parallel importer claims that he is entitled to part of the cash rebate. He said that the $3,000 he kept as a loan referral fee was the discount he gave to me on the price of the car. However, this was not explained to me at the point of sale. Be that as it may, I would like to ask if a parallel importer can legally draw a portion of the cash rebate entitled to a buyer from the bank for a loan which carries the buyer's name. How can a cash rebate offered to a customer by a bank be taken by a seller? Can the relevant banking and motor trading regulatory bodies explain why this is allowed, or should be?