Should I Get a Car Loan or a Personal Loan to Buy My Car?

Key Takeaways

• Car loans from banks are secured loans regulated by MAS and come with lower interest rates and a loan tenure of up to 7 years.
• Personal loans are unsecured loans, typically for a loan tenure of 1 to 5 years, that charge higher interest rates but offer more flexibility.
• Car loans from banks are more affordable but can only cover 60% to 70% of the vehicle purchase price, making them suitable for those who can afford the down payment.
• Personal loans can potentially be used to cover the entire vehicle purchase price, but how much you can borrow depends on many factors, including your income.

Buying a car in Singapore is a highly expensive endeavour due to upfront costs such as the Certificate of Entitlement (COE) and road tax. So, most car buyers need to rely on loans when acquiring a vehicle.

There are two main options when financing a car purchase in Singapore: a car loan or a personal loan. While both types of loans can technically be used for car purchases, they differ in terms of interest rates, flexibility, loan amounts, tenure, regulations and collateral requirements.

This article will compare car loans vs personal loans in Singapore. By the end of this piece, you’ll understand the pros and cons of car loans and personal loans the differences between the two, and the eligibility requirements for each. You’ll also understand which type of loan is more suitable for you based on your financial situation.

Car Loan vs Personal Loan: Key Differences

What Is a Car Loan in Singapore?

A car loan is a type of secured loan, with the vehicle acting as collateral. Car loans from banks are regulated by the Monetary Authority of Singapore (MAS), which sets limits on loan tenure and how much you can borrow to fund your vehicle purchase.

The maximum amount you can borrow is calculated based on the car’s Open Market Value (OMV), which is different from the selling price. This applies to both new and used cars, except for certain types of vehicles such as motorcycles, commercial vehicles or motor vehicles for the physically disabled and their caregivers.

The Loan-to-Value (LTV) limits according to MAS’s regulations are as follows:

Here are some examples of the minimum down payment and the maximum amount you can borrow for popular car models, based on the above MAS regulations and average OMV in April 2026:

As car loans are secured loans, car loan interest rates are usually lower than those for personal loans. However, they typically come with long loan tenures of up to 7 years for new cars. Loan tenure for used cars is calculated based on the registration date of the vehicle.

Car loans are offered by both banks and car dealerships in Singapore. The difference is that banks are obliged to follow MAS’s rules and guidelines, whereas car dealers may or may not choose to follow them.

On the one hand, that means that car dealers might be willing to accept a lower deposit and lend you a larger fraction of the selling price. Loans from dealers might also be easier to qualify for and be approved more quickly. That being said, dealers tend to charge much higher interest rates and are unregulated by MAS, so it may actually be unwise to opt for one of their loans.

Pros and Cons of Car Loans

Here are the pros and cons of taking out a car loan from a bank:

Pros

• Low interest rates
• Long tenure of up to 7 years

Cons

• Money borrowed can only be used for the car purchase
• Can only borrow a maximum of 60% to 70% of the vehicle price
• Less flexibility

What Is a Personal Loan?

A personal loan is an unsecured loan you can take out from a bank or licensed money lender in Singapore. As personal loans are unsecured and involve no collateral, they tend to carry higher interest rates than car loans.

Personal loans are among the most flexible types of loans available. The funds are disbursed directly into your account and can be used not only for your car purchase but for anything else you want, such as renovations, weddings or even day-to-day spending.

The amount you can borrow is calculated based on your monthly income, with lenders typically offering loan amounts of 4 to 10 times your monthly income. Depending on how much you qualify to borrow, a personal loan may be able to cover the purchase price of your car and other costs such as insurance and repairs.

While personal loans are easier to obtain, they might be more onerous to repay. Interest rates tend to be higher, and the loan tenure is typically shorter, usually spanning from 1 to 5 years. This translates to higher monthly repayment amounts.

That said, personal loan interest rates vary and are determined by a mix of factors, such as your creditworthiness, income and loan tenure.

Pros and Cons of Personal Loans

Pros

• More flexibility, money can be used for anything
• May be able to cover the full cost of the car

Cons

• Higher interest rate
• Short tenure
• Loan amount is usually calculated based on your monthly income

Also read: MariBank Instant Loan Review (2026): Fees, Rates & More

Eligibility Requirements for Car Loans

Car loan requirements can vary depending on the lender, but in general, car loans from banks will require you to satisfy the following eligibility requirements:

• Age: At least 21 years
• Citizenship: Singapore citizens, Permanent Residents (PRs), foreigners
• Income requirements: Minimum monthly income tends to be around S$2,000 for Singapore citizens and PRs, or S$4,000 for foreigners
• Documents needed: Vehicle sales agreement and log card, documents pertaining to employment, income, existing loans and financial commitments

Compare and apply for the best car loans here.

Eligibility Requirements for Personal Loans

• Age: At least 21 years
• Citizenship: Singapore citizens, Permanent Residents (PRs), foreigners
• Income requirements: Minimum annual income tends to be around S$20,000 to S$30,000 for Singapore citizens and PRs, or S$60,000 for foreigners
• Documents needed: CPF statements, payslips or Notice of Assessment (NOA)

Compare and apply for the best personal loans here.

Total Debt Servicing Ratio (TDSR) and How It Affects Your Loan

Just like other types of debt, your car loan is subject to the TDSR. The TDSR is a framework enacted by MAS that limits how much you can borrow based on the proportion of your gross monthly income used to repay your debts. This includes debt such as home loans, car loans, personal loans and even credit card debt.

Just so you know, the current TDSR limit is 55%. That means your total monthly debt repayments cannot exceed 55% of your gross monthly income. When it comes to car loans, banks are not allowed to lend you amounts that would cause you to exceed the TDSR threshold.

For instance, if you earn S$10,000 a month, you cannot spend more than S$5,500 a month on debt repayments. If you are already spending S$5,000 a month repaying existing debts, a bank can only offer a car loan with no more than S$500 in monthly repayments.

By extension, lowering your monthly debt repayments may improve your chances of obtaining a car loan. So, it is a good idea to pay off existing debt wherever possible before applying.

In general, TDSR may not directly affect personal loans in the same way as car loans. However, banks check creditworthiness and assess existing debt, which in turn can influence approval, loan amount and interest rate.

Car Loan vs Personal Loan: Which Is Better?

Car loans from banks are generally the cheaper option due to lower interest rates. However, you will need to be in good financial health to benefit from a car loan, as you must be able to afford a down payment of at least 30% or 40%, plus your loan amount could be reduced further by the TDSR.

Personal loans tend to be more costly because they come with higher interest rates, and must be paid back within a shorter time, typically 1 to 5 years. However, they are more flexible, enabling you to use the money in any way you wish, and may have the potential to cover a larger percentage of the car price. They are also easier to apply for than car loans with banks.

In a nutshell, if you are able to qualify for one and have enough money for the down payment, go for a car loan from a bank. Otherwise, you may have to opt for a personal loan instead.

If you found this useful, check out our guide on the cost of owning a car in Singapore. You may also be keen to deep dive into the cost of hiring a domestic helper in Singapore.