OCBC offers loan approvals before you go car shopping

Shopping for a car, but not sure of your exact budget?

A new car loan package by OCBC Bank promises to give a clearer picture of how much you can borrow.

Its pre-approved car loan leverages MyInfo - a secured personal data platform launched in 2016 - to access a potential borrower's personal and income details and arrive at how much he or she can borrow

The bank's online application portal, which went live in January, churns out a form with crucial information retrieved from MyInfo automatically filled in. The applicant has to input only minimal information.

Within 60 seconds, the applicant gets a response stating the maximum loan amount approved. With this, consumers get a better picture of the range of cars they can afford.

OCBC says that unlike previous pre-qualified car loans, there are no caveats or qualifiers. Once an applicant gets an approval from the system, the bank will honour up to the stated loan amount, subject to regulatory loan curbs in place.

Under Monetary Authority of Singapore rules, car buyers are allowed to borrow up to 70% of a vehicle's retail price. The OCBC application process also saves time, as it removes a step which involves the car dealers filing a loan application for the customer, with the purchase hanging in the balance during the approval process.

Mr. Kenny Tan, OCBC's head of car financing, says the bank hopes to penetrate the used-car market with this new initiative. The bank is a leading lender in the new-car segment, but does not have a strong presence in the pre-owned space.

With the certificate of entitlement supply set to shrink further in the next few years, tapping the used car market is vital in shoring up the car loans business, Mr. Tan says.

The interest rate for the pre-approved car loan is currently priced at 1.88% per annum, the upper end of a market range starting from around 1.68%. This rate, Mr. Tan says, ensures that a "competitive commission" is still being paid to car dealers, whose support is critical to lenders.

He recalls that one lender in the past had tried to bypass dealers with a scheme targeting end users directly. It has since quit the car loans business. "We are not here to disrupt the market," Mr. Tan says. "We are here to innovate so that we add value for customers, dealers and the bank."

Since it was launched three months ago, OCBC's pre-approved car loan has had more than 2,000 applications, with about 10% resulting in actual car purchases so far. "The numbers are encouraging, given that we are in the initial phase of engaging industry partners to explain and share more on this initiative," Mr. Tan says.

The new service will be available exclusively on the sgCarMart and OCBC website for Singaporeans/PR and foreigners above 21-years old looking to buy new or used cars from parallel importers, authorised dealers or direct sellers.