The Monetary Authority of Singapore (MAS) will place a cap on motor vehicle loans from Tuesday Feb 26.

For a motor vehicle with open market value that does not exceed $20,000, the maximum loan-to-value is 60 per cent of the purchase price, including relevant taxes and the price of the Certificate of Entitlement.

For vehicles with an open market value of more than $20,000, the maximum loan will be capped at 50 per cent.

In addition, the tenure of a motor vehicle loan will be capped at 5 years.

In a statement on Monday, the MAS said: "The financing restrictions are necessary to encourage financial prudence among buyers of motor vehicles. In this prolonged environment of very low interest rates, there is greater risk of buyers over-extending themselves on motor vehicles."

The financing restrictions will not apply to loans for the purchase of commercial vehicles or motorcycles.