Buying a new car whether it is a 2018 brand new model or tokunbo is a great milestone for most Nigerians. Only a few Nigerians can buy a new car without needing to borrow money. A car loan can be a great option to finance your dream vehicle. In this guide we explain how to get car loans in Nigeria.
What is a car loan?
A car loan, as the name suggests, is a loan you take out to pay for a car. You decide how much you need to borrow and over what term you want to pay it back. Most car loans run for around three to five years, but longer or shorter terms might be available.
Interest rates are usually tiered depending on how much you want to borrow. As a general rule, rates are lower the greater the size of the loan. Therefore it may actually be more cost-effective to borrow a bit more. That said, you should never borrow more than you can afford to repay.
Advantages and disadvantages of car loans
- The biggest advantage of taking out a car loan to pay for your motor is that once you’ve driven the car off the forecourt, you own it outright.
- One of the big disadvantages of car loans, however, is that because cars depreciate in value so quickly, by the time you finish paying off what you owe, your car may be worth a fraction of the price you paid for it initially. So this option won’t suit those who like to regularly update their vehicles.
- Although monthly payments may be lower if you opt to repay your loan over a longer term, remember that you will end up paying much more interest overall.
- Interest rates are often higher than personal loans and there are certain conditions attached to the agreement.
Things to note when trying to get a car loan
- When you apply for a car loan, the better your credit rating the better the deal you are likely to get.
- Although monthly payments may be lower if you opt to repay your loan over a longer term, remember that you will end up paying much more interest overall.
- For instance, the vehicle will be used as security against the loan and you won’t actually own it until the last payment is made. In some cases, you’ll never actually own the vehicle and will have to hand it back once the finance arrangement is finished.
What you should consider before taking a car loan
Before buying a car with a loan, it’s important to think about the following factors before signing on the dotted line:
- Affordability of monthly payments
- Interest rate and charges associated with your car finance contract
- Size of upfront deposit required
- Mileage limits imposed by the lender
Providers of Car loans in Nigeria
There are lots of different car loans in Nigeria to choose from, so it pays to do plenty of research before picking one. Remember to look at other car finance options too, so you can make sure you are getting the best deal to suit your needs.
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