We all know that personal loans in Nigeria are incredibly difficult to access. Some unscrupulous lenders have even resorted to requesting your first born child as collateral. Here’s what you need to think about before you borrow and how to make sure you get the best deal for you and not loose a child in the process.
1. Shop around
As with any financial product, when it comes to taking out a personal online loan it pays to shop around and compare APRs. The APR (annual percentage rate) tells the true cost of a loan taking into account the interest payable, any other charges, and when the payments fall due.
Your bank may say it offers preferential rates to its current account customers but you might still find there are cheaper loans available elsewhere. Go on the Loan search page to find the best rates.
2. Check the small print
Before you apply for a loan, check the small print to see if you’re eligible. Some best buys come with some onerous conditions. Access and Diamond only offer their best loan rates to current account customers.
3. Think about early repayment charges
It might seem unlikely at the time when you take out a personal loan – but don’t forget that it’s possible you will be able to pay off your debt early. Many loan providers will apply a charge if you wish to do so, so it’s a good idea to check how much this might cost before you apply for a particular deal. If you think there is a good chance you will want to settle your loan early, it may be worth searching for a deal that comes without any early repayment charges.
4. Check your credit rating
If you plan to apply for a market leading personal loan, it’s crucial that you check your credit rating first. Lenders are only required to offer their advertised ‘typical’ APRs to two-thirds of applicants. Therefore, if your credit rating is not in good shape, you may be offered a more expensive deal than the low rate loan you originally applied for. Go on the credit score page to gain access to low rates
5. Consider a credit card
Before you apply for a personal loan, consider other forms of credit. You might find a credit card is cheaper and a card with a 0 per cent introductory offer on purchases will enable you to spread the cost of big purchase interest-free. However, if you don’t think you will be able to repay your debt within the 0 per cent offer period, you may be better off with a long term, low rate deal.
7. Check out peer-to-peer lending
If you’re anti-banks you might want to borrow from a peer-to-peer lender such as Imeela. The site, “a marketplace for social lending”, links borrowers and lenders. Applicants are credit scored and you need a decent score to be accepted.
8. Borrow more
In general, the larger the loan the lower the interest rate. Due to the way some providers price their loans, there are occasions where you can actually save money by borrowing slightly more.
9. Don’t apply for too many loans
When you apply for a loan online, most applicants will leave a “footprint” on your credit record which lenders check before approving a loan. Having lots of applications on your record makes you look desperate or in financial difficulties. As a result lenders will see you as more of a credit risk, so your latest loan application is less likely to be approved.
10. Know the risks of secured loans
Secured loans are cheaper than unsecured loans but you run the risk of losing your home if you don’t keep up repayments. Secured loans are only offered to homeowners with equity in their property and mean the lender effectively takes a charge on your property. So don’t sign-up unless you’re 100 per cent sure that you will be able to meet your repayments – this type of loan is basically less risky for lenders but more risky for borrowers.
11. Know the loan fees
The loan fees in Nigeria vary by each individual lender. Every lender should be able to give you an estimate of its fees. You should ask what each fee includes and an explanation of any fee you do not understand.
Early repayment fees
- You can pay off your debt before the end of the loan term if you come into some cash. But watch out for early repayment fees. Many lenders levy a penalty for early repayment, which could wipe out any potential interest savings.
- Some lenders charge arrangement fees, which can bump up the cost of credit. You should also beware of any early redemption fees should you choose to clear the debt before the end of the loan term
- Most personal loan companies charge customers fees for late or missed payments.
Tips to ensure your loan application is accepted
As we all know, it’s very difficult to get a loan in Nigeria. You have an idea and the bank may request you pledge assets as collateral that you may not have. That’s a big challenge for anyone who’s trying to start a business.
Here are some tips to ensure your application is successful and not rejected.
- Check the credit requirements. You should check what credit rating your lender requires, and then see if you meet them. If you’re required to have good credit, it usually means no negative listings on your file. If you’re unsure, it’s best to ask the lender before you apply. The majority of lenders have online chat services that can offer assistance.
- Find out the minimum income requirements. Each lender will have a different minimum income requirement, and this minimum may also change depending on the loan type you’re looking at. The minimum income for personal loans is listed on finder.com review pages, so you can confirm this before you apply.
- Ensure your loan purpose is allowed. Check with the lender to see if your loan purpose is okay. If you’re taking out a secured personal loan, there will be more restrictions, although you may also find limitations for other types of loans as well.
- Verify your details. Double-check your details and information before you submit your application so that the lender has no reason to reject your application on this basis. Is your application filled out entirely? Is all the information accurate? These are the type of questions that can aid you in verifying your details.
- Check that you meet the employment requirements. Do you need to have established employment at one company for a certain amount of time? Do you need to be receiving a regular income into your bank account via direct deposit? See what the lender requires of your employment and ensure you meet that.
- Don’t hold more loans than you can afford. In short, lenders want you to be able to repay your loan. The main reason Nigerian lenders won’t lend to you when you have a number of loan balances already is because they don’t think you’ll be able to pay back the new loan. You could look at consolidating your loans or repaying some of them before applying for a new one.
- Check that your collateral is sufficient. See what your lender requires in terms of collateral and check that the asset you plan to use meets their requirements. If you’re in doubt, get in touch with the lender before you apply.
There’s no way to completely guarantee that your personal loan application will be approved. Even if you meet all the eligibility criteria listed by a lender, the lender can still reject your application at its discretion. What you can do is avoid common mistakes that lead to personal loan application rejection and follow the tips we’ve discussed to improve your chances of approval.