Loans can be a vital financial tool for individuals and businesses alike..
In Nigeria, loans can be a vital financial tool for individuals and businesses alike. Whether you’re looking to cover unexpected expenses, finance a business venture, or achieve a long-term goal, loans can provide the necessary funding. However, borrowing money can be a daunting experience, especially in a country with a complex financial landscape like Nigeria. In this blog post, we’ll provide a detailed guide on what to do and what to avoid when getting a loan in Nigeria.
WHAT TO DO
Research and Compare Loan Options
Before applying for a loan, research and compare different loan options available in Nigeria. Consider factors like interest rates, repayment terms, and loan amounts. You can use online loan comparison platforms or consult with a financial advisor to find the best loan for your needs. Consider how long you’ll need to repay the loan. Shorter terms usually have higher monthly payments but lower overall interest, while longer terms have lower payments but higher interest costs.
Check Your Credit Score
Your credit score plays a significant role in determining your loan eligibility and interest rate. Ensure you have a good credit score by checking your credit report and history. You can request a credit report from the Credit Reporting Bureau of Nigeria or use online credit scoring platforms.
Choose a Reputable Lender
Only borrow from reputable lenders like commercial banks, microfinance banks, or licensed online lenders. Avoid loan sharks and unlicensed lenders who may charge exorbitant interest rates. Look at the lender’s overall rating on review platforms. A high rating generally indicates satisfied customers, but read the details to understand any specific concerns.
Consider a Secured Loan
If you have collateral like a house, car, or assets, consider a secured loan. Secured loans often have lower interest rates and more favorable repayment terms. However, it’s important to understand the benefits, risks, and responsibilities that come with this type of loan.
WHAT NOT TO DO
Don’t Borrow More Than You Need
Avoid borrowing more money than you need, as this can lead to financial strain and difficulty in repayment. The more you borrow, the more you’ll pay in interest over the life of the loan. Even a slightly larger loan can significantly increase the total cost due to interest accumulation.
Don’t Ignore Loan Terms
Don’t ignore the loan terms and conditions. Ensure you understand the repayment schedule, interest rate, and any additional fees.
Don’t Miss Repayments
Missing loan repayments can lead to penalties, damage to your credit score, and legal action. Ensure you make timely repayments. Your payment history is the most significant factor in determining your credit score. Missing even one payment can negatively affect your score, making it harder and more expensive to obtain credit in the future. Also lenders often charge late fees if you miss a payment, which can add up quickly and increase the total cost of your loan.
Don’t Use Loans for Non-Essential Expenses
Avoid using loans for non-essential expenses like luxury items ( buying the latest iPhone, handbag or human hair) or vacations. Use loans for essential expenses like house rent, school fees, medical bills etc. Or for investments that can generate returns. Most people also use the loan to start up a new business and later pay off the loan while still running their business and doing amazingly well.
Don’t Deal with Unlicensed Lenders
Avoid dealing with unlicensed lenders who may charge exorbitant interest rates and engage in unethical practices. E.g. Iya Barakat that just opened a shop close to your house and is telling you you can borrow 1,000 000 with just 5% interest but you have to use your land which is worth 5,000 000 as collateral. And you have to pay back the whole money in six months. The whole thing will seem like a good deal to you and you’ll take it, forgetting that you don’t even make 100,000 in a month from your buisness. At the end of the day, you’ll lose your property which is worth more than what you borrowed.
Conclusion
Getting a loan in Nigeria requires careful consideration and planning. By researching and comparing loan options, checking your credit score, understanding loan terms, and choosing a reputable lender, you can ensure a smooth borrowing experience. Remember to avoid borrowing more than you need, ignoring loan terms, missing repayments, using loans for non-essential expenses, and dealing with unlicensed lenders. With the right approach, loans can be a valuable financial tool to help you achieve your goals.