Getting a car loan in Nigeria seems to be difficult which isn’t. We are no longer in that kind of era where car loans and other financial services are designed for the privileged. Well, Currently in Nigeria, anybody can access a car loan.
To get started with knowing how to get car loans, we need to understand what car loans really are.
A car loan, as the name suggests, is a loan you which 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 being said, you should never borrow more than you can afford to repay.
Where to get car loan in Nigeria?
There are actually banks and institutions that offer car loans, and other car financing options in Nigeria. Some of them are:
And many more……
But what are the requirement to be able to access car loans in Nigeria? That would be considered below;
Who is eligible for a car loan in Nigeria?
They are two main categories of people who are eligible for car loans in Nigeria; they are salary earners and self-employed/Entrepreneurs.
- Salary earners
The salary earners are the main people who are privileged to access a loan in Nigeria because most Nigerian banks only grant salary earners sometimes, those that fall under a certain bracket.
Most of these commercial banks do offer business owners/self-employed car loans with a very good interest rate.
Note that your business must be registered with the CAC (Corporate Affairs Commission), with some necessary documents.
Documents needed for a car loan
You are expected to provide the bank with some necessary documents which will be used in processing the loan. Some of these documents are;
- An application letter
- Duly completed Auto Loan application form
- Proforma Invoice from the bank list of approved car dealers
- More payslip for the last 3 months
- A current statement of account stamped by your bank
- A letter of total emolument
- Other KYC (Know your customers) if necessary
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Consideration and Requirements for a car loan in Nigeria
There are several requirements but First, identify the car you intend to buy and how much it cost. It is easier if the car dealer you find already has car loans options.
Some loan companies in Nigeria already have car loans options available and also have an arrangement with car dealers. It makes the process more easier.
Also, you need to find out how and when it will be delivered after you’ve successfully paid for it. Do this with a proforma invoice. It is a draft invoice. Remember the financial institutions won’t finance the entire purchase of the car.
They finance around 60% or 70% of it. For example, if your car cost 3m and the bank funds 60% of that, that’s 1.8m while you offset the remaining balance.
The financial institution would be interested in determining your credit rating before you’re qualified for the loan. The following will determine your chances for a preferred loan:
Your monthly income
This is very important. Your income will determine your financial strength. It is how financing institutions ensure you can pay back the car loan you intend to get. If you fall short of the required range, you may not get the car loan.
The consistent inflow of funds.
Usually, a period of three months to one year or two is the duration to check the overall inflow of your account, especially for salary earners to confirm how steady the inflow of funds is.
So, to increase your chances of getting the car loans to ensure you have a consistent State of account. You’ll be required to provide all of these, and it’s part of the process required to verify your credit rating.
After this verification, your loan tenure is next. The loan tenure is the duration which the car loan will run for. Most car loans run for a term of four to five years.
That is you have that long for repayment. You also have the option to pay off the amount before the stipulated period on the loan agreement.
So after all those being done, what is it to consider? There are many things to consider now.
After you have observed all your options, you need to consider the following factors carefully before you proceed with the loan.
- Interest rates
Make sure the interest rates on loan are favourable. Paying for a loan with high-interest rates is a disadvantage.
2. How affordable are the monthly payments for the loan?
The affordability of the monthly payments should interest you because you don’t want changes that would cause a strain on your finances. Settle for charges that are within your income bracket. That way, you won’t feel the stress of repaying your loan.
3. Upfront deposit required.
The upfront deposit required helps you determine the percentage of your car loan will cover for you. When you get to this stage, make some proper calculations in order to make things simple for you.
When you apply for car loans, 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.