The Complete Guide to Getting a Loan in Nigeria
Accessing financing through loans can serve many helpful purposes for Nigerians – funding business ventures, managing cash crunches, investing in professional growth and more.
However, navigating the various loan options and application process can seem daunting for first-time borrowers. This comprehensive guide covers all key aspects to help you successfully secure the funding you need.
Loan Types in Nigeria
Major loan categories include:
Raised by individuals for personal needs like medical bills, home renovation, school fees financing etc. Offered by banks, microfinance institutions and online lenders.
Targeted working capital financing for companies and entrepreneurs. Used for capital expenditure, inventory purchases, equipment acquisition etc.
Cater to farmers, cooperatives and agro-processors. Used for inputs like seeds, fertilizers; farming equipment; harvest marketing costs.
For financing vehicle purchases – often saloon cars, trucks, tractors. Come from banks, specialized financiers.
Long-term lending for home buying, building or renovations. Mostly offered by commercial banks.
Major loan providers include:
Banks: Offer extensive loan products – personal, business, mortgages, auto etc. Competitive rates but strict eligibility criteria.
Microfinance Banks: Specialize in MSME lending with less collateralization. Better suited for small loans.
Fintech Lenders: Leverage apps and digital lending for quick access but can charge higher interest rates.
Cooperatives: Member-owned outfits providing microloans and other financial services especially in rural locales.
Government Loan Schemes: Targeted initiatives like the CBN MSME fund, Bank of Industry loans etc. to boost priority sectors.
Assessing Loan Needs
Clarifying key aspects upfront ensures you borrow right:
Purpose: Specify what the loan is for – starting a fashion boutique, purchasing a vehicle, paying university fees etc. This also helps identify suitable lenders.
Amount: Do detailed calculations around the total amount required and get quotes for any large expenses planned from the loan amount. Account for any additional related costs.
Having clear purpose and amount gives lenders insight into your funding needs and repayment abilities.
Choosing a Loan Provider
With many options available, shop around before deciding:
Interest Rates: Compare Annual Percentage Rates (APR) across shortlisted lenders for the most competitive pricing. Also check if rates are fixed or variable.
Fees: Apart from interest costs, check other charges like:
- Origination/Admin fees – upfront one-time charges
- Late Repayment Penalties
- Early Settlement Penalties
Loan Tenure: Typical durations range from 12-60 months. Longer terms reduce installment amounts but increase interest costs.
Eligibility: Each lender specifies income, credit score, age, collateral etc. criteria that borrowers must meet. Review thoroughly before applying.
Collating Application Documents
Standard paperwork required includes:
- Completed Loan Application Form
- Proof of Identification (National ID, Passport, Voter ID)
- Proof of Residence (Utility bills, Tenancy Agreement etc.)
- Bank account statements
- Pay slips/Tax returns if salaried
- Business documentation if self-employed
- Collateral agreements where relevant
Submit accurate details and ensure references can validate information.
Making the Final Decision
Once approved, before accepting the loan:
Scrutinize Agreement Thoroughly: Apart from rates/fees, check loan amount, disbursement dates, repayment schedule, rules for late payments or early termination.
Review Affordability: Do a detailed assessment of your income streams and expenses. Calculate the repayment instalments along with existing loan obligations and ensure it is affordable without over-burdening your finances.
Don’t Overborrow: Even with approval for higher amounts, restrict borrowing to what you actually need for your intended purpose. This keeps repayment easier.
Additional Tips for Smooth Borrowing
Follow these best practices:
Build Credit History
Maintain a good credit score by using credit cards responsibly, paying recurring bills on time etc. This helps secure attractive loan offers.
Avoid Multiple Loan Queries
Each loan provider performs credit checks before approving applications. Too many checks within a short span can negatively impact your credit rating. Apply selectively.
Set up standing instructions for installment deductions from your bank account to prevent missing payments and extra charges.
Monitor Credit Report
Periodically review your credit report from agencies like CRC Credit Bureau for any discrepancies or suspicious activity.
With some diligence around paperwork preparation, comparing offerings, and discipline in borrowing only essential amounts, Nigerians can access gainful financing for productive personal and business investments through loans. Utilize the resources above to make the process smooth and rewarding.
Frequently Asked Questions
What is the easiest loan to get for a small business in Nigeria?
Microfinance bank loans have the most lenient qualification criteria, making them most easily accessible for small business financing needs.
What minimum income is usually required to get a personal loan?
Most banks require minimum monthly income of N200,000-N250,000 for personal loans. Microfinance institutions may approve smaller amounts for lower incomes applicants.
How can someone with no employment get a loan?
Your best options are peer-to-peer lending platforms and some non-bank financial institutions that provide microloans based on alternative credit scoring models.
What is the maximum tenure for most loans?
The longest repayment tenure offered is typically 5 years. Some mortgages stretch to 15-20 years. Loans above 1-2 years often have very high interest charges.
Can loans be settled before the full tenure?
Yes, most lenders allow early repayment but some charge penalties for foreclosure within a defined minimum period.