Comparing and getting a loan in Nigeria may take anything from minutes to days. The loan industry has made advancements in its modus operandi, especially as most loan providers have deployed cutting-edge technology to boost their operations. That is why before taking that loan, it is important to ask some pertinent questions.
Below are some of the questions borrowers should ask when trying to compare and get Loans in Minutes.
How much do I need?
The first, and perhaps the most important, step in choosing a personal loan is knowing how much you need. In Nigeria, the smallest personal loan sizes begin at around ₦2,000, but most lenders offer a minimum of ₦5,000 to first-time borrowers.
This amount increases progressively as borrowers honour their repayment agreement. Failing to live up to the repayment plan may result in lower loan amounts.
How do I intend to pay back the loan?
This is an often overlooked question, but it is very important in the scheme of things. In taking out a personal loan, the cash is usually delivered directly to the borrower’s bank account.
However, in cases where the borrower is seeking a loan for credit purposes like financing a purchase, some lenders offer the option to send the funds directly to the creditors and skip your bank account altogether.
In cases like these, it is very important to map out the mode of payment. Will the money be deducted straight from your account?
How long will I have to pay it back?
Most loan repayments are done in monthly installments, depending on the amount. Some loan providers are known to offer lesser interest rates for quicker repayment plans.
That is to say, repaying a loan in six months installments will attract lesser fees that repaying the same amount in eight months.
As a borrower, you should know that both your interest rate and the monthly payment will be impacted by the length of the loan you choose.
How much will I pay in interest?
Your interest rate depends on a number of factors, including your credit score, loan amount, and the length of time you’ll be paying the loan back.
Interest loans are known to vary based on the kind of loan. For instance, a personal loan will attract lesser interest than a business loan.
Having a good credit score and you choosing the shortest repayment term possible will typically get you the lowest interest rate.
Can I afford the monthly payment?
Applying for a loan goes just beyond receiving that urgent cash to sort out that expense. As a borrower, other factors should be important to you, like choosing which repayment plan works best for your income level and cash flow. Some people prefer to make their monthly payments as low as possible, so they choose to pay back their loans over several months or years.
Others prefer to pay their loan off as quickly as possible, so they choose the highest monthly payment.
Choosing a low monthly payment and a long repayment term often comes with the highest interest rates. It might not seem like it because your monthly payments are so much smaller, but you actually end up paying more for the loan over its lifetime.
As a general rule, borrowers should aim to spend no more than 35% to 43% on debt servicing.
Are there hidden fees?
In Nigeria, most loan providers are known to charge a sign-up or origination fee. Others don’t charge any fees other than interest.
An origination fee is a one-time upfront charge that your lender subtracts from your loan to pay for administration and processing costs.
It’s usually charged as a flat-rate fee. For example, if you are taking out a loan for ₦5,000 and there was a 5% origination fee, you would only receive ₦4,750 while ₦250 goes back to your lender.
In this case, there are two ways to avoid this. Either take out a higher loan or shop for a loan provider who doesn’t charge origination fees.
Other than origination fees, some providers are known to insert such things as loan application fees or disbursement fees.
Not being aware of the extra fees that you could be paying, can cause your loan to be a lot more expensive than desired.
What is my credit score?
Before you start applying for personal loans, it’s important to know your credit score to make sure you can qualify. Most personal loan lenders are looking for applicants to have a good credit score, particularly online banks.
However, if you have an existing relationship with a bank, you may get approved for a favourable deal if you have a good history of paying bills on time and honouring the terms of your past loans and accounts.
Sometimes loan providers will offer lower interest rates on personal loans and work with borrowers who have fair or average credit scores.
Why is interest higher for short-term loans?
Interest rates are generally higher on shorter-term loans, as there are increased administration costs in setting up the loan.
Can I still borrow money with a poor credit rating?
Yes, you should still be able to borrow money if you have a bad credit rating, but will likely be subject to higher interest rates.
Borrowers who have an insufficient credit history or don’t have a credit score at all are likely to pay higher fees and interest rates.
nairaCompare can help you run a credit check to know if you are loan worthy here.
Do I need collateral in getting a loan in minutes?
Depending on the amount you are borrowing, and depending on your credit history, you may or may not be required to secure your loan with collateral like your property. If you are required to do this, think carefully before accepting the loan since if you miss repayments, your property may be repossessed.
What is the penalty for defaulting on repayment?
Different loans have different rules which can be found in their ‘terms and agreement’. Unfortunately, most people do not take the time to read those.
One thing to look for is whether or not your loan terms have a repayment penalty.
Although most loans may seem not to charge repayment penalties, they do exist. When choosing your loan part of the process is deciding on a repayment plan, where you choose a loan term to pay off your debt.
Repayment loan terms vary. Some lenders are known to charge higher for those willing to pay off their loan before the tenure is up. An early payment means they are losing money.
Be sure to read the fine print to know if your lender operates that way.
What documents will I have to submit when applying for a loan in minutes?
As always, the documentation varies from lender to lender. While the exact documents required vary, there are few general documents that most banks/financial institutions usually require applicants to submit.
They include proof of identity, address proof, proof of income, and proof of business for self-employed individuals.
Other things to note
Asking yourself some or all of the questions above can help you easily weed out loans that are not best suited for you. But the key is to take the time to read the fine print.
As long as you meet the eligibility criteria of the lender and have a good credit score, you shouldn’t find it difficult to get a personal loan at a good interest rate.
It is important to do your research and comparisons before applying for a personal loan. That is why a third-party aggregator website like nairaCompare comes into play.
With nairaCompare, you can compare loans offered by different banks and financial institutions. You can check and compare the interest rate charged, processing fee charged, and loan amount offered by different lenders and make a decision accordingly.