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“I Need A Car Loan” (How To Get A Car Loan In Nigeria)

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Mike: Hi Ugo I need a car loan how do i get one? Ugo: Getting a car loan in Nigeria is not that difficult provided you are qualified for it. The following steps may just give you a shot at getting the loan Mike: Hold on. Qualified? How is one qualified? Ugo: Nigerian banks are very much inclined to extend car loans to individuals who have a regular income stream. A regular income stream basically means you have a regular source of revenue such as salary or income from a trade. Salary earners with companies that a well known have better chances of securing a car loan. Individuals who are self employed can also get a car loan provided they can prove that their business generates a regular pattern of inflow. The easiest way to demonstrate that is to show them your bank statement for a period of atleast 2 years. So basically, these are the guys that you can classify as qualified. Mike: Now I get it. So if I was working for one “Baba A Supplies” I might not get a loan? Ugo: The chances of getting the loan will indeed be very small. However, it does not rule you out completely as it only makes it more difficult. You will have to prove to them that the company is a viable company and that they are able to pay you continous salary for the period of the loan. Mike: Ok so how can I get the loan? Ugo: These are the following steps (For salary earners. Same maybe slightly different for self employed individuals) Step 1: Identify the kind of car you wish to buy. Be it a tokunbo car or a brand new car the banks are always willing to finance. This is a very important step as you do not want to approach a bank without knowing what car you have in mind to buy. That way you have a guide even if you decide to change your mind on the type of car along the way. Step 2: Find out the price of the car and when it will be delivered to you once you pay. That is pretty much easy. All you need to do is to go to a car shop/dealer identify the car you wish for and get a proforma invoice. A proforma invoice is basically a draft invoice. It is none binding on you or on the seller of the car. Banks usually don’t finance the entire purchase price of your car. They usually fund 60% or at most 70% whilst you fund the balance with your own money (equity). So if the car cost N2m the bank will give you 60% of that which is N1.2m while you pay the balance N800K. You will also be expected to pay for insurance of the car which is about 5% of the value of the car. That is N100k in extra cost to you as well, so you have to take that into consideration when applying for a loan. Banks don’t accept 3rd part insurance. Step 3: Find out if the car dealer already have arrangement with your bank.  Some of them also have arrangement with car dealers which also aid processing of the loan. For example you wish to purchase a car from Car Dealer and Company (CD Co) and have approached Bank X. Bank X and CD Co also have an arrangement where buyers of their cars can get loans. Then the process becomes easy for you. If they don’t still approach your bank with the invoice anyway. Step 4: Banks offer several products that outline their terms for a car loan. However, the details are mostly the same. The difference probably lies in the speed at which your loan will be processed and their ability. So if you use a bank that offers a product relating to car loans the better for you. If your bank doesn’t then you can either proceed with them or try another bank. However, almost all the banks offer such products. Step 5: Assuming your bank does, get in touch with your account officer and request that you need a car loan. If you want to approach another bank then just identify the bank and approach their customer service desk for direction. But bear in mind that you will have to open an account with them and give them standing orders (which I will explain later) Step 6: Now that you have met with the bank, you will be asked to draft a formal application letter for a car loan. The letters isn’t anything complicated and will typically look like this (Car Loan template) . Once you are done with the letter attach a copy of your payslip, the invoice for the car (now you must had got the final invoice) mentioned above and a copy of your employment letter. Give it to your account officer for processing Step 7: Now that you have submitted your application the bank all you now need to do is wait for it to be processed. The bank through the account officer will present you a set of forms to fill which will include things like your personal details, salary, address, bank address etc. They are mostly routine and should be easy to fill. Step 8: Once that is done the bank will present you with an offer letter. The offer letter from the bank is a document showing the amount lent to you by the bank, the interest rate, repayment structure, fees, security etc. Lets take them one at a time Loan Amount : Loan amount is the sum that the bank has finally agreed to lend to you. Remember it helps fund part of the purchase price of the car. Please note that the bank will not disburse the money to you if they do not have deposit of your own contribution (equity) in an account domiciled with the bank Interest Rate : This is the rate the bank charge you on a monthly basis. The bank will mostly write it like this “interest rate is 20% and is subject to market conditions”. What this means is that the rate may go up or down depending on what the rates go for in the market. Most times it goes up. It is important to look closely at the interest rate as it forms a huge chunk of the money you pay the bank. So make sure you ask around to be sure your rates are competitive (as good as what is obtainable in other banks). The banks will also charge you fees. The fees are the Facility fee and Management Fee. The Facility Fees are mostly 1% flat and is a one off fee. The Management fee is usually also 1% but is paid every year of the anniversary of the facility. Repayment Term: Since the loans are mostly 4 years repayment terms will simply state that you will “repay the loan monthly in arrears for 48 months”. They will also give you an option to pay off the amount if you wish to pay off the loan before the end of the 4 year period. Always ask for a repayment schedule as it gives you an idea of the amount you will be paying every month. See sample repayment schedule Here as well. If your salary account is domiciled with the bank that loaned you the money, then repayment will be by a direct debit from your salary at the end of every month. If your salary account is domiciled elsewhere then you will give the bank post dated cheques for the duration of the loans. They may also require standing orders which are basically an order by you to your bank (where you have your salary account) to deduct from your salary every month pay the bank that gave you the car loan. In both cases you should always check your bank statements at the end of the month to see how much was debited to your account as loan repayments. Check the amount debited to your bank (loan) account against your repayment schedule to be sure you haven’t been over charged. If the difference is more than 10% in any given month (i.e your repayment schedule says N80k for a given month then suddenly you see N88k for that month) you should quickly call your account officer for explanation. Step 9: Once you accept the offer and fulfill all requirements of the bank the loan will be disbursed to your account. But mind you the bank will only disburse the amount to you when they are about to issue a bank draft to the car dealer for the purchase of the car. Step 10: The bank will issue a draft to the car dealer after which the car will be released to you. The bank will hold a key of the car. The ownership of the car will be shared between you and the bank. Therefore your name and the banks name will reflect in all the car documents. The car is now yours and you can now drive it home. Note that the bank do not usually ask for a collateral. Their security is basically the comprehensive insurance which you pay for and the car itself. So when you default in payments, the bank can seize the car from you and sell it recover their money. Note: This is just a guide and does not guarantee that you will get the loan if you follow the steps above.

Ugo Obi-chukwu "Ugodre" is a chartered accountant with over 16 years experience in financial management, corporate finance and financial analysis. He is also a retail investor and a personal finance advocate with over a decade experience investing in the Nigerian stock market. Ugo is the founder/Publisher of Nairametrics and blogs regularly on the website.

9 Comments

9 Comments

  1. Allen

    September 29, 2011 at 7:41 am

    Many thanks. This is really revealing.

  2. Ugodre

    September 29, 2011 at 7:47 am

    @Allen Your most welcome. Thanks for commenting

  3. Anonymous

    September 29, 2011 at 9:10 pm

    Just walk into any branch of WEMA Bank, UBA, and First Bank and obtain a loan form free of charge.They are presently giving out loan. But you must have account with them.Thebrideng

  4. Ocean Finance & Mortgages Leading Loan

    December 31, 2011 at 1:58 pm

    TESTIMONY Am Mrs. Sandra brown, from the united states of America. I don’t know how my life would have been without the help of this great financial agency. I really want to appreciate this wonderful institution for coming to my aid in assisting me with a loan that has made my company grow strong over the years. Thanks to Ocean Finance & Mortgages Leading Loan Company for coming to my aid….contact them at [email protected] or call them through +447031995062. I can assure u would have reasons to smile with their low interest rate

  5. Relationship Banking

    January 19, 2012 at 6:01 am

    A guide should always be like this, It's like you have been provided with all the options and it's up to you what you will do with the information provided.

  6. 100001846706361

    November 24, 2012 at 9:55 am

    hello

  7. Mr Paul Vincent

    January 27, 2017 at 10:46 pm

    Sell a kidney. Save lives and make money. He wants to sell his kidney
    to save the life? You are looking for an opportunity to sell a kidney
    for a good price? This is an opportunity to sell for $500,000,00
    Dollars. interested suppliers should contact Dr Frank Willian surgeon
    and consultant nephrologist For more information please contact us by
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  8. SUN (@AuditorSUN)

    July 19, 2018 at 5:35 pm

    Thanks Ugo. I am really considering this method.

  9. Mrs Flora

    August 19, 2018 at 2:26 am

    I want to quickly use this opportunity to inform my friends out there that need a good loan to help themselves to contact Mrs Joyce because she is the only loan lender that i can trust online since six Months i have been accessing a loan through online, i saw a comment on Monday that she offer loans and i requested a loan of $2000 from her, for my greatest surprise she only requested for my id card and account details which i sent to her and in 2 days i received a message that my account was credited, i am so happy now because i never believe that this could happen, she is so genuine and didn’t need any upfront payment. This is her contact email: [email protected]

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Personal Finance

How to build solid financial success system and achieve financial freedom quickly

These are the three systems you need to speed up your financial success by almost 20 times.

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Financial system and freedom

The majority of people I know want to increase their financial success. If this is also what you want to do, you need solid financial systems.

What systems do you need and how do you increase financial success especially if you are stuck in a 9-5 job? In this article, I will show you exactly what to do.

To increase your financial success, there are three systems you need. These systems determine how fast or slow you achieve financial freedom and are explained below.

Multiple Income System

This is the system that brings in massive money into your life. It comprises 3 main components – quality of your main income, source of your income, type of income.

The quality of your income can be high or Low. It is high if your main income gives you the ability to save more than you spend. It is low when you can only spend more than you save. High-quality income is the only type of income that can make you rich.

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The second component of the multiple income system is the source of your income and there are two types – the one source income and multiple source income. The key to fast-tracking your financial success is to upgrade your source of income from one to many.

The third component of the multiple income system is the type of income you earn. There are two types of income – active income and passive income.

When you earn only active income or have a weak passive income, you limit your chances of financial success. True success is created when you have a strong active income and a strong passive income. You accelerate your financial success when you depend on passive than active income.

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These are the three components of the multiple income system. When you have all three components working for you, you accelerate your financial success by almost twenty times.

So, now that you know the first system for fast-tracking your financial success, let’s look at the second system.

Money Preservation System

Earning extra income is just one step in the financial success process. What truly creates wealth is the income that you keep. True riches are created when you keep more income for yourself.

Unfortunately, this is rarely the case. Most people are only keeping leftovers for themselves. They are enriching others through their spending and getting poorer and broke every day. To achieve financial success, you must preserve more of what you earn. To succeed with preserving income, you must maximize two key components – the savings component and investing components.

READ: Billionaires that can triple the value of Bitcoin

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The savings component works best when you save big portions of your income every month and investing your savings to produce solid passive income. To save big portions, you must strive to increase your savings by 1% every month. You must also try to maintain a low maintenance living standard.

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The second thing to do to preserve your income, is to ensure that money saved and invested is never lost. Losing money through unguided investment decisions is not wise. To achieve financial success, you must invest to preserve your savings.

So, now that you know the second system that can accelerate your financial success. Let’s look at the third system.

READ: Ripple adds Bank of America to payment network

Money Multiplication System

The money multiplication system is the system that enlarges your wealth. There is a limit to which savings and investing alone can make you rich.

This is because they are heavily dependent on your own direct effort. To create massive wealth, you need to move beyond your effort and create systems that can enlarge wealth even in your sleep. To create this kind of system you need one critical component –  Leverage.

READ: $385 million worth of Bitcoin moved by unknown identity

What is Leverage?

The best way for me to explain leverage is to use the example of a school Teacher and a movie star. A school teacher solves the problem of ignorance through education and a movie star also solves the problem of ignorance and boredom through education and entertainment.

Both teach their audience something about themselves or other people, that they do not know before. A teacher delivers her services by standing in front of a few students and is confined to a classroom. Every day of her life she does the same thing, teaching the same materials to different kinds of students.

READ: Nigeria generates N416.01 billion from Company Income Tax in Q3 2020

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Without her presence, her work cannot be delivered, her time is blocked. She is cut off from the wider society and can only earn income from her direct effort. Although, the teacher arguably provides higher perceived value than the movie star, she lacks leverage and her income is limited by it. This, therefore, means that you can provide enormous value and still not be rich. Value alone does not lead to wealth. It is value and leverage that creates massive wealth.

The movie star in contrast has massive leverage. He shoots a movie in some remote town unknown to the audience. He invests weeks, months, and sometimes years producing the movie. But, once produced, he never has to do the same movie over again. The movie produced is distributed all over the world. He is seen on all the media platforms, in theatre, television, and DVDs.

READ: Top passive income strategies using Cryptocurrencies in Nigeria

His movie is watched by billions of people. He is able to build a solid fan base and is patronized from all over the world. A movie star works once and is paid for a lifetime. It is the long-lasting and far-reaching value of the work of a movie star that makes him richer and wealthier than the classroom teacher. Thus, even with little perceived value, a person can create massive wealth with the right leverage.

Leverage is thus the ability to work once and be paid for life. It also the ability to do it in one place and spread it all over the world. The tools that make leverage possible is the right relationships, the right media platform, and the right distribution system. If you do not build your own leverage system, there is a limit to how much money you can earn.

Explore Data on the Nairametrics Research Website

So, these are the three systems you need to speed up your financial success by almost 20 times. Perhaps, you are thinking to yourself how do I build these systems and where do I start. If this is you, we can help. We will help you build these systems and accelerate your journey to financial success. If you need help, send an email to [email protected]


About author

Grace Agada is the Senior Financial Happiness Director at Create Solid Wealth. She is an Author and Column Contributor in six National Newspapers. She is a contributor at BellaNaija, Nairametrics and Proshare. She is on a mission to help working-class professionals and CEOs become more financially successful. To learn more about Grace and how she can help you, send an email to [email protected]

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Personal Finance

Must-do things after you finally become debt-free

Now you are finally debt-free, these next steps will help you make sure you never fall back into debt again.

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So now that you are debt-free what next? Remember that clearing your debt is just one part of the exercise; staying out of debt is vital to ensure that you don’t end up in the same financial injury. Living debt-free is not rocket science. All it requires is the consciousness that healthy finance is essential for you to live a happy life.

You may want to check out our previous articles 9 Brilliant ideas to pay off debt fast in 2021 and How to get out of debt: A step-by-step guide where we discussed extensively how to find your way out of debt.

Outlined below are some things to help you live debt-free; have a good read.

Make a list of your income and expenses

The first thing to do to ensure that you don’t fall into debt is to plan. Planning is such a vital step to success for anything we want to do in life. Indeed, if you don’t want to fail, you cannot neglect to plan. This doesn’t have to be complicated in any way. It’s as simple as you putting down words and figures. The first step in this process is making a list. You need to see on paper, what your finance looks like. It may not seem like such an important thing to do, but it is necessary. Making this list, all you have to do is write out what you earn on one side. If you have different streams of income, put it all on paper. Then, write out your expenses on paper, everything you know you spend money on monthly. Depending on when you receive your incomes; you can make it weekly or bi-weekly. Just compare how much is coming in against how much is going out.

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Create a budget plan

The next step in the planning process is to create a budget. Based on your analysis from the step above, you should assign every dollar/naira you earn a task. You cannot afford to be passive with your money, give them work to do. They are available to make life easier for you right, but if you don’t tell them what to do, they cannot help you achieve that. You have to understand also; depending on what the ratio of your income to expenses is, you might need to make certain adjustments. In fact, if you want to stay out of debt, you NEED to make those adjustments. This step is not as difficult as you may think, if you do not know how to go about this process of creating a budget, you can use a budgeting app to make it easier for you. There are so many choices out there so you must choose wisely because your financial needs may be different from your neighbour’s.

Be intentional about your money

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This tip can be summarised into the first two steps already outlined. But it is such an essential factor that deserves special attention. Intentional merely is being deliberate in your actions. Therefore, being intentional about your money requires that you don’t leave anything to chance. Conscious money habits will ensure better financial health and keep you from running into debt. So, as basic as the first two steps might seem to you, you really cannot neglect them.

Do not make purchases based on emotions

It is very easy to spend to make ourselves feel better. The painful truth is that the things you buy won’t make you feel better. They cannot take away that feeling, because when the initial gratification has waned, you would still be left with that emptiness you were feeling in the first place.

Unsubscribe from sales emails

Everybody likes to get the first updates for those juicy deals and grab them as they come. If you have not planned for it, please don’t do it. You have to unsubscribe from emails that make you spend more money. Remember that the person sending those emails wants to make money. You do not need to place that instant ordering; turn it off.

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Maintain a good credit score

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Remember when we talked about how to stay out of debt; one of the tips offered was to negotiate lower interest rates. Having a good credit score qualifies you for lower interest rates. More than that; having a good credit score grants you more negotiating power, better insurance deposits, easier approval for loan requests, it also affords you higher credit limits. Overall, having a good credit score places you on better standing than having a bad one.

Do not tie up your money in illiquid investments

As necessary as an investment is, you must engage in those with high liquidity as opposed to illiquid investments.

Earn more money

There is no human on this planet that this idea will not be appealing to. We always want to have more money, no matter how much we already have; it’s in our nature. The simple ways to earn more money is to get a side hustle, become a freelancer or contractor; use your skills to make money. With unlimited access to technology, the world of work offers more opportunity than ever for anyone to turn their skills into pay.

Staying out of debt can be summed into these few words; “Live within your means”. The way to ensure that you do that is by planning. Be intentional about your money. Life can happen at any time but even when it does, with a proper plan already in place, you will be better equipped to handle unforeseen circumstances than when you don’t even know where your money is coming from.

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Personal Finance

How to get out of debt: A step-by-step guide

Follow these few simple practices and you may well be on your way to living a debt-free life.

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The crowding out effects of rising States' debt: Why Nigerians should worry, How to Get Out Of Debt: A Step-by-Step Guide

Having to run or hide from someone just because you owe them some money is not a very fun exercise. But what if you didn’t have to do it, what if you lived debt free? Hold your gasps; it’s not so shocking. It is very attainable, and if you can follow the few simple practices we’re about to examine, you can be well on your way to FREEDOM.

Here, we’ve outlined necessary steps to help you live debt-free;

READ: How to make more money solving problems

Gather your data: These include records and information that contain your bills and expenses, income and source(s) of income, credit score etc. the goal here is to get you acquainted with yourself. You have to know yourself well enough to understand your spending pattern and identify critical areas to adjust or habits to do away with.

Understand your debt: Make a list of all your debts, all that you currently owe, and how much interest rates are charged on them. Remember to include the minimum required payment for each debt. This would help you understand the type of debt(s) you owe. Understanding your debt will help you know how it happened and give you a clearer perspective on how to clear it. If you have more than one type of debt, it can be challenging to keep track, and you may find yourself always paying money and not even knowing if you are a step closer to clearing your debts. But you cannot begin to pay off your debt until you understand what the figures in your records represent.

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READ: Football: Manchester United net debt rises by 133% to £474.1million

Create a budget and debt pay-off plan: Creating a budget should have come as a first step. However, that would be more effective in the situation that debt doesn’t exist, because one of the reasons for budgeting is to make sure that you DON’T fall into debt. Having gathered your data and coming to terms with what the records are; the next thing to do is to create a plan. There are different tools you can utilize to help you. A simple keyword search would give you an idea of what to do. The budget plan doesn’t have to be complicated, create a list that you would be able to understand and stick to the program.

(READ MORE: How declining interest rates, others drive a shift in Nigeria’s investment sector)

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Lower your interest rates: The reason why people fall into debt and find it challenging to pay is due to the interest rate charged on their actual amount borrowed. You see; because you are required to pay interest rates on that money, it drags out the length of time you could payback. Negotiate your interest rates lower. Even when you may have already borrowed and started paying it off, if you find it challenging to complete payment, you should consider asking for lower interest rates. Depending on who your lender is, and how persuasive you are, you may find yourself having less to worry about.

READ: Afreximbank posts $217m net income in 9M 2020

Pay more than you have to pay: Another reason you could remain indebted to someone is when you stick to just paying the monthly required amount. Because of the interest charged on most loans, you only concentrate on paying that specific amount for that particular month. That keeps you in debt because instead of bringing you closer to clearing your debt, you are only dragging it out. Regardless of the interest rate, if you can pay more than the expected amount, you should go on to do so. It is something that you can discuss with your lender. It serves both of you because the faster you clear your debt, the quicker he gets his money back.

Earn More Money: To settle your debt, you have to go out of your way to ensure that your income supersedes your expenses. One way you could earn more money is by starting a ‘side hustle’ or taking a part-time job. In this modern age, there are more opportunities than ever, for anyone to diversify their streams of income. And most of these gigs are conveniently remote; you can run them from the comfort of your home. Of course, any human would be elated at the prospect of earning money, and when you are in debt, you just have to go out of your way to do everything possible to clear.

Curb Your Excesses: If you are in debt and you are finding it difficult to clear, evaluating your lifestyle habits could help put things into perspective. You have to be honest with yourself. If you want to pay off your debt faster, you’ll need to cut your expenses as much as possible. One tool you can create and use is a bare-bones budget. This is a strategy you can use to make your expenses as low as it can go and live a minimalist lifestyle. Live only on bare necessities and do away with frugality.

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No matter the type of debt, you can always clear it. Never believe that it is impossible. Always remember to have a plan. You really cannot afford to leave your life to chance. Be intentional about every aspect of your life, especially with your finances.

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