Loans is one of the bedrock of country economy, no country can develop without proper circulation of money and the best way to have wide circulation of fund is Loan. When business has access to fund there will be expansion therefore boosting country economy.
For individual it means comfortability, you can easily take loan to buy whatever you want, pay for hospital bill and payback the loan later.
Before we go into the types of loan in Nigeria, I will like you to know what loan is
What is loan
Loan is a money you receive from friends, bank, loan app with an agreement to pay back at a specify day with interest agree upon.
Now that you know what loan is, it is time to go to types of loan
Types of loan in Nigeria
Loan is categories into two which is secure and unsecured loan. The deferent between them is that secured loan Is gotten in person and comes with collateral and a lot of paper work, while insecure loan are the normal loan you can get by dialing USSD code or apply through mobile phone. These two categories of loan are further divided in to the following
Insecure loan
Below are the types of insecure loan in Nigeria
Personal loan
These are loan targeted at people who want to buy goods and services. It is a soft loan usually at #100,000 and the payback is also short between 15 to 60 days.
The interest rate for this kind of loan ranges from 1.5 to 5%. Personal loan is rampant in Nigeria, you can get it from banks like Access bank, Gtbank and mobile app like Fairmnony, Carbon, Migo loan and others
Salary Advance Loan
This is a loan for salary earner, the loan is usually given out in proportion to net salary, for instance it might be 50% of net salary which means, if someone is collecting #100,000 as a monthly salary he or she can obtain loan of up to #50,000.
The interest rate is low and the pay back period is just 30 days. Once you receive your salary, the loan amount plus interest will be automatically deducted from your bank account.
Credit card loan
This is a new loan in Nigeria, instead of going for outright loan you can request for credit card loan such that whenever you want to buy something and you don’t have money you can use the credit card.
Credit card is like an overdraft where you can take money from when you have notting, but it is in card form. The interest rate varies depending on the bank that give that card but It is usually between 3% to 5%.
The pay back period is 30 days to the time you make a transaction with the card. But you can pay back before the 30 days if you want, in fact some bank will automatically deduct your money once you load your account.
Easybuy loan
This is another unsecured loan, this loan does not require collateral and it is targeted at people who want to buy phone or other product.
Before you can access this kind of loan you will need to provide at least 10% to 40% of the phone you want to buy. Banks and ecommerce store are usually the one that give such loan
Secured loan
Below are the types of secure loan we have in Nigeria
Mortgage loan
This is a loan targeted at those who want to buy house, the loan interest rate is not much and the payback period can be up to 10 years depending on the bank and the amount of the house.
Mortgage loan can also be seen as property or estate you use as collateral to obtain a loan, such loan type are heavy between #10m to #100m.
Auto loan
This is another secure loan, targeted at those that want to buy car, the loan is usually given by bank, the interest rate depend on the price of the car and the payback period can be upto 2 years.
Before you can obtain this kind of loan you need to provide at least 20 to 30% of the amount of car you want to buy. Some bank will allow you to buy the car from your dealer while some bank will provide the dealer.
Asset loan
Asset like generator, home appliances. To get this loan you need to go to bank so that they can check your credit score and see if you are fit to collect the loan.
The loan pay back period is between 6 months to 1 years and the interest rate depend on the amount of assets you want to buy.
Other categories of loan in Nigeria are
Fixed rate loan
These are loan with fixed interest rate, it does not go up or comes down through out the repayment period, for instance if you collect a personal loan of #50,000 with interest rate of 5% that means you will pay back #55,000.
Variable rate loan
There are some loan that have a wavering interest rate e.g overdraft loan, the loan will keep increasing or reducing till you pay back.
This kind of loan interest rate is usually calculated par day. For instance if you obtain overdraft loan of #10,000 with interest rate of 0.3% per day. It means your loan will be increase by #30 every day. Let say you pay back #1,000 today the amount of loan will reduce to #9,030, the interest rate for the next day will be 0.3% of #9,030.
Example of bank that give this kind of loan is Kuda bank.
Installment loan
These are long term loan such as mortgage loan, the payback period is usually between 5 to 30 years. The loan is payback with interest rate gradually; monthly or annual until its finished.
For example if you collect a mortgage loan of #10m with interest rate of 5% per year and the payback period is 10 years, you will pay back 1.5 million very year.
When taking loan what you need to do
Though it is a good thing that we now have a lot of loan company in Nigeria, the problem now is that most of them just want to meek people dry in the name of giving loan. To not fall victim of loan scam check the following point
Their interest rate
The rule is that if you are taking loan with short payback period the interest rate should be low, it should not exceed 5% irrespective of the amount of loan.
Processing fee
Paying a fee before taking a loan is bad, run away from any loan app or bank demanding more than #200 processing fee.
Terms and condition
Check the term and condition well before you take loan, don’t just thick the check box, some loan app in Nigeria will send provocative message to your contact in other to shame you if you default while some app or bank will automatically deduct money from your account through the BVN you provide.
Conclusion
Above is the types of loan in Nigeria for now, as Nigeria financial ecosystem develops surely there will be more loan product and once it is out we will update this page.
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