Owning a car is a huge achievement in the life of most people. It is sometimes a measurement of one’s progress in business or career. However, in many cases, you don’t have to get all the money you need in one lump sum before you can own a car of your dreams. Unfortunately, this factor robs many middle-income people of the opportunity to own cars of their own. The fear of paying for the car with their limited resources puts a lot of pressure on their financial plans.
Meanwhile, you have the option of buying a car via a car loan in Nigeria and there are financial institutions, trusted car platforms and car dealerships that can provide this service. These financial institutions offer car loans with the option of payments by monthly instalments (a.k.a repayment plans) so that you can meet up with your other financial commitments alongside acquiring a car. Here are some tips that make it easier to get a car loan:
- Don’t Over shop for the Loan
Before negotiating a loan, you are expected to start a loan application process with various lenders. This is known as loan shopping. This application process is expected to give you a feeler about the best loan terms out there.
Loan over-shopping is the tendency to prolong your loan shopping period. Most times, loan conditions change and this will have an implication on your loan shopping if you prolong the time. While it is good to explore all possible options on the table, it is better to limit the shopping period to within one or two months.
- Know the Eligibility Requirements
All financial institutions have some similar ground-rules for offering car loans, which revolve around the ability of the borrower to pay back. However, when narrowed down, these conditions may differ and may include age, minimum salary requirements, employment type and residential area. To be on solid ground, it is advisable to know the requirements for each financial institution before you set out on determining the one that is best for you.
In Nigeria, you will need valid proof of identification like an international passport or National ID and a bank statement showing your financial transactions and patterns over a minimum period of 6 months.
- Put a Ceiling on the Loan Amount
The loan amount is usually determined by the type of car you want to buy. Also, the amount a financial institution will be able to offer you will depend on your age and income. While some banks may be willing to offer up to 100 per cent of the car loan, other lenders offer just a certain percentage.
Meanwhile, certain levies are charged by the lender while processing the loan application. Charges such as processing fee and foreclosure fee apply. The latter is a charge based on outstanding loan amount and varies from one financial institution to another.
To avoid getting overwhelmed in the end, it is crucial to be aware of these charges from the onset. This will help you plan ahead and know the loan package that is suitable to your wallet.
- Know the Interest Rate
While getting a car loan might ease the financial strain on you, a bad interest rate rubs off the joy attached to the loan. Interest rates are charged on car loans as marginal costs of funds, and this is usually based on lending rate and additional spread. Once the car loan is approved, the interest rate is fixed regardless of whatever uncertainty the future holds. But you can opt for a floating interest rate if you think interest rates will be down in the future.
- Know the Repayment Plan
Two things are uppermost in getting a car loan. The first is getting the loan approved; the next is actually paying back the loan. Usually, banks that offer car loans have a flexible repayment plan; sometimes spanning into years. It is important you ask for a repayment plan that suits your financial capacity and convenience. You should remember that defaults on repayment usually attract extra charges in most banks.