Car Financing – Becoming a car owner is an exciting and exhilarating moment in one’s life. With all the troubles that coexist with jumping public transport or using cab-hailing services, the happiness and ease that comes with owning your own car is unmatched. Everyone wants a car, even people who work five minutes away from their homes, want a car.
The downside to this is that no car costs as little as five naira, but if you know a plug please let us know. That being said, no car costs a penny because even the worst car brand (if there is any) costs money. And except you are thinking of buying a motorcycle, the oldest car brand needs some thousands of naira to acquire.
Depending on your societal status, we all have dream cars, but not everyone can afford to buy their dream car, so we budget and plan. In budgeting and planning, you perform a research; compare prices and vendors to pick the best suitable options. After all these, it is up to you to decide how you want to finance acquiring your car. And to be fair, not all Nigerians can presently afford to buy a car upfront, no thanks to the Nigerian economy.
Not being able to afford a car upfront should be a deterrent to you getting a car, because in today’s world there are dozens of financial opportunities and schemes that can afford you the opportunity of becoming a car owner. One of the many popular financial schemes is getting a Car loan. A car loan is a popular financial scheme that people use a lot nowadays to buy vehicles of any type for themselves.
Getting a car loan in Nigeria is not rocket science; it is not as tasking as people peg it to be. You need to research properly, follow the steps and you have your car loan and your car. In this article, you will learn how to get a Car loan in Nigeria and a list of auto-financing companies in Nigeria.
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What is a Car loan?
A loan is an amount of money you borrow from someone or somewhere for an agreed period of time by the two parties involved, to be paid back upon the agreed time. From the definition of a loan, a Car loan is a loan taken out for the purpose of acquiring a car.
A car loan is best gotten from a financial institution or an auto-financing company, on a short term or long term basis. Most financial institutions or auto-financing companies give loans for up to 5 years.
Also, when taking a car loan from a financial institution, interests are involved. An interest is the amount of money paid regularly at an agreed rate for an amount of money loaned. So, if you borrow any amount of money, you will pay an additional amount of money over a period of time. Interest rates are often lower, if the amount of money borrowed is high and is a long-term loan.
Pros and Cons of Car loans
For starters, it is never advisable to take out a car loan you cannot pay back. This means that you are required to have a pay-back plan before forging ahead to take out a car loan. So, what are the pros and cons of car loans?
Pros of Car loans
- Immediate access to your car: Instead of waiting for many years to get your car, with a loan you immediately get your car and start riding in it. In acquiring a car loan, you can always buy a car now, ride it now, and think of the payment plan later.
- Build your credit profile: When you borrow an amount of money from an auto-financing company, there is always an agreed date as to when the loan will be paid back in full. If the money is paid back in full on time it increases your credit profile, which means that next time when you ask for a loan it will be given to you almost instantly. Like when you borrow money from a friend, the earlier you pay back the more you increase your friend’s trust in you when it comes to borrowing money.
- Market competition: There are loads of companies that offer car loans, and they are always on the lookout for anyone interested in acquiring a car loan. Because of this, it is easier to have a wide variety of car loan financing options and repayment systems.
Cons of car loans
- Interest and fees: Many auto-financing companies that give out loans have interest packages on loans acquired. Some of these companies charge exorbitant interest fees, and sometimes the fee becomes almost impossible to pay back.
- Risk of default: With loans or car loans, there is a specified date when the money will be repaid back monthly or bi-monthly. Once there is a default in payment, the interest fee is added to, and this automatically increases the total amount to be paid back.
How to get a car loan in Nigeria
Like earlier said, getting a car loan is not rocket science. The major key to getting a car loan is to be qualified, and once you are qualified, you get the loan. So, what are the steps to being qualified to get a car loan in Nigeria?
First, you have to have a regular source of income. This means that every month a certain amount of money has to pass through your bank account to show that you can repay the loan back, as agreed. Whether you are an employee in a company or an Entrepreneur, you have to have the capacity to back the loan back. As an entrepreneur you have to have the revenue to pay back the loan with the interest
Second, you have to present your bank statement to the auto-financing company. Some companies ask for six months to one year, and others ask for two years, it depends. The statement of account helps the lender know what your financial history is. If you have just been employed to a company a month before applying for a car loan, your chances of getting approved are slim.
The type of company you work for is also a huge factor in determining if you will get a loan or not. If you work for a known company or a multi-national, then you have a higher chance of getting approved for a car loan in Nigeria.
After getting qualified there are some further steps involved after your financial status has been approved.
- Identify the type of car you want to buy. Before approaching an institution for a car loan you have to know the type of car you want to buy. Knowing the type of car you want to buy, gives you an estimated amount of money you need to loan, and even if you want to change the car choice, you have a range to work with.
- Auto-financing institutions usually don’t give a 100% car financing, they provide at least 60% of the money and the remaining money is provided by the person borrowing it. Before getting the money from the institution, it is necessary to get a proforma invoice from the auto dealer. A proforma invoice is a draft invoice that shows that you have shown interest in the car and the car price.
You also need to have paid for car insurance, which is usually 5% of the value of the car. The insurance company has to be affiliated with the financing institution, because banks don’t accept 3rd part insurance companies.
- After an invoice has been acquired and it has been approved, you get in touch with your account officer and present the documents to the officer.
- The account officer works with you to ensure that all needed documents have been submitted and approved.
- After all steps and documentation have been made, the money is disbursed to your account. The financial institution holds a spare car key to allow them to reclaim the car if the loan is not paid back in due time plus interest.
10 Auto-finance companies in Nigeria
There are several auto-finance companies in Nigeria. Many of them are independent institutions that are not affiliated with banks. Here are 10 auto-finance companies in Nigeria in no particular order.
- Royal Exchange Plc
- CreditVille Limited
- Credit Nigeria
- Rosabon Financial Services
- Access Bank Group
- First Bank of Nigeria Ltd
- AUTO LOAN | FCMB
- Vehicle and Asset Finance – Stanbic IBTC
- Opticom Finance Limited
- Citibank Nigeria
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