When getting a loan, there are certain topics that should be discussed with your account officer. These topics are necessary to avoid mistakes due to ignorance and to also guide you to making the best choice of a financial institution to make use of.
Loan repayment tenure:
The loan repayment tenure is the duration for which a loan would last. Different kinds of loans have different durations. It can be as low as one (1) month to as much as five (5) to ten (10) years. The longer the repayment tenure, the more you can take and also the lower your repayment would be. Also, some loans are paid monthly, some quarterly, biannually or even annually.
For some kinds of loan, you start repayment immediately while for some others you wait for a month and some others you can be allowed to stay for as much as 1 year before you start repayment. For private lenders, you would most likely start repayment immediately but for government loans (Example: loans given to entrepreneurs by the Central Bank of Nigeria), you may be allowed to stay a space of one year before repayment kicks off.
Do you buy out loans:
If you have an existing loan, you should ask about the possibility of the financial institution buying out your previous loan so that you have just one repayment to do. Although we currently do not buy out loans, there are several financial institutions that do.
Generally, loans are insured. Mostly life insurance in the rare case of loss of life. You would want to know the insurance rate if the financial institution insures their loans. Insurance is usually a certain percentage of the total amount being loaned out to you.
Top up loans:
Can I get an additional loan if need be before the end of my loan tenure? Would the repayment plan be rescheduled to fit the new loan? Would you have to start paying immediately for the previous and the new? At what rate would the new loan be given to you? Creditville Limited gives top-up loans after three (3) months of collection of a loan to customers who have shown good repayment pattern and have good customer rating by their account officers.
Early repayment penalties:
For loans given by private lending companies, this question is very important. You would want to ask the question “Can I liquidate or offset my loan before the end of the loan tenure?” While some institutions fine you for paying off your loan early because it reduces the profit made on your account, some actually encourage you to pay off early. Creditville Limited is an example of a financial institution that does not fine you for early repayment. Early repayment is very much allowed as our loans are tailored to be flexible in such a way that it soothes the customer.
For every loan, there are often repercussions for late repayments. If you miss a payment, it messes with your repayment plan and makes the initial one null and void. There are often charges placed as penalties for late repayments and you should enquire about this to avoid issues in the future. Issues that may arise from ignorance.
Extra charges or fees not shown on the repayment schedule:
Typically your repayment schedule contains the amount you would be paying on either a monthly, quarterly, biannually or annual basis. There might be one off charges which do not reflect on the repayment schedule though. Example of such one off payments could be management fee, legal fees, insurance and the likes.
Interest rates differ from company to company and from customer type to customer type. Customers with good credit history are usually on much lower interest rates than first-time customers who have not built their creditworthiness. Creditworthiness not only determines the interest rate at which you’ll be placed but also determines if you will be given a loan in the first place. This is achieved by checking your exposure rate (Credit checks).
Method of calculation of interest rate:
A 3% flat rate is much higher than a 4% reducing balance rate which is why even though the numbers may look appealing you need to be sure of which method is used in calculating your interest rate.
Read full article on Flat rate and Reducing balance method of interest calculation.
How long does the loan process take?
This question is valid because you may have a deadline to meet. Some loans are disbursed faster than others. This varies from company to company and also from one type of loan to another. So you should be asking your account officer “How long does it take to disburse the loan after all requirements are met?” At Creditville Limited, you can get a loan of up to four (4) million Naira in four (4) months.
Who can be a guarantor?
If the loan is a guarantor loan, you would want to know the class of people that qualify as suitable guarantors. Can a business owner guarantee you? A civil servant? Or does it have to be a banker or someone who works with a blue chip or multinational company? You should ask these so you don’t end up wasting your time and not getting your loan approved. At Credtville, the class of guarantor depends on the kind of loan to be taken. Payday loans are a bit more flexible as a colleague can guarantee you and we have recently created products that do not require a guarantor at all. Read the full article on things to consider before standing as a loan guarantor
What kind of collateral is acceptable:
For collateral loans, you should enquire about the kind of collaterals that are acceptable. Collateral must generally be able to pay off your loan if sold.
Do I qualify for lower rates?
As mentioned earlier, your credit determines the interest rate on your loan. At Creditville Limited, for example you may get a loan on 6.5% for the first time and 5.5% for the second one and then it drops subsequently to 5%. The customer rating comes into play. A higher customer rating will get you a lower interest rate so you would want to know what your rating is to know if you are due for a decrease in interest rate.
Repayment dates are usually chosen at a time in the month which is convenient for the customer. For payday loans, repayment is usually scheduled for your payday or in cases of inconsistencies, the worst case scenario date is taken. For business loans, monthly peak period is scheduled for repayment. So you would need to converse with your account officer to set a convenient date for you.
Method of Repayment/Automatic Deductions:
How would repayment be done? Via cheque payments? Remitta? What platforms would be used? Would transfer be accepted
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