The idea of owning a personal vehicle to make your life more comfortable and enjoyable, might seem out of reach due to financial constraints. In this guide, we will show you a stress-free way to realize your dream by securing a car loan in Nigeria.
A car loan is a financial arrangement in which a lender provides funds to an individual or business for the purpose of purchasing an automobile.
The borrower agrees to repay the loan amount, typically in monthly installments, over a specified period, along with accrued interest.
The car itself often serves as collateral for the loan, and if the borrower fails to make the agreed-upon payments, the lender may have the right to repossess the vehicle to recover the outstanding amount.
Car loans are a common way for individuals to acquire a vehicle without having to make the full upfront payment.
If the hurdle of insufficient funds prevents you from purchasing a car, fret not, as we are here to guide you on obtaining car loans in Nigeria without unnecessary stress.
The reality is that many individuals driving cars today financed their purchases through ‘car loans.’ Unlike the past, when accumulating a substantial amount of money and dealing with car vendors were the norm, obtaining a car nowadays is more accessible.
Who can get a car loan?
Not just anybody; certain requirements must be met before a bank approves a car loan. However, the process isn’t overly complex.
Banks in Nigeria typically grant car loans to those with regular or stable income. This implies having a steady income from your business or employment.
Individuals working with reputable or well-known companies have better chances of securing a car loan from any bank.
How to prove you have stable income
When seeking a car loan from banks, demonstrating a stable income is straightforward. Simply present your official bank statement for a period of not less than two years. Even if you are self-employed, obtaining a car loan is possible as long as you can prove a regular income for the same two-year period.
Note: Lack of association with a reputable company or an unsteady income doesn’t rule out the possibility of getting a car loan in Nigeria. It merely requires additional effort.
Eligibility for a car loan
Banks assess your eligibility based on factors such as age, salary, job type, and residence.
Documents required for car loan:
- Identity proof: International Passport, National ID Card, Driving licence, Voter’s card, etc.
- Address proof: Voter’s card, utility bills, etc.
- Age proof: Birth Certificate, Baptismal card, Affidavit, etc.
- Passport Photographs
- Income proof: 2 – 3 months bank statement, latest income, tax return, etc.
How to get car loans in Nigeria
Below are step-by-step procedures to obtain a car loan in Nigeria:
1. Be sure of the type and brand of the car you want to buy. Banks are ready to provide car loans, but they prefer knowing the specific car as they might not offer loans for certain brands or used cars.
2. Understand the cost of the car. Banks typically provide 60 – 80% of the price, and you are responsible for paying the remaining balance. Additionally, you need to cover the insurance cost, which may be up to 5% of the car price.
3. Find a bank that offers the best car loan in Nigeria. While many banks offer similar services, you may have preferences. You’re not obligated to take a car loan from the bank where you have an account. If another bank provides a better deal, feel free to choose them. Some car dealers have agreements with specific banks, simplifying the process.
4. After selecting a bank, visit and initiate the process. You’ll be required to write an official letter, attach a copy of your payslip, car invoice, bank statement, and job confirmation. Fill out necessary forms, a straightforward task.
You’ll receive a document from the bank detailing your car loan, including the amount and interest rate. After this, the loan is granted, and you’ll receive a draft giving you the right to purchase and own the car.
The dealer releases the car to you, although the bank retains ownership of half the car until you clear the loan.
Important things to know
Hypothecation: If you purchase a car through a loan in Nigeria, the lender has the right to seize your car if you fail to pay EMI on time. You’ll need to sign a hypothecation letter during the car loan process.
Repossession: If payments are missed for several months, the bank can repossess and sell your car to recover the money. Once you clear all EMIs, ensure to change the owner’s name on the papers.
Loan duration: Car loans in Nigeria typically have a duration of four years. During this period, you’re expected to make specific monthly payments as part of the loan and interest. The interest rate often fluctuates with the market price.
Getting a car loan in Nigeria is not a daunting task. Following the instructions provided above can lead you to drive your new car. Remember to pay a portion of the money monthly until you clear the loan.