5 types of loans common in Nigeria

Slowly but surely the myths about loans are fading off and more people are opening up their minds to it.

And that’s why with every article, Irorun brings you closer to the facts of finances. Today is not any different, we’ve curated 5 types of loans that are common in Nigeria.

Now, you can pick a loan option that’s best suited to you. Happy reading!

This type of loan requires collateral as a condition for borrowing. A lender can request collateral for large loans for which the money is being used to purchase a specific asset or in cases where your credit scores aren’t sufficient to qualify for an unsecured loan. Check out how you can boost your credit score.

The collateral for the loan could be your property or an asset with a value equal to or higher than the loan amount.

The interest rates of secured loans tend to be lower than that of unsecured loans due to the use of collateral. Fees and loan terms can vary for secured loans, depending on the lender, though they do tend to have long repayment periods.

BNPL is just as the name implies. This short-term loan allows you to buy the desired item the moment you spot it, without the nagging feeling of “low funds”. The BNPL loan greatly depends on the terms of the lender and how they operate. Some lenders may accept monthly installment payments over an agreed period or a one-off whole payment at a specific date.

A very popular BNPL loan scheme is the loan option attached to gadgets(case in point: iPhone). Apple offers an option where you can own a device(after thorough background checks) and pay back monthly installments until the loan amount(equivalent to the value of the device) is completed. BNPL loans such as this eliminate “buyer’s guilt or hesitation” and allows you to buy am as e dey hot while still maintaining a good standard of living.

Unlike the secured loan, this type of loan does not require collateral and is usually given to borrowers based on their credit score and financial history. It’s mostly known as a personal loan.

Although there is little to no security, unsecured loans are common since they are easy to pay. They also have a short repayment time as opposed to secured loans.

This type of loan is usually given to an employee. It’s a part of the wages of an employee paid at the end of the month. Only an individual with a salary paying job is eligible for this loan.

This loan is usually short-term, and also comes with interest rates, though subsidized. The repayment terms are as such; you can make payments once at the end of every month, or once every three months. It’s important to understand that employers rarely give salary advances unless otherwise stated. This means that salary advance loan is usually only available when stipulated in your employment contract. No be every office dey do am.

However, if an employer gives a salary advance to one employee, he/she must extend the opportunity to other employees. Discrimination based on performance, race, age, or gender is highly discouraged.

Asset finance is the practice of using a company’s balance sheet assets (such as investments or inventory) as a security to borrow money or take out a loan against what you already own. It can provide a secure and easy way of getting working capital for your business.

Various things can be offered as collateral, from inventory, machinery and even buildings. For example, a vehicle manufacturing company may use its vehicles as an asset to secure finance. The amount loaned will usually depend on the value of these assets which the finance is secured against.

It’s often used as a short-term funding solution (to pay employees, suppliers or to finance growth in a company) and provides a more flexible way of borrowing compared to traditional bank loans. For growing businesses and start-ups especially, it provides an easy way to increase working capital.

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