Building Credit

Banks are amazing financial institutions, and offer banking solutions to make our individual and business life easier. On the other hand, they do not offer the best of savings interest rates, neither do they give considerable interest on the borrowed sum. This is because the major purpose of a bank is to make money and therefore they don’t exactly put you first. A Credit union is members oriented and nonprofit.

Many have turned to credit unions due to its many benefits, which is what we explore in this article.

What is a credit union?

Credit unions replicate the operation and services of financial institutions like banks, with the exception that they are owners oriented. The members of the union own the institution. The goal of a credit union is to serve the members first rather than maximizing profits as seen in banks. Most times, a credit union offers better savings and loan interest rates, but also suffer from reduced maximum disbursal amount as a result.

How does a credit union work?

The members of a union are its owners. When you open an account with a credit union and deposit money, you become a member of the union. This gives you the position of both an owner and a customer. They use your money in meeting the loan needs of other members and the cycle continues. A credit union operates just like a bank.  

What are the pros and cons of a credit union?

There are several pros and cons that come with using a credit union. They are:

Pros

1. You are a member of the union and therefore receive benefits like dividends and voting rights
2.  Credit union offers lower fees than traditional banks, which makes them a cheaper option
3. They also offer lower rates to members on taking a loan.
4. Credit unions are community and members oriented
5. Since they are smaller, they have better customer service and can cater to the needs of the customers effectively  

Cons:

1.  Although a relatively low sum, you have to pay to become a member of a credit union. Credit unions also have a minimum opening account balance
2. Not all credit unions are insured, therefore poses a risk with your money
3. Credit unions are limited in branches and ATMs because they are location-based and operate in a small area
4. The services offered by credit unions are limited compared to commercial banks. For example, their maximum loan amount  
5. Credit unions most times do not have enough profit to implement the best technology compared to banks. You might not have the leisure of mobile or online banking.

Are credit unions better than banks?

This depends on your needs. Credit unions are not better than banks, but they may be beneficial to you since they offer lower interest rates on a loan and higher rates on savings. However, credit unions cannot match the financial capacity of a bank.

Banks owe their allegiance to shareholders, while credit unions are more members oriented. We cannot say one is better than the other because it depends on your needs. For example, if you need a loan running into hundreds of millions, a credit union cannot help you. They do not have such financial capacity, therefore you have to turn to a bank.

Conclusion

Although very beneficial, credit unions remain a nonprofit institution, and cannot match the financial capacity of a bank. However, if you would not need a huge loan sum, and prefer a place where you would be valued and your voice count, then a credit union is for you.

No one ever plans to stack up a history of bad credit, or intentionally skip payments plans, but things happen. For whatever reason you did, it’s often followed by bans here and there, and flagging your credit against a further loan. Such a situation is hard to circumvent, and you lose the power to get a quick loan for emergency situations. In such a condition, you may ask about how to get a personal loan with bad credit? Is it even possible? Well, it is, and we are going to show you just how to do so.

What is a credit record?

As a borrower, your credit record is a history of how responsible and timely your debt repayment has been. It captures details like how much you borrowed in the past, when you did, and how quickly you repaid the loan. Credit records are compiled by several sources including banks, collection agencies, governments, and credit card companies.

In most countries, when you apply for a credit from a financial organization, they forward your credit record to the credit bureau. Your credit history is then considered as well as other factors, to determine your creditworthiness. This is simply your ability to repay a debt as at when due.

What makes my credit bad?

Missing payment deadlines raises a red flag for borrowing companies. It is the major factor taken into consideration in the analysis of your credit history. You develop a bad credit after skipping repayment deadlines.

As a credit user, you have a credit score that is calculated based on many factors. A poor credit score would see you develop bad credit.

How do I improve my credit history?

You can do so through any of the following means:

1. Pay your bills on time
2. Improve your credit score by making utility and credit phone payments on time
3. Clear your debt and keep your spending low on credit cards
4. Only open a new credit account when necessary
5. Do not close unused credit cards if they do not cost annual maintenance fees
6. Dispute inaccuracies on your credit report

What is a bad credit loan?

This is a loan that they specially design for customers in need of a loan but has a poor credit score and weak credit history. It is the situation you get stuck in after an overspending spree on credit cards. Although you are going to pay high interest to get this loan, if you really need it then this is a way out.

Bad credit loans are also called personal loans. They operate like normal loans where you borrow and pay back in fixed monthly installments for the entire payment duration. You can use such a loan for just about anything you desire.

How do I get a personal loan with bad credit?

Although difficult, you can get a personal loan with bad credit through any of the following means:

1. Credit unions
2. Family or friends
3. Using a co-signer whose high credit score would help you get a lower interest rate
4. Tap home equity, which you can always use to get a loan. It does not consider credit score.
5. Online or Peer to peer lending (P2P)
6. Cash advances

Getting a personal loan with bad credit might be a ton of work. This is because you have to consider so many factors, or meet certain criteria to be eligible. However, always look out for interest rates, and be sure you can afford to pay back before accepting one.

What are the pros and cons of obtaining a bad credit personal loan?

Pros:

1. The loan application process for bad credit is fast
2. Different lender options
3. Flexible repayment duration
4. You can improve your credit score if diligent with payment

Cons

1. High-interest rates
2. They usually come with fees and penalties attached
3. You might require a collateral
4. Bad credit lenders might not be licensed. Be sure to do diligent research to ensure that they are.

Conclusion

A bad credit is not the end of the world or your access to loans. Although at high-interest rates, they offer you a chance to rebuild your credit score and solve your pressing financial needs. Always look out for interest rates and other attached fees before committing to a personal bad credit loan. 

Before the emergence and advancement of the internet, individuals who needed to raise money had engaged others to do so. As time advanced, banks became more digitized, therefore raising money involved a few phone calls and bank transfers without leaving your home. 

However, with the emergence of crowdfunding platforms like NaijaFund, you can now raise capital from all around the world without even getting to know your sponsors.

NaijaFund is one of the most popular crowdfunding platforms in Nigeria. It removes the physical barriers associated with receiving financial support from people all around the world.

How does NaijaFund work?

You start by logging on to the official website (www.naijafund.com) and take the following steps

1. Create your funding campaign.
2. Link your bank account to NaijaFund’s payment processor (Paystack). This is done by imputing your account details in the “My Account” section.
3. You can also describe the campaign to inform the public of its nature and also spur them to contribute. Share campaigns with the public through social media, the press, and also through emails. 
4. They deposit payments into your registered bank account.

All campaigns must have a fund goal and bound by time limits set by you.

Does setting up a Campaign on NaijaFund cost me money?

Setting up a campaign on NaijaFund is FREE, and the payment made by all contributors is also free. However, after your campaign raises its target fund, NaijaFund charges a 10% fee on the funds raised as a maintenance fee for managing the platform. 

Also, paystack, who is their third party payment processor, charges a further 1.5% + N100 on payments from local banks cards in Nigeria, and 3.9% + N100 for payments from foreign cards.

The charges are deducted per transaction. All donations to your campaign are processed within 24 hours, after which it is sent to your bank account on the next working day.

Can I raise money for anything with NaijaFund?

Yes, you can. As far as people see the need and purpose of your campaign, they would not hesitate to donate. Although you can set up just about any campaign for any purpose, non-purposeful campaigns are sure to see you have no donor. 

You can browse the categories of successful campaigns to see how to set up one successfully.

Do I have to be a non-profit to use NaijaFund?

No, you do not. NaijaFund crowdfunding is available to anyone, for any type of campaign, not only non-profit purposes. Many non-profit use NaijaFund, because of its simplicity and is a great way to raise money, this does not mean that it is strictly non-profit.

Can I run more than one campaign on Naijafunds?

Yes, you can. The platform allows you to raise up to 5 campaigns at a time.

Is NaijaFund Legit?

Your Naijafund page is secure and safe. Payments are made through encryption technology, and all the money donated would be transferred to you after the deduction of charges.

Conclusion

If you have a desperate financial need or want to raise money for non-profit purposes, NaijaFund offers a very secure platform to do that. If your campaign is purposeful, people would contribute to it.

Make sure you get your message out there to family, friends and other people on social media, you just might find out how far people are willing to go for you.

IMF Loans, also known as International Monetary Fund Loan, has answered the prayers of many nations, and it continues to do so. What exactly makes the loan important? Read on to find out more.

About the IMF

The International Monetary Fund, established in 1944 after World War II, is an intergovernmental organization that performs the role of fostering the stability of the international monetary system. It also facilitates international trade, promoting sustainable growth, and reducing global poverty. 

The IMF comprises 189 countries.

Over the years, the IMF has experienced rapid growth, and now, it offers loans to member nations to help them fight crises and payment problems. 

But just like everything else in this world we occupy, the International Monetary Fund Loan (IMF Loan) has its critics, supporters, and even economists have a thing to say about it. 

What experts are saying about the IMF? 

Supporters of the IMF say they love the concept behind IMF because it offers help when a crisis arises in member nations and help to heal or reform backward economies. However, critics have said the IMF Loan is complete rubbish as it replaces national autonomy and aggravates economic problems. Economists say the loan creates a moral hazard on national scales, which we would get to in the disadvantages down below. 

What loans do they give?

The IMF, unlike other development banks, does not lend money for specific projects. Its loans are to help countries tackle their shortage of foreign exchange problems and stabilize their economies. 

IMF gives two types of loans to its member countries – non-concessional loans and concessional loans. 

The concessional loans attract very low and, in some cases, zero interest rates; they are for low-income countries. The non-concessional loans attract market-based interest rates.

There are several mechanisms used for IMF Loans. However, the two commonly used are the Extended Fund Facility and Standby Arrangements. For the Standby Arrangements, they only allow member countries to borrow money over one or two years, and repayments made between three to five years. For the former, the Extended Fund Facility, countries can borrow for three to four years and make repayments in about five to ten years. 

What are the conditions for getting a loan?

Before the IMF can grant its loan, the interested government has to agree to adjust its economic policies to solve the problem that caused it to seek financial help. 

They also serve as safeguards to ensure the country pay back the IMF loans. Conditions vary, mostly dependent on the economic policies of the lending country. Some common terms include:

1. Elimination of price controls

2. Budget consistency with the fiscal framework

3. A minimum level of federal government primary balance

4. A ceiling on government borrowing

5. A minimum level of international reserves

6. Minimum domestic revenue collection

7. A minimum level of social assistance spending such as subsidies

8. Improve financial sector operations

9. Build up social safety nets

10. Strengthen public financial management

How do countries get loans from IMF?

Countries that are member states of the IMF can access IMF loans for its balance of payment needs upon request. On request, the IMF will discuss with the country’s government to access the financial situation and needs. 

The country seeking the loan and the IMF have to agree on economic policies before the IMF approves the lending. Depending on the policy conditionality of the IMF, the country will have to meet some pre-conditions, send a letter of intent, and a detailed Memorandum of Understanding to The Fund’s Executive Board.

Once an understanding has been reached on policies and financing the package, the Fund’s Executive Board grants the country access to IMF resources.

Merits of the IMF

 1. Fills Deficit Gaps: An IMF loan is often beneficial to countries with a balance of payments deficit, to fill in the gap. 

 2. Offers Loans to its Member Nations: Perhaps its most beloved function is the loan’s ability to bail out member nations at crucial times. The IMF may decide to attach conditions such as specific economic policies that governments have no choice but to follow to access its loans. 

 3. Technical Assistance and Support: The loan providers counsel and advise countries trying out a new economic policy. 

4. Global Financial Stability and International Monetary Co-Operation: The loans help maintain financial balance in the global market.

5. Economic Growth: It does not only rescue the economies of countries and dills deficit gaps, but it also helps to stimulate economic growth.

What are the shortcomings of IMF Loans?

The IMF loans have undeniably been helpful to many, but it does still suffer criticism because it:

 1. Creates Moral Hazard: Many nations make the mistake of drawing up unsustainable budgets because they believe they would be able to get an IMF loan. Skeptics say it is no different from the moral hazard created by government bailouts of major banks.

 2. Barely any Intervention or Too Much of it: IMF sometimes does too much or too little time, and most people dislike it for that. Critics accuse the IMF of only help free-market countries. Free-market supporters blame the IMF and say it is too much of an interventionist.

3. Rich Countries Control The Organization: The rich countries decide in the IMF. They determine which country can borrow and the conditions attached to the loans. Developing countries are merely onlookers in the scheme.

4. Unfavorable IMF Conditionalities: Countries can only access IMF loans if they agree to meet IMF conditions. These conditions increase poverty in borrowing countries and are damaging to the masses, such as the removal of subsidy.

5. Unlevel Playing Field: One of the conditions for IMF loans is for countries to remove trade barriers and quotas, which gives room for foreign goods and services. Local businesses cannot cope with international companies in a free market economy.

Conclusion

The IMF, tasked with promoting sustainable growth and reducing global poverty, has generated mixed results, recording both successes and failures. The IMF loan has succeeded in some countries (the Asian financial crisis of 1997-1998) and failed in others (mostly the low-income countries).

Critics point out to its unfavorable conditionalities, such as fiscal austerity, privatization, trade liberation, open capital markets, and high-interest rates, which have failed massively in developing countries.

The IMF, in recent years, has reformed their loan conditionalities and developed several loan initiatives targeted at supporting low-income countries.

Meaning and Types of Loans

Every single day there is the need to carry out business transactions. It is a fundamental element of everyday living. Having the means to complete these financial activities usually means having sufficient funds. That is, however, a different matter.

Half the time, a lot of the things you need to do cannot be done because of a lack of finances at the time.

What happens then? You get a loan then. The technicalities on loans seem to be straight forward.

In this article, we will be breaking it all down; what loans are, what types of loans there are in Nigeria, and how you can get them. 

What is a loan? 

A loan is simply money (in some cases, it could include other financial assets) given to another individual with a promise of repayment either on principal (the actual amount borrowed/lent) alone or with interest (an additional amount added to the principal usually calculated throughout the loan). They could be for personal use or business. 

What are the types of loans?

There are various types of loans in Nigeria meant for multiple purposes. As there are many reasons to carry out transactions, there are many types of loans to meet these reasons as well. The types of loans are;

• Secured loan: a secured loan is a loan that requires you to provide collateral when applying for the loan. This collateral is a form of safeguard for the loan provider, and so if you don’t pay the loan back, the loan provider gets to collect the collateral to settle the loan. Secured loans usually have lower interest rates, and you can borrow more. 

• Unsecured loan: with unsecured loans, it requires no collateral in the application of the loan. Unsecured loans are usually personal, instant loans in Nigeria and come with higher interest rates because of the payback. There is less money available to borrow with unsecured loans, however. 

• Single payment loans: as the name implies, these loans involve a borrower taking out a loan from a loan provider and agreeing to pay back the full amount of the loan plus interest in one payment.  

• Monthly payment loans: unlike single payment loans where you pay back the loan once, you repay monthly payment loans over a spread period. Each month, you pay a prefixed amount, until the loan and interest are settled.

• Salary advance loans: Salary Advance loans involve people who collect their paycheck ahead of time. Most paychecks are paid towards the end of the month, but with a salary advance, you could get it earlier than that. The amount is then deducted from the actual salary when it is paid. Salary advance loans usually don’t charge high-interest rates.

• Mortgage: these are loans taken out for the purchase of a house or landed property. At a fixed period, an amount is deducted to settle the mortgage. However, if the payments on the mortgage stop or if it isn’t paid, the mortgage loan provider gets to collect the property from the borrower. 

• Fixed-rate loans: fixed-rate loans are loans with one fixed interest rate throughout the loan. 

• Variable-rate loans: with variable rate loans, the interest rates on the loan change over time.  The change is determined by the general interest rates fluctuating. 

How can you access the loans?

Loans are easily accessible from most financial institutions; it all just depends on what type of loan you’re looking for; either it’s for personal use or business. Banks, credit unions, cash advances are valid means of getting loans, and there is a plethora of other loan service providers popping up each day, each with its terms and conditions. 

Conclusion

Now that we have broken down the types of loans, you know which would meet your needs perfectly. Be sure to check out the interest rates on loans before you collect them, as well as the payback period. 

Getting a loan usually involves operating an account with a bank, heading off to the bank, seeing your account officer or the bank’s loan officer, taking out a loan application and filling it, and waiting for your loan to be approved, hopefully. That’s a lot of stress, especially now that you can easily send a USSD code to get loan information from your favourite loan platform.

Not all loans have to go through this arduous process, though. Some loans are actually accessible, and you don’t even have to go to the bank to get them!

In this article, we discuss what the USSD platform is, and how you can use it to access a quick loan in Nigeria. 

What is USSD? 

USSD is an acronym that stands for Unstructured Supplementary Service Data. It’s also known as quick code.

As the name implies, they are codes used to access options through your mobile telecommunication network provider. USSD can be used for a range of things – callback service, mobile-money, content, and information, or to provide network configuration services. In this case, we consider how the use of USSD in banking.

What is USSD Banking? 

USSD Banking is a type of banking that allows you to make financial transactions from your phone through the use of short or quick codes. It simply requires a cellular network; no internet connection is required. Through USSD banking you could make almost any kind of financial transaction; from making transfers to buying airtime. More importantly, you can use USSD codes to get loans. 

How to Apply for Loans Using USSD Codes

The steps to applying for a loan via USSD are straightforward. You simply need to:

• Know which loan provider you’re borrowing from. 
• Get the functional USSD code
• Meet all specified requirements
• Dial the code
• Follow the prompt
• Get your loan

USSD Code for Loans in Nigeria 

To apply for a loan via USSD, you simply need to input the code into your phone and follow the prompts that pop up. Some USSD Codes for loans in Nigeria are: 

Platform	USSD Code for Loans
AB Microfinance Bank	*389*755#
Access Bank Payday Loan	*901*11#
Accion Microfinance Bank	*572*6#
Airtel Quick Cash	*561#
ALAT Loan By Wema Bank	*945*100
Aledin Nano	*903#
Carbon Loan	*1303#
Ecobank Xpress	*326#
Etisalat	*561#
Fairmoney Loan	*322*2#
FCMB	*329#
First Bank First Advance	*894*11# or *894#
Glo Cash	*322*1*04225701*Amount#
GTBank Soft Loan (QuickCredit)	*737*51*51#
Interswitch	*322#
Kwikcash	*561#
Migo Loan	*561#
MTN Cash	*606*4#
Trader Moni	*540#
Paga	*242#
Payattitude	*569#
Quickteller Loan (Airtel, MTN & 9mobile)	*322#
Quickteller – Glo Users	*805#
Zenith Bank Loan	*966#

Requirements for Getting Loans Using a USSD Code

As easy as the USSD loans are, so are the requirements. Naturally, you need to be operating an account with most banks to get access to their loans through USSD.

For other instant loan providers, you do not need an account, however. Besides that, you would also need to provide your full name, your bank verification number, account details, and address, and any other information as specified by the loan provider.

Conclusion

Using USSD codes to access loans is perfect for when you need quick cash or are looking to avoid the strenuous physical means of getting a loan. They require very little and you should get your loan if you meet all specified requirements in minutes.

This article provides information about how you can apply for Bank of Industry Loans in Nigeria, as well as what it requires to do so. 

What is a Bank of Industry Loan?

The Bank of Industry is tasked with providing financial assistance for small to medium scale businesses in Nigeria through the use of loans. Therefore a BOI Loan is precisely for this purpose. 

Who is eligible for a Bank of Industry Loan?

Anyone with legitimate business can apply for a Bank of Industry Loan. However, more priority is given to businesses engaged in manufacturing and processing. The loan is targeted at sectors such as processing of agricultural materials, information technology, oil and gas, the creative industry and mining of solid minerals. It is important to note that BOI loans are only disbursed to business entities and not individuals. 

Also, BOI loans are only meant for the purchase of industrial equipment. They can not be used to buy assets like land or building. 

How much is available to collect?

BOI loans start from an amount of N5 million. However, the Bank of Industry can provide smaller loans in Nigeria through its matching funds platform, which it operates through Microfinance banks. 

how much interest is charged on BOI loans

The Interest rates for BOI Term Loans is at a maximum of 10% per annum, while that of loans for working capital is at 12-15% per annum. 

Do BOI loans require collateral?

The Bank of Industry needs businesses applying for loans to be held accountable, and so it mandates some assets of the businesses be pledged to secure the loan. Other security options such as bank guarantees, mortgage on landed property, debentures and external guarantors (in the case of loans worth less than N10 million. Third-party collateral is also suitable. 

What are the requirements for a Bank of Industry Loan?

Any business applying for a bank of Industry Loan must possess the following;

(For Micro-credit Loans)

•  Application Letter

• Certificate of Registration (photocopy)

• Copy of Cooperative’s constitution and Bye-laws

• Business Plan

• Business owner’s passport photographs (4 copies)

• Current Tax Clearance Certificate

• Copy of means of Identification

• Business’ bank Statement for one year

• Record of sales for six months and operating expenses.

• Evidence of Collateral

(For Small and Medium-scale Enterprise/Large scale Entrepreneur)

• Formal Letter of Application

• Copies of Certificate of Incorporation, Certified True Copy of Memorandum and Articles of Association.

• Photocopies of the Certified True Copy of Forms C02 and C07.

• Business Plan.

• Statutory Certificate of Occupancy or Deed of Assignment

• Photocopy of Title Documents  to the Collateral

• Approved Building Plan

• The estimate of Cost to be incurred on Factory Building.

• Valuation Reports on Factory Building(s) (for existing projects) and property offered as Collateral Security.

• Plant and machinery quotations

• The Audited Accounts of the business in the last three years

• Tax Clearance Certificate for the Company and two Directors for the previous three years.

• Passport photographs of each of the two Directors and the Company Secretary (4 copies) 

• Evidence of Appointment

How do you apply for a Bank of Industry Loan? 

You can apply for BOI Loans in two ways. For Physical application, business owners are to visit any of the BOI branch offices situated in 24 states in 6 geopolitical zones in the country or the headquarters in Lagos.

Applications for BOI loans can also be made online, through the Bank of Industry Website or through the application link www.boi.ng/apply. 

how long does it take for your application to get approved

Processing of BOI loans can take 30 to 40 working days to obtain approval. Afterwards, it takes 15 days for the credit to be disbursed.

Conclusion

If you’re looking for a means to expand and grow your business, the Bank of Industry provides the perfect loans suitable for such capital intensive financing. 

Peer to Peer lending in Nigeria

When we think about lending, most times our minds drift to the options financial institutions offer. However, peer to peer (P2P) lending is something that most of us have engaged in at some point in our lives. We call it the “borrow scheme” or “can I see” scheme. You know, “can I see N500,  I’ll give you back by tomorrow…”  

P2P lending is the same concept, however, to define it we can say that: Peer-to-peer (P2P) lending is a form of microlending that enables individuals to obtain loans directly from other individuals, cutting out the financial institution as the middleman

Types of P2P lending

Peer funded for Individuals

This type of P2P loans is usually funded by regular individuals and peers. These individuals invest in credit financing and earn returns based on interest charged on the loans.

Group Peer funded

Slightly different from individual funded credit. They are funded by a group of people, usually high net worth individuals through hedge funds, bank endowment funds, etc. Large investors fund this type of personal loans through peer-to-peer lending platforms. 

The major difference between the two types is the amount of money involved. Group peer funded loans deal with higher amounts of money than individual funded. 

How P2P lending works in Nigeria

Though the concept of p2p is familiar, the organizations pioneering its progress in Nigeria are fairly new. FINT, Farmcrowdy, and Kia Kia are at the forefront of driving this lending system. These organizations partner with individuals who act as investors on the back end while packaging these loans for the recipients who are in need.

These organizations do the hard work of running credit history as well as setting up certain criteria to make sure that these back-end investors are protected. 

Peer to peer lenders typically processes loans in two ways:

Firstly, your application is updated usually for days allowing potential investors to review your application. 

Investors then fund your loan, based on your application, by offering a portion of the total amount requested. If your request reaches 100 percent funding or at the expiration of the listing time, you may accept or decline the loan. 

Secondly, P2P lenders fund your loan is by approving your application and getting the required funds from a stock of blind investors. In this type of funding,  investors don’t review your application individually and you do not have to wait for your loan to be funded. 

What are the requirements for P2P lending in Nigeria

Criteria will differ based on the specific organization, however, listed below are some general requirements: 

• The borrower must be a salary earner
• must have a national means of identification, 
• bank account statement for the last 6 months (salary account), 
• employment offer letter, 
• a recent utility bill (not older than the last 3 months). 

Benefits of P2P lending

Benefits of p2p lending are, but not limited to:

• Access to interest lower rates
• Quick turn around time on application decision
• Transactions are very transparent, including any fees imposed by the p2p platform
• Can be more flexible than traditional loans

Conclusion

Next time you need an instant loan, think of p2p lending as an option, based on some benefits discussed, it could be a viable option to meet your needs. 

Credit report

Doing all the right things like making loan repayments on time doesn’t guarantee a top credit score. When you apply for an online loan, and lenders come back with a higher interest rate or tell you to ask again later – how does that feel?

Please be aware, and it’s not only late or missed payments that diminish your credit score or make lenders cautious of you. If you’re applying for a personal loan, there are other things on your credit report that lenders examine.

However, it isn’t just new applicants who are examined. Periodically, lenders review their current customers’ to assess the risk level of the borrower to the business at a given time.

Here are the top four credit items that make lenders wary—and how to avoid them.

1. Too many loan applications in a given time

There is no problem with opening a new loan account with your bank or taking out a revolving credit facility. But applying for loans in three to four online loan apps or banks in a short space of time in the bid to stay out of debt could be a sign of desperation. Also, opening two or three new credit facilities could tell lenders you’re in a bit of financial trouble. 

At the very least, you’ll be attracting attention the next time you ask your bank for something.

2. Being a guarantor

When you co-sign a loan as a guarantor or in any other capacity, the entire debt reflects on your credit report. As far as lenders are concerned, you’re the owner of the debt until it is fully settled. It will be included in your debts when applying for any form of credit.

So before co-signing a loan for a friend or family member, tell them the implication of making such commitments to a loan obligation that is not yours. If you are taking out a loan soon, then you should avoid co-signing another person’s loan as a guarantor.

3. History of partial repayments

While making partial repayments is good to avoid loan defaults, it affects your credit report negatively. Lenders who see your habitual nature of making partial payments monthly will be reluctant to grant you credit.

Occasionally making partial repayments doesn’t signal a problem. For example, you are making partial payments in January, after the holidays. But consistently paying partially every month shows you can’t pay off the balance. 

4. Lots of hard credit enquiries. 

For every time you apply for a loan, the lender will request a credit report on you. The impact of credit report inquiries varies by the borrower, credit score and the number of confirmed inquiries. Many people don’t realise that too many enquiries on your credit report can negatively affect your credit reports. Enquiries can be made on your credit report even when you are requesting a “buy now, pay later” on a cellphone. So be sure they’re only done when absolutely necessary. 

Conclusion

It is crucial to note that there are big red flags of credit reports, like bankruptcy, foreclosure and late or missed payments. But those are not the only financial mishaps that make banks wary of a potential consumer. 

Loan refinancing means taking out a new loan to clear one or more outstanding loans. Borrowers usually refinance their loans to receive low-interest rates or to reduce their repayments ultimately. Taking out personal loans to merge your debt can affect your finances positively and help you stay debt-free. 

However, once you’ve been granted a personal loan and your monthly repayments are on time, you may consider refinancing the loan.

It is a smart move if your credit score has improved significantly to a stage where you’ll be offered a rate reduction to compensate for commitments and cost of taking the loan.

When is the best time to refinance your loan?

• Better credit score: One way to be eligible for a lower interest rate on your personal loan is to boost your credit score. If your score has seen an improvement since you took out your loan, it could be a plausible reason to refinance.
• You want to change the existing rate type: Having a variable interest rate on a personal loan makes it difficult to plan for monthly repayments. By opting to refinance your loan, you can switch from a variable to a fixed rate. It enables you to enjoy consistent monthly payments.

How to refinance a personal loan

1. How much money do you need?

In refinancing a loan, you’re primarily clearing out the existing loan with a fresh one that has different repayment conditions. Find out the exact amount of money you need to pay off your existing loan. You can also ask if any prepayment fees might exceed the benefits of refinancing.

2. Check your credit score and report. 

Before considering refinancing your loan, you must confirm if you are eligible for a lower rate than what you’re paying currently. If the new interest rate isn’t notably lower, it may not be worth it. Alternatively, check your credit score to know if there is a difference.

3. Do your research

Research is crucial when you are considering refinancing personal loans. It’s worth it to see what different lenders offer and their requirements. You might also need to consider the time factor, a new loan with a lower interest rate isn’t always better if you’re making repayments for a longer time.

4. Compare refinance rates

Always compare refinancing rates and pay attention to every rate presented. Draw a table to compare key features and interest rates. Then, based on your research and your discussions with the lender, decide what’s best for you.

Advantages of refinancing a personal loan

• Better interest rate: Not only could a jump in credit score help you get a better interest rate on a new loan in Nigeria, but you might also enjoy lower rates in your transactions generally.
• Faster repayment of loans: When you’re convenient with higher monthly payments, and you want to pay your debt faster, you can refinance a personal loan to get a shorter term. It reduces the cost of interest payments on the loan.
• Extend your repayment period: If you are having difficulty in making timely payments, extending your loan repayment can help you manage your monthly repayments better. 

Disadvantages of refinancing a personal loan

• Payment of extra fees: Whenever you are granted a new loan, you might have to bear additional lender cost, which can cut into the benefits of refinancing. Be sure you understand the terms and conditions of your personal loan refinance to help you make the best financial decision.

Conclusion

Taking a refinancing option on your personal loan might be a good idea. However, you need to be careful and with clarity when choosing to refinance other sensitive loan options like a mortgage.