When you need to take out an auto loan to buy a car in Nigeria, you will get charged interest. But how much does your interest rate impact your monthly payments and the total amount owed?
What Is An Interest Rate?
To start with, we have to look at what an interest rate is and the factors that impact it. If you are shopping for a car in Nigeria and you plan to buy a car using credit, your lender owns the car until you can pay the loan amount off. The interest rate you pay is a fee for using the lender’s money to buy a car. What interest rate you end up paying your lender for borrowing their money is based on several factors, such as:
- Principal Amount: The principal amount is the initial naira amount you want to borrow.
- Loan Term: The loan term is how long you will be repaying the car loan. Shorter-term auto loans usually mean higher repayments, but less interest paid in the long run. With longer terms, you will have lower monthly payments but end up paying more.
- Repayment Schedule: The majority of car payments are made monthly. However, if you can make payments more often, you will end up saving even more money. When you make more payments, you pay less interest.
- Repayment Amount: With every car loan payment you make, a portion goes to interest, and a portion goes to repay your principal.
How To Calculate Auto Loan Interest For Your First Payment
If you want to learn how to calculate auto loan interest for the initial payment, you can use this simple calculation:
- Divide your interest rate by the number of monthly payments you will be making this year.
- Multiply it by the balance of your loan, which for the first payment, will be your whole principal amount.
Your result is the amount you will be paying in interest for the first month.
How To Figure Out If Interest On A Car Loan Is Moving Forward
Once you have started paying down your initial principal, you can calculate the new balance to work out the interest you will pay in the following months. To figure this amount, follow the steps below:
- Subtract the interest you just calculated from the payment you just made, and this leaves you with the amount that you have paid off the loan principal.
- Deduct this total from your original principal to get your new loan balance.
There is human error, and number rounding means that you cannot get the exact calculation every time. However, this gives you a good idea of how to calculate the interest rate on a car loan.
Four Nigerian Banks That Offer Easy And Fast Car Loans With Interest
- FCMB: FCMB offers a consumer credit scheme that allows qualified individuals to acquire cars for their personal use. Customers can own a car and pay over a period of time. With an FCMB auto loan, you can easily find the car of your dream, compare prices, mileage and also inspect the vehicle to ascertain the condition.
FCMB car loan features
- Auto-loan amount: Up to N30 million.
- Interest Rate: As low as 20% per annum.
- Equity Contribution: As low as 30%.
- Loan repayment tenure: up to 36 months.
- ACCESS BANK: Access bank offers a user-friendly platform for customers to acquire new and pre-owned vehicles in a financially convenient manner. This offer is available to salary account holders, SMEs, and corporates.
Access Bank car loan features
- Open to salaried income persons, SMEs and Corporates.
- Equity contribution as low as 10% of the invoice value.
- Competitive pricing.
- Up to 48 months tenor.
- Wide variety of vendors to choose from.
- STANBIC IBTC: Stanbic IBTC Bank offers car loans for both new and used vehicles with a maximum loan limit of N15m and tenor of 48 months. All vehicle brands are also covered in the offer. The bank offers new and existing customers the opportunity to get the car of their dreams with an affordable, convenient and structured repayment plan.
Stanbic IBTC car loan features
- Competitive interest rates.
- A variety of partner dealerships to help you find the best car.
- Flexible payment terms with a 4-year tenure.
- A monthly electronic statement to track your repayments.
- UBA: Whether it is your first car or you want to upgrade to a higher model, UBA auto loan offers you the chance to own your dream car with a convenient repayment plan. Approved car brands are Toyota, Honda, Mitsubishi, Hyundai, Mercedes, Nissan, Ford, Suzuki, Kia, and Volkswagen.
UBA car loan features
- Access to reputable auto dealers/retailers.
- Convenient repayment terms; up to 48 months.
- Competitive interest rate.
- Maximum loan amount of N15m.
- Minimum equity contribution of 30%.
- Mandatory comprehensive insurance and vehicle tracking.
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