Lenders quote two different things and call both “the rate”, and a loan app will often quote by the month. Either can make an expensive loan sound cheap.
Loan repayment calculator
Monthly repayments and total interest on a loan in naira, what a flat rate costs as a reducing balance, and what a rate quoted by the month comes to over a year.
Reducing balance against flat rate
Reducing balance charges interest on what you still owe. As you repay, the interest portion of each payment falls. This is how a mortgage works, and how an honest quote is expressed.
Flat rate charges interest on the original amount, every month, for the whole term — including the final month, when you owe almost nothing. The same number costs close to twice as much on a flat rate as on a reducing balance.
A rate a month is twelve of them a year
A loan app’s rate a month sounds smaller than a bank’s rate a year, because it is a twelfth of one. Multiply it by twelve before you compare them, and then add the fees. Set the calculator to a month and it shows the year beside it.
Ask which one, and get the naira figure
A rate means nothing until you know what period and which basis it is on. The question that cuts through it: what is the total amount repayable, in naira? A lender who will not put that in writing is telling you something.
What else to check before signing
Who is lending
A bank or a microfinance bank is licensed by the Central Bank of Nigeria. A loan app has to be registered with the Federal Competition and Consumer Protection Commission, which publishes the list of those it has approved. An app that is not on it is outside the complaints process you would need later.
Some apps have messaged a borrower’s contacts to shame them into paying. That is not debt collection, and the FCCPC has fined lenders for it. Do not give an app access to your contacts.
A workplace cooperative, or an ajo or esusu among people you trust, will usually cost less than any of them.
Everything you type stays on your device
The calculation runs entirely in your browser. Nothing you enter is sent anywhere, logged or stored.