In Ghana, there are 5 types of loans you can apply for in 2022. You can use borrowed money for a variety of objectives, all of which must be in line with our requirements. This is the greatest moment for us to respond to inquiries such as, “What are the different kinds of loans, and which one is the best? What are the purposes of the types of loans? “. As a result, loans are accessible for starting a business, buying a home or property and dealing with a personal emergency.
Furthermore, because each sort of loan tackles a unique problem, none of them is the greatest for meeting our various requirements. This post will explain the many sorts of loans available in Ghana, as well as everything you need to know.
Types of loans in Ghana – What you should know
Try to determine the form of a loan that is appropriate for your needs, whatever they may be. If this is your first loan, though, ask around and do your research. You can’t require a business loan but take out a personal loan, which usually has a high-interest rate.
5 types of loans you can apply for in Ghana
The 5 types of loans in Ghana you can find are:
- Personal loans
- Secured loans
- Unsecured loans
- Fixed-rate loans
- Variable-rate loans
1. Personal loans
Personal loans are one of the 5 types of loans you can apply for in Ghana. You can use this loan to solve your personal pressing needs. Personal loans can be used to pay off bills, buy groceries, and pay church dues, among other things. A personal loan is a type of loan that allows you to borrow money from a lender for nearly any personal reason. Usually with a set term, a set interest rate, and a set monthly payback schedule. This form of loan is available through banks, online lenders, and street lenders and requires no collateral. It’s for people who only require a small sum of money.
2. Unsecured loans
They provide no-collateral personal loans and approve them depending on your credit score. The advantage of this type of loan is that it does not require any type of collateral. The disadvantage is that the interest rate will rise slightly. When a borrower defaults on a personal loan, the lender has few options other than enlisting the help of agents or debt collectors. These persons assist in the collection of bad debts. Lenders, on the other hand, do not have the authority to take your assets, such as land, as collateral. You commit to pay back the loan and provide proof of a steady salary and excellent credit history.
3. Secured loans
Collateral is used to get secured loans. Because if the interest rate falls, it has recovered a portion of the loan risk. The benefit is a partially low-interest rate, but you risk losing your collateral if you default on the loan. If your credit score isn’t good enough to qualify for an unsecured loan, they will ask for collateral. To the lender or bank, secured loans exhibit a lower risk rate.
4. Fixed-rate loans
Fixed-rate loans are one of the five loan categories available in Ghana. The interest rate and monthly payment remain the same on this sort of loan until they pay off the full balance. A fixed-rate loan is a sort of a personal loan in which the interest rate remains constant throughout the term of the loan or for a portion of it. For long-term loans, most Ghanaians opt for fixed-rate loans. They have a good idea of the future costs and monthly payments to some extent.
5. Variable-rate loans
Depending on the marketing structure, the interest rate on this form of loan can go up or down. A variable-rate loan, often known as a personal loan, is one in which the interest rate fluctuates in response to changes in market structure. In most circumstances, it’s referred to as an “adjustable” or “floating” rate.
In Ghana, personal loans are classified as unsecured loans, secured loans, fixed-rate loans, and variable-rate loans.
Examples of loans you can apply for in Ghana
- Business loans
- Home loans
- SME and agricultural loans
- Home equity logbook loans
- Car loans
- Student and education loans
- Salary advance
1. Business loans
Entrepreneurs and startups can apply for business loans. They also provide it to companies who are planning to expand. It comes with a low-interest rate on average. Because it frequently causes a large amount of capital, banks mostly give it.
A business loan is a loan that is solely used to fund the operation of a business. Asset-based loans, invoice finance, micro-loans, and business cash advances are examples of such loans.
2. Home loan
Customers who wish to buy a house can get a loan from them. In most circumstances, the borrower first looks for a property before meeting with the financial institution to apply for a loan. Until the borrower pays the last payment, the financial institution takes possession of the property. It has a variable or fixed interest rate and a set repayment period. They mortgage the property in issue to the lender, which is usually a bank, as collateral until the debt is paid off in full.
3. SME and Agricultural loans
Small and Medium Enterprise (SME) loans are available to anyone who wants to start a business to help the economy. They sell it on the idea that, depending on the platform, you will pay little or no interest. Agricultural loans help farmers and agribusinesses transition from traditional farming to automated farming, boosting the agricultural economy. In exchange, they repay the loan by the due date.
4. Home equity logbook loans
To get this form of loan, the applicant must submit all of his home’s documentation to the bank. The loan could be for 50% of the home’s monetary value. This form of loan is quite beneficial to landlords, especially when they wish to start a new project. Education financing, re-roofing, and property buying are examples of projects. The loan amount will be determined by the property’s valuation.
Read also: Guarantor loans – Meaning and what you should know about them
5. Car loans
This is a loan that allows borrowers to purchase their dream car. Before you may acquire this form of loan, you must meet certain terms and criteria. The bank or lender would often finance 80 percent to 90 percent of the car’s worth with an interest rate attached. It requires the borrower to repay the loan and acquire the vehicle outright.
6. Students and education loans
For a while education was too expensive, but the availability of loans has enabled it to be subsidized. Lenders provide student loans to students or parents in order to help them pay for their education. In exchange, the students graduate, find work, and begin repaying their loans.
They also use student loans to pay for things like tuition, books, and supplies, as well as living expenses.
7. Salary advance
A salary advance is a type of loan given to salaried workers who require cash and agree to repay the loan at the end of the month. Monthly wage employees who require loans but cannot wait until the end of the month should apply for a salary advance.
They give employees who receive a monthly income or salary the salary advance. It’s basically a loan to an employee, which they repay as soon as their salary arrives in their account.
How to apply for any of the loans
In Ghana, applying for a loan is the same as applying for a loan from any other lender. There are a few minor variances. The steps are:
- Fill out the application form on the lender’s website or download the loan app from the Play Store. Alternatively, you can fill out your application form in person at the lender’s or bank’s actual location.
- Create a profile on the loan app and fill out all of your personal information.
- Allow the app to read your information. If necessary, you can also submit your documentation here.
- Wait for your loan to be approved and then take out your loan.
Eligibility for different types of loans Ghana
For eligibility for the loan types, you need to:
- Be 18years and above
- Have a national ID
- Possess an active phone number
Digital loans have transformed Ghana’s lending industry in recent years. The 5 types of loans you can apply for as shown in this article can come in handy when you need cash flow. What you should be concerned about is determining the type of loan you require.
However, it is critical to conduct thorough research and comparisons, as well as to understand the loans that your loan fits within. If you need a loan for an emergency or to expand your business, you need first to determine which form of loan you will take out. Understand the conditions and eligibility for each type of loan, as each has its own unique characteristics in Ghana.