N1,000,000 for your Use...For real!

I have a proposition for you today, and I sincerely hope you take it serious and take advantage of it. Remember those days when it's safe for you to keep away from your Nigerian banker friends? Yes, because the moment they know you have a job, they'll come after you asking for deposits, asking you to open all kinds of accounts, and you wonder how much you are earning that 3-4 banks are solicting for your widow's mite termed "salary". So it was rather interesting for me to have someone call me about 2-weeks ago (he still hasn't let off my case!) to "market" me vigorously to collect money from his bank....

I tried to convince him I didn't need the loan, considering it was too small to finance any "grandiose" ideas I have in this small head of mine, but after much "pestering" and for good old time sake, I was willing to take this loan and put it to some use. What is this loan all about?

They termed it a quick loan up to the tune of N1,000,000 repayable over a 12 months period. No need to open any account with them, all they require is your post dated cheque covering the 12 month period. In accepting his offer for this loan, I made some considerations which I'll like to share with us.

The interest rate (p.a) for the loan is put at 17%, a one time processing fee of 1.75% and a quarterly management fee of 1.25% represents the cost associated with this loan. Typically these are the rates similar to what obtains amongst banks if you intend to collect any loan facility at the moment. However, there's some side to the loan being offered that I find interesting; loan repayment is on a "reducing balance" basis. In essence what you actually pay as interest rate over the 12 months tenor period is only 14%. Comparatively with what obtains in the market now, this rate is relatively competitive. Furthermore the fact that I dont have to open an acccount with them to qualify for the loan is a major selling point I couldn't ignore. So all I have to do is write out 12 post-dated cheques and I'm fine.

Should you go for this loan? I will say a categorical yes! Ask your self a simple question, What can I do with N1,000,000 over the next 12 months that will give me over 14% returns? for those of you who are quite entrepreneurial, that's a slam dunk question...for those who are not, don't lose hope, you can invest this money in the stock market. This loan is far much convenient than accessing a "margin loan" which is more common these days being offered by brokers or some other banks.

For those who hate the mention of the word "debt", let me give you another perspective to look at this opportunity from. If this facility is accessed and you use it to buy non-money yielding assets like a sound system, Ipod, second hand cars etc. then you may be using the facility in a very inefficient way (unless ofcourse you are sure the prices of these goods will be greater than 25% of its current price in 12 months time!). However, if the facility is used appropriately, in a best case scenario, you can have returns over 25% having the facility yielding good money for you and paying itself. In a worst case scenario, where any stocks you put the money has a short to medium term bearish run in the market, you can take solace in the fact that you played the Cashflow game properly: having access to a lump sum N1m at current time and having to dole out small payments over time would have given you good time-value for the money: and remember the investments you have are still in place, only a matter of time, the return will dwarf the cost of the loan.

I will be taking the loan, and I'll put it in some stocks I intend to hold for medium to long term. I encourage you do the same. I'm not authorised to put the name of the bank on this blog (It will be too much freebies for them), however, you can contact my friend who works with this bank and discusshe will freely share his corporate identity with you. His name is Sola Olagunju and he can be contacted on 0805 245 9019.

As the months go by, I'll give you a feedback on how well the investments I'll use the loan for performs.

Enjoy!

Note: (I hear the quick loans are only accessible to people in some selected sectors of the economy, I however encourage you still go ahead and discuss with them, if they can work from 1st principles, then they should be concerned about your ability to pay focussing only on your cash-flow for the next 12 months.)