Are you a small business owner considering borrowing from online loan apps in Nigeria? Facing a salary delay at work? Perhaps you have come across persistent online loan 24/7 ads on your phone and you are curious. Online loan apps in Nigeria are popular. Nigerians can easily apply for a loan using just a smartphone and an internet connection.
Many people with unplanned expenses get money from these online loan applications. This might feel like a lifesaver, but it is not. These online loan apps have hidden disadvantages that can hinder your financial growth. It can also affect your reputation as well as your mental health. In this article, we will discuss the effects of using online loan apps in Nigeria. You will discover the hidden disadvantages of these apps, though they seem helpful at first glance.
Effects of Online Loan Apps in Nigeria
The following are the disadvantages of using online loan applications in Nigeria:
1. Debt Traps and Multiple Loans From Different Online Loan Apps
The convenience of using loan application tools in Nigeria is concerning. I read a story about a lady who shared her experience of how she became trapped in a cycle of debt.
She needed the money for an urgent situation and defaulted on payment because her plans to repay were futile. She was scared that her parents or anyone close to her would find out. She ended up borrowing money from an online loan app to pay another loan. It became a cycle till she had a huge debt due to the ridiculous interest rate.
This is the case for many borrowers who want to avoid embarrassment, but get into a debt trap. They make unwise decisions to borrow money to pay off outstanding debt. They end up juggling two or more loans in an unending cycle with interest. This only results in more financial problems.
2. Extremely High Interest Rates and Hidden Fees
The interest rates of the online loan apps in Nigeria are extremely high. Many Nigerians take loans from the loan apps without paying attention to the interest rates. Some loan apps in Nigeria charge annual percentage rates (APR) between 34% to 271%. If you focus only on getting a fast loan for a present need, you will overlook or not pay attention to the high interest rates.
Beyond interest, these apps also include hidden charges such as processing fees, late payment penalties, and even early repayment charges. These costs are often buried in the terms and conditions, which most people never read. For example, if you borrow #30,000 from an online loan app with a 25% interest rate, you have to pay a total amount of #37,500 in a few weeks. The amount gets higher when you default on your payment.
3. Misuse of Data Information
Online loan apps often have access to your data information such as contacts and photos. Some online loan application tools misuse borrowers’ information to embarrass them on other platforms. They harass borrowers who couldn’t pay their debt with calls, messages, and some go as far as posting their pictures online.
4. Intense Debt Recovery Method
Online loan applications in Nigeria are aggressive with their recovery methods. Many users who are unable to pay up in time complain of the use of profane words. Some send threatening messages to the borrowers. The online loan apps also engage in incessant calls.to borrowers and their contact lists. This can affect your relationships as well as damage your reputation.
5. Unrealistic Due Dates For Loan Repayment
All the quick loan apps in Nigeria have a short repayment period for borrowers. The repayment plan option is between 7 – 30 days. This will put you under financial pressure when you are unable to make a payment on or before the due date. Usually, there will be other commitments and responsibilities to take care of. Borrowing money from these easy online loan apps may burn you out physically and mentally.
6. Dependency on Online Loan Apps
The convenience of accessing loans from online apps in Nigeria has created a culture of dependency among Nigerians. Some individuals seldomly go to the apps when there seems to be a little discomfort rather than practice delayed gratification. They just borrow money whenever a slight issue comes up.
The habit of borrowing money has a great consequence. I once had a roommate who depended on loan apps to get money before her payday. Her company experienced financial challenges and delayed her salary for months. She eventually could not handle the debt, and she faced a horrible financial crisis.
7. Online Loan Apps Encourage Impulse Borrowing
Online loan apps in Nigeria make it easy for you to access loans. This allows you to get loan disbursements without thinking. You will become blind to the ridiculous interest rates as you opt for online loan apps on impulse.
This will also lead you to having bad money habits. Instead of addressing your financial issues, you come to rely on online loan apps, which will cause you to be financially unstable.
Conclusion
Online loan apps in Nigeria offer easy and quick loans, which may be beneficial to some small business owners. However, they also have hidden effects on the lives of people. The disadvantages of getting a loan from online loan applications is far more than the benefits. Extremely high interest rates, impulse borrowing, debt traps, harassment, and misuse of personal data make them a risky channel.
If you are considering borrowing from or referring to using an online loan app, these are some questions you must carefully meditate on. Do I really need this money right now? What are my repayment plans? What are the safer alternative options I have? Don’t go blindly for loan options when there are alternatives like savings or family support.
You have financial freedom when you manage your finances properly. You will not get that from online loan applications. Subscribe to the SimplVest newsletter to get more exquisite tips and guides on managing money and achieving your financial goals.
