The idea of collateral-free loans seems incredible to just about any Nigerian who has had a first-hand experience in accessing a loan from conventional loan providers. After all, this is Nigeria; a country where personal finances are fast going South for most people while some are hanging by a thread despite a rigorous 9-5 almost on a daily basis.

With the advent of fintech companies in Nigeria comes the vegetable-like growth of online lending platforms that give loans just by downloading their apps and filling out one’s details.

While this is supposed to be a blessing to average Nigerians who are struggling to stay above poverty line, these online lending platforms, which are nothing but loan sharks, have further plunged Nigerians into figurative shark-infested waters and led them into deeper trouble than they found themselves before borrowing and even worse; making them rely on more lending platforms to get by.

Although these platforms offer loans that can take care of certain emergencies and sort immediate bills — their aftereffect on one’s personal finances can be very devastating. There have been first-hand reports of these loans driving people to near-suicide states because of the many inconveniences that come with them!

Loan Shark Definition



Cambridge Dictionary defines a loan shark as “a person who charges large amounts of interest for lending money to someone, especially when their financial position means they cannot borrow money from a bank“; while The Free Dictionary defines it as “One who lends money at exorbitant interest rates, especially one financed and supported by an organized crime network.” Both definitions are in fact correct but not totally applicable as with Nigerian loan sharks.

In Nigeria, all online lending platforms — though offer collateral-free loans — are in reality nothing but loan sharks that grant short-term loans at extremely high-interest rates to desperate borrowers who mostly need the loans to cushion the effect of the biting economy.

Borrowers can get a loan in less than five minutes just by downloading an online lending platform app, enter required details and get credited just like that. In the end, most borrowers are left much worse because they are expected to pay back their loans within 1-3 weeks plus an interest rate that is nearly as high as 50%!

Here, we explain the reasons why you should avoid taking loans from online lending platforms (loan sharks) or loan apps in Nigeria:

1. Extremely high-interest rates

What makes a lender qualify as a loan shark is the high interest rates that come with their loans. While Nigerian bank interest rates are mostly between 9%-11.130% per annum, these loan sharks offer loans with interest rates mostly between 15%-30% weekly or monthly. Although some claim to offer loans between as little as 2% – 5% — this is never the case. This means a borrower who accesses a N10,000 loan could pay between N11,500 – N13,000 weekly or monthly. For someone who is barely managing, he/she is left to not only pay up the principal + interest but will also pay extra charges with each passing day if he defaults as a penalty.

2. Giving up your BVN

Although online lending platforms sell their short-term loans mostly using the “collateral-free” caption, what they won’t tell until you start filling out a form on their app is that your BVN will be required in order to be eligible for a loan. According to them, the BVN is used in determining the creditworthiness of every individual who signs up on their platform. And while desperate borrowers might not be concerned about giving out their BVN details, financial institutions have repeatedly warned that the BVN is one’s “financial ID card” and it can be used to access some of your financial information/records and can also be used to orchestrate a fraud. What’s worse is that it can be submitted to the credit bureau in order to have your BVN blacklisted if at all you default. While this might not be much of a concern to you now, your credit rating will be negatively impacted which means chances of borrowing from your financial institution or carry out some more serious business transactions in the nearest future are slim since your credit rating is bad.

3. Unfethered access to your mobile device

Every loan app requires certain access in order to function on your phone. Although these apps should work without your access — it is their way of getting every sensitive information about you without really asking directly. These include but are not limited to your contact details, text messages, email accounts, social media accounts, media, camera, etc. This means that you must be willing to grant an online lending app access to use them as they deem fit. With this access, your contacts are extracted and contacted without notice if you default or have your picture posted on social media platforms or worse; have your social media hijacked since you granted them access to post on your behalf.

4. Harassment, humiliation and intimidation

With each passing day, online lending platforms have become more notorious in the art debt recovery by harassing, humiliating and intimidating loan defaulters. Whether your reasons for defaulting are of serious concern or not, online lending platforms can send libellous text messages to your contacts; brand you a wanted criminal who ran away with their company’s money. The humiliation is often much because long lost friends, family members, bosses, colleagues at work, religious colleagues, and siblings all of whose contacts you have saved to your phone, are likely to receive damaging messages about your person.

In some cases, one is likely to be threatened personally about having their details sent to the credit bureau for blacklisting if they fail to make repayment on time. And then there are constant phone calls that can be considered intrusive — all to remind defaulters to make payment.

All of these have been known to bring nothing but shame and humiliation to some borrowers and pushed many to the brink of suicide for being humiliated in terrible ways.

5. Lien on your bank account

Most people get angry and worked up when online lending platforms automatically make deductions from their bank accounts without their “consent” when in reality they agreed to the platform’s terms of use the moment they started using it. Having a lien placed on your account means a loan shark can legally make deductions directly from your account without having to write to your bank. Liens on accounts, as regards securing loans from online lending platforms, are activated the moment you enter your debit card details on their website or mobile app. While they may lure borrowers to enter their debit card to get paid or as a final means of verification, doing so means submitting every detail of your debit card to them from where they will automatically deduct not just their principal and interest you accrued over time.

6. Inability to develop a saving culture

A common, noticeable pattern with people who access loans from online lending platforms is their inability to save since they are mostly servicing high-interest loans they accessed from these loan sharks. Their inability to save stems from repaying loans + interest, which often leaves them with little or nothing in the end and have to depend on more loans in other to get by. For some people, they borrow from some other loan sharks to settle another and get caught in a web of financial struggle. The cycle can be very difficult to break for those who want to get out but since they don’t have enough no thanks to constant high-interest debts that are being serviced, they must continue to remain subservient to these loan sharks who profit off them and leave them in worse financial mess than they were.

7. Addiction

Getting constant loans from fintech loan sharks can be somewhat addictive since the idea is similar to that of “free money” until one starts struggling to pay back. Getting used to them can be very addictive, particularly payday loans; meaning one might have to depend on multiple online lending platforms periodically — wait till one gets paid at work at the end of the month and pay off the debts then go back to borrowing again. The “wash, rinse and repeat” process with payday loans can be devastating to one’s finances, financial growth and personal life.

Note: While your reasons for wanting a loan might be genuine, we recommend asking your friends, family or colleagues for a loan if at all you ever need one. Giving up sensitive, personal details in the name of borrowing and paying higher interest rates on them is not in any way advisable if at all your mental health, personal details and peace of mind mean anything to you. If at all you don’t have friends, family members or colleagues who can lend you some money temporarily, seek other alternatives. If you are gainfully employed, avoid payday loans because they can ruin you financially. Develop a saving culture rather than spend everything that comes your way. This way, you can have some funds to fall back on in cases of emergencies rather than settle for loan sharks, default and face constant humiliation, harassment and threats.

Source: https://financialslot.com/7-reasons-why-you-should-avoid-loan-apps-in-nigeria/

Nice one
Threads like this should be hitting FP often

Them go even publish your picture tag you as thief


Wait fes
Where is my first to comment money?

Even Nigeria government dey borrow na!

Loan sharks in Nigeria are death traps. Banks offer better interest rates even though its still high comparatively. If you want to live long in this country avoid loan sharks /apps

Lately, I have been reading how these guys have been sending damaging messages to borrowers' family members, bosses and colleagues, both here on Nairaland and on Twitter.

A fellow created a thread saying he wanted to commit suicide as he had borrowed from various loan sharks and have accrued about N700k in interest and principal.

Unsolicited text messages keep dropping on my phone about how a contact is a "wanted criminal" and has "disappeared" with their "company money".

If you value your financial health, avoid them, not just because of the embarrassments and approach with which they adopt in recovering their monies but because of the addiction that comes with it.

This: https://www.nairaland.com/6600277/how-ruined-life-borrowing-loan


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Lalasticlala

a

NewDelhi:
Sokoloan, gocash, xcredit etc.

If dem born your papa well don't pay their money . They'll start messaging your contacts that you and your families are criminals on the run with company money and wanted by the police. I get alot of texts from them concerning defaulters who have my number. Sometimes the call me to beg the person to pay

They themselves know you can't meet up with the payment that's why they offer you loans with ridiculous interests and tenors of 7days

I think a thread was created about them weeks back https://www.nairaland.com/6590757/sokoloan-very-nasty-set-people

Was the person drunk when he took the loan?

E be like say loan apps don show this one pepper

Infact avoid any loan companies in Nigeria

Chinese companies loan shark apps full playstore.

Sokoloan, gocash, xcredit etc.

If dem born your papa well don't pay their money . They'll start messaging your contacts that you and your families are criminals on the run with company money and wanted by the police. I get alot of texts from them concerning defaulters who have my number. Sometimes the call me to beg the person to pay

They themselves know you can't meet up with the payment that's why they offer you loans with ridiculous interests and tenors of 7days

I think a thread was created about them weeks back https://www.nairaland.com/6590757/sokoloan-very-nasty-set-people

Is there any Nairalander that can just call me and saw come and take dis job offer in Abuja no matter how humbling or menial it may be?
I want to share this testimony pls. Life after NYSC had been so so tormenting

Private loan providers serve a need. The problem is that most Nigerians do not like to repay loans

Financialslot1:
Lalasticlala

Why are you calling him? Is he owing you?

Soko..call the rest

Please contact us if you need a quick loan.

Conditions
You must be resident in Lagos

You must be a salary earner

financeandloanshub@gmail.com

WhatsApp +234 0809 236 7241

Hmm. This is serious!!!

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Hmmmm

Make Una listen o, until this stuff is almost ruining your life before you realize what u've gotten urself into.. u keep borrowing and paying and they keep increasing the limit, before u know it, ure using Ur salary to service loans...

This happened to me until I had a big deal that gave me a lump sum, before any other thing, I paid off all loans (even those that were not due), uninstalled the apps and prayed to God never to allow me get into a situation that would make me seek such loans again... I was lucky, u may not be!

Borrow at yout own peril

Ohhh my bany dea drivi me crazy

No escape route to financial liberation in Nigeria

Chinese mafia in Nigeria fintech industry.
Instead of the regular breaking of legs and fingers, to enforce payment,
they send damaging text and calls. If they don't resort to that, they'll be bankrupt cos the average Nigerian doesn't want to pay back his loan.

u say they charge high raates. what do u expect
Whoever gives u loan without collateral is taking a bigger risk than the one that requests collateral. A higher premium is paid to insure a non-collaterized loan. If you decide you want to be a scammer and u wont keep ur money in banks anymore, its a loss for them.....and u know what they say about taking bigger risk in business.
If e easy go drop ur 5million naira land in GTB to collect 1m naira loan

Funny enough, they employ you and I to torment defaulters.

Some working in such fintechs have no choice as there is a high rate of unemployment in the country presently.

Who would have believed that there will be a time like this when one would be offered a loan at almost 50% IR and still click agree?

A time is still coming if things exacerbate, loan sharks will be offering interest at around 70-100%.

Would CBN say it's not aware of this? But could quickly ban crypto.

Nigerians dont like paying back loans.

so hooked on it now

Nice one, this just shift my mind......

MrFollowFollow:
Private loan providers serve a need. The problem is that most Nigerians do not like to repay loans

Thank you. They see it as free money.

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