7 Reasons why you should Avoid Taking Loans in Nigeria
On this page, you will learn the dangers attached to loans also; top 7 reasons to avoid loans most especially if you have future plans.
It is 100% correct that taking loan can save you from a lot of emergencies. It might be health issue, starting a lucrative business idea or maybe, acquiring an asset/property.
Funny enough, most people just jump into taking loans without looking deep at the other end. See! Loans are very good, yet; they can either make or break you. Haven’t you heard about people who their properties are been claimed due to the loans they collect and are unable to settle? I’ve read a lot of true situations like this, however, I haven’t really come across any.
Well, it’s still the best to be on the brighter side which is my we came up with this content idea “reasons to avoid loans”. On this page, you are sure to get hold of most important negative thoughts to consider before optioning for a quick loan offer in Nigeria. Before then, let’s take a peek at understanding what loans really are because am sure not everyone is an enthusiast in the field.
Understanding Loans in Nigeria
Loans generally are valuable (usually money) which are being collected with the purpose of paying back. However, loan agencies or financial institutions are allowed to operate on their terms of service without having to be regulated by a board. Even Nigerian banks whose policies are mostly regulated by the CBN are allowed to operate fully on terms they see fit when it comes to loans they offer to individuals and businesses.
This bring up to why loans in Nigeria has a lot of pros and cons and also, which is why we bring forth, some of the top 7 reasons why you (an individual/business owner) should avoid going for loans. Most especially if what you need the money for isn’t business minded with at least, good percent of assurance of generating better ROI in a short period of time.
7 Reasons why you should Avoid Taking Loans in Nigeria
1. Forced to Pay Extra Charges
As mentioned earlier, loans issued my most financial institutions requires that you make extra payment while refunding the amount of loan received. This can be really annoying or maybe stressing as this is made compulsory made compulsory and one of the terms you must agree upon before you are been issued a loan.
In essence, what this means is that; when you request for a loan of maybe 500k from a financial institute, while repaying back, the amount will be above the 500k which was initially issued to you. This extra charge charged by financial institutions is mostly referred to as “interest rate”. The interest rate charged for a loan varies depending on so many factors like company policy, amount of loan requested and length of repayment.
2. It is Addictive
Another reason why you should avoid taking loans in Nigeria is that; loans are addictive and not that easy to stop when you begin. For instance, it is rear for someone to option for a loan for the first time but once he tried the first time, he will still want to option for more in the future. This is not because of the importance alone.
The thing is, people’s need for money is endless and once you tried a new means and it was a success, you sure will keep on. This is really not bad as it will disrupt your future financial planning.
3. You Are Most Likely to be Broke Afterwards
This is the result of being addictive to loans. Once you get acquainted to loans, it is really hard to stop and, in the future, it will result to you, losing your future earnings in the name of servicing the loan you applied for. Losing a huge percent of your future earnings to service due loans will certainly make you broke at all times.
You might have over a ₦1million in your account but you will still be broke because, the money isn’t enough to service all your loans. I advise you stay away from loans due to some of these factors.
4. You Risk Ownership of your Properties/Valuables
Most loans issued come with a collateral term which must be agreed upon before issuance of requested loan amount to the individual/business. Collateral in loan and financial terms has to do with that (your property, valuable or asset) which you put at stake to be issued a loan. The general term which covers collateral in loans is that; if there is issue with you paying for the loan when it is due, the financial institution have the right to sale your property to cover expense in servicing the loan. Collaterals which is being staked for a loan must be worth more in value than the amount of loan applied for.
However, after the sale of the collateral item, the financial institution may take their loan amount while they refund the remaining amount to the property owner. This may be really risky. What if unforeseen events happened and you were not able to pay back your loan before due time, what if your property is being claimed just like that? Have you ever thought about it? I think you should.
5. Application Process can be Annoying and Time Consuming
Loans might be really stressing to apply, most especially banks or federal government loans in Nigeria. Did you remember the covid 19 loan that was introduced by Federal government of Nigeria in 2021? How people suffer just to gain featured in the loan scheme.
That alone should save as an example why you should avoid loans. One really annoying thing is that; there is no assurance you will be issued the amount you applied for after going through all the steps and procedures required to the loan request. However, using Nigerian financial apps like Branch, Faire Money, Kuda and other might save you some stress but the amount which is usually issued for starters is too small.
6. Interest Rate is Always High
Most Loan institutes in Nigeria apply unfair interest rates which is why you need to be really watchful. Well, how can you be really watchful when you have little to zero knowledge the minimum/maximum percentage which is to be charged by these financial institutes?
I mentioned earlier, that there is no board or agency saddled with the responsibility for regulating the performance of loaning institutes in Nigeria. This give them (loan bodies) the power to charge as high interest rates as they deem fit. Imagine paying over 5% to 8% daily for servicing a loan. Isn’t that more of a scam? You just need to make some research on loan providers that have low interest rates.
7. You Risk your Future Credit Score
This is self-explanatory though. However, it is clear that when you are indebted, you tend unstable financial balance thereby harming your future credit score. This means that, money will no longer stay in your hands as they use to when you were not in engaged in any form of loan scheme.