Loan Apps in Nigeria: 8 Top Dangers and Possible Red Flags

To many Nigerians, Loan apps can be a lifesaver at some point. It has helped them out of emergencies and financial crises. However, this does not mean that the loan apps are safe as these apps are characterized by several dangers.

Some of the dangers that online loan apps pose will be discussed in this article, to enable you to know why you should be very careful while using them and possible red flags to look out for before using any of them.

We shall be discussing the topics here;

• What are loan apps

• How loan apps operate in Nigeria

• What happens when you default

• Dangers of loan apps in Nigeria

• Red Flags to Check for in Loan Apps in Nigeria

 

What are loan apps

A loan app is any mobile application that you can use to borrow money from the comfort of your home. Most of these loan apps don’t require collateral or documents. It is as a result of its ease to process that people love to borrow from them to solve their immediate financial problems. These loan apps allow you to apply for loans from the comfort of your home.

How loan apps operate

The ability to secure loans within minutes after a few clicks in a mobile app, particularly without collateral, made loan apps a darling of many Nigerians. However, what most borrowers do not know, is that the contacts (as the case may be) on their mobile phones, were the ultimate collateral. 

The numbers stored on their phones and accessed by the loan apps were the lenders’ insurance against any inability to repay. In essence, their reputation and dignity or whatever were to be left of it was to be used in guaranteeing repayment of loans from N5,000 to N100,000.

It could be a business partner, customer, or even love interest and hundreds of other people a person would not want to get humiliated in their presence, but this is the ultimate card the loan apps count on to get paid.

While several Fintech companies give out loans and abide by the law on data privacy, one of the numerous sins of some of these companies is the infringement on the data privacy right of Nigerians as contained in Section 37 of the 1999 constitution as amended.

It is important to state that these apps, once downloaded, ask you to grant them permission to access your contacts for risk management purposes. In their terms and conditions, they also state that your information will not be shared with anybody and that it is highly safe with them but this has not been the case.

These apps collect your details and give you a loan to repay in one or two weeks with an interest rate of 15-45 percent as against the CBN interest rate of 13 percent per annum.

What happens when you default?

Defaulters on some loan apps are defamed, contacts blackmailed and called criminals. Some of the loan apps add interest of 5 percent daily for defaulting.

The companies who now have access to your contacts start calling them, sending them messages, and calling you a criminal on the run. There was even a case where defaulters were posted online as deceased persons.

Some of the notorious loan apps send messages to your contacts saying you are HIV positive, while still expecting you to pay the money. They go to any length to the same defaulters to recover their money.

Dangers of Loan Apps in Nigeria

There are many dangers associated with using these loan apps in Nigeria. If you hate embarrassment, you must be cautious before choosing a lender. Below are some dangers associated with using them.

1.      Defamatory Messages

One of the dangers of loan apps in Nigeria is harassment and defamation. It is no new thing that people get a lot of disturbing phone calls and messages if they do not have the money to pay at the set date or worst-case scenario, before the expiration of the loan tenure.

Your family and friends will also be called and frightened with texts and WhatsApp chats that seem to blackmail you and label you a fraudster. This is very bad especially if you still have the intention to pay back but do not have the money at that particular time.

Some even threaten to publish your name and details in the Newspaper and tag her as a fraudster.

2.     Extremely high-interest rates

These loan apps take advantage of the desperation of your situation and charge you high-interest rates. They give you a loan to repay in one or two weeks with an interest rate of 15-45 percent as against the CBN interest rate of 13 percent per annum.

 

The reason for the very high-interest rate is unknown but their inability to adhere to CBN directives suggests that they are probably not monitored by the government or Central Bank. So, a high-interest rate is a danger you stand to face using loan apps.

 

3.     Fake loan apps

There is a long list of fake loan apps in Nigeria and it’s something even the government has not been able to tackle. With the list of fake loan companies in Nigeria increasing day by day, you can run into fraudsters. And the truth is that people are constantly falling prey to these fake loan apps.

4.      Small borrowing amount

Another danger of loan apps in Nigeria is the fact that the amount you can borrow with these apps is usually very small and most times can’t cover your needs unless you have to sign up for many apps at once.

Most of them can only qualify you for 5,000 for the first time and try to increase it gradually going forward depending on your repayment history. Some even give N2,000 or less which may not meet the purpose for which the loan is sought.

5.     Invasion of Privacy

Data privacy is one very fundamental right of people across the world. Most data received by these loan apps are unsafe as they are shared with other loan apps that keep calling you and pleading that you take loans from them. So, there is a possibility that using the app could bring about an invasion of your privacy.

6.     No known addresses

It is well known that these loan apps do not have physical addresses which makes it difficult for one to reach them for complaints or track them where they infringe on the rights of Nigerian citizens. They prefer to operate clandestinely. So this is a danger any loan app user stands to face.

7.     Addiction

Addiction to these loan apps is one danger most of its users face. Because the app is readily available to them at all times, it forms a part of them whenever they need money urgently.

Gradually addictions step in, making it difficult for you to stop borrowing. And before you know it, you have accumulated several loans from different loan apps that you may not be able to pay back.

Addiction to a loan is what no borrower wants in his life as it can slow your financial growth.

8.      Victim of Internet fraud

To get a loan from any loan app, you would be required to fill in your personal information which may also include your BVN. These details may find their way to the hands of fraudsters who could dupe you of your hard earn money. Uploading your personal information in some of these apps can be very risky because it could be sold out and used by cybercriminals.

These cybercrimes could be calling you to send out your ATM card details. They can also use the information to target your social media accounts and either hack them or engage you in conversations to defraud you in any possible way.

So be very vigilant when using any loan app.

Red Flags to Check for in Loan Apps in Nigeria

Below are ways to spot harmful loan apps in Nigeria. Ensure you check for these factors before borrowing from any of them.

• They constantly pressurize you to collect loans with enticing promise.

• They send threatening messages to your contact list

• Excessive high-interest rate

• Constant online harassment of borrowers

• The use of unethical loan recovery means

• Their staff uses rude and derogatory statements on customers.

• Have a repayment duration of seven days instead of a minimum of 60 days, as stated by the law.

• Undisclosed charges and fee amounts.

• Lack of physical offices and reliable customer service system

• Operates an unsecured website and doesn’t have an official email address, phone number, and social media handle.

In Conclusion

It is advisable that before you borrow from any loan app you do your research carefully. Check out for red signs, and when you see one, flee from it immediately. There are genuine loan apps in Nigeria, but until you calm down and analyze the loan apps, you won’t be able to identify them.