Quick loan platforms flood Nigeria, becoming debt traps
Quick loan platforms and apps claiming to process loan requests within a space of 24 hours, some boast of within a few hours are now apparently flooding the country and many of them becoming debt traps to Nigerians, checks by Quick Loan Arena has revealed.
These quick loan platforms claim to create liquidity for salary earners self employed and small business owners in the country.
However, this trend may be putting them up to debt traps with the tendency for some to take quick loans that will inconvenience them during the monthly repayment period.
According to a report by Daily Trust Newspaper, covering a cross section of patrons of quick loans in Abuja, Lagos and other parts of the country, the trend became popular since 2018 and gained higher fame in 2020 with the economic crisis created by the COVID-19 pandemic.
There are a handful of these quick loan outlets who offer enticing loans with low interest rates with little to no paperwork. While some offer from N10,000 to N5m, there are those whose thresholds reach tens of millions.
Their tenors are between one and 12 months (one year), with some up to a maximum of 24 months (two years).
One of the firms is QuickCheck. Its interest rate is as high as 5 per cent monthly on the first loan and loans range from N1,500 to N500,000 with terms from 91 days to one year.
For Carbon (formerly PayLater), a One Finance & Investment Ltd product, a loan attracts interest rate starting from five per cent monthly. Its loans range from N1,500 to N1m with repayment time of up to 64 weeks.
But for another loan app, 9ja Cash, a loanee can choose to repay in 91 or 180 days. Interest ranges from one to 34 per cent with an equivalent monthly interest of three to 29 per cent.
FairMoney operating online by MyCredit Investments Ltd said it was a licensed online lender that provide instant loans and bill payments. It said its loan disbursement was under five minutes.
It states on its website that: “Time is valuable to us, so we’re not wasting yours. It doesn’t take more than five minutes to get a loan on FairMoney. We don’t need any paperwork or collateral. Our Interest is not fixed. You can pay the lowest interest in the country with early and on-time repayment.”
Credit Direct Limited (CDL) based in Lagos with branches across the country pioneered the unsecured micro-lending space in Nigeria and is positioned to be the dominant market leader in the country and beyond.
CDL said its services were trusted by over 300,000 active customers, the largest endorsement in the Nigerian public and private sector; and that this had inspired them to remain the leader in Nigeria’s micro-lending space.
Among the board of directors as stated on its website are Chairman, Ladi Balogun; the MD/CEO, Akinwande Ademosu; and a Non-Executive Director, Mrs Yemisi Edun. Yemisi was an Executive Director, Finance with FCMB, before she became the acting MD of FCMB in January, 2021, after the MD, Adam Nuhu, went on leave over an investigation on his alleged affair and children with a married woman.
Baobab Loans gives a minimum amount of N20,000 and a maximum of N40m depending on the assessed borrower’s repayment capacity. The firm said it could process and disburse a loan in 72 hours repayable in one to 24 months with minimum administrative procedures.
Baobab which also operates as a Micro Finance Bank (MFB) has offices in Kaduna, Abuja and Lagos, among others. It is headed by the CEO of Baobab Group, Philip Sigwart, and the MD/CEO of Baobab Nigeria is Kazeem Olanrewaju.
RenMoney, another online quick loan platform, boasts of offering convenient personal and micro-business loans. The firm which is in Lagos also offers savings and fixed deposit deals.
“Whether you’re employed or run your own business, our loans of up to N6m can help you meet your needs conveniently,” it says on its platform.
RenMoney said it had provided 240,000 units of loans to Nigerians with over 10,000 SMEs empowered.
On regulation, it said: “We lend responsibly and are regulated by the Central Bank of Nigeria (CBN). Deposits and savings are insured by the Nigeria Deposit Insurance Corporation (NDIC).”
According to Segun Onifade, a resident of Abuja, he has patronised FairMoney and RenMoney. Explaining the process, he said: “You will go to their website or their app and fill in your details, including Bank Verification Number (BVN) and at least three guarantors’ phone numbers.
“When they evaluate your monthly income, they then approve what they think you can repay monthly through the loan tenor.”
On the interest rate, he said some platforms charged about six to eight per cent, including their processing fee.
He further said, “They will also ask you to choose a monthly repayment date.”
While the impact of these loans may be good as claimed by some customers, there are constraints from others who believe the easy process entices more people to take loans that they do not actually need.
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