Quick Online Loans: Baits with Hidden Debt Traps

The online trend of getting loans as quickly as within 24 hours or less is becoming quite popular. This is as more local and foreign players joined the queue in the last one year. Although online lending platforms help in creating liquidity for employees and owners of Small and Medium Scale Enterprises (SMEs), they are also luring people into gripping debt traps, as many have been found wanting during repayment periods.

With the increasing difficulties in recovering their loans, some financial bodies in this field have resorted to deviant steps and direct blackmail to compel debtors to settle the amounts outstanding.

The story of Bassey Young went viral on account of this. According to reports, he borrowed 12,000 naira from Fast Money, an online financial outfit, last month. After the 30 days repayment period passed, Fast Money began bombarding him with calls and messages.

Meanwhile, Bassey’s plan for the borrowed funds did not yield the expected results, and Fast Money was not ready for excuses.

Exactly ten days later, Fast Money sent a damning SMS to all contacts in Bassey’s phone. The SMS reads:

“A criminal by the name Bassey Young, with phone number, 08065851528, carted away with the company’s money. The Police are out searching for him. Pls notify us if found.”

Consternation buzzed in Bassey’s world as he had over 70 calls within 10 minutes from family, associates, friends, and others. In Bassey words, ” the most painful result about this strange action from Fast Money is that the Procurement Manager of an organisation which I was going to supply goods worth half a million naira, got this message and called. Since then and even after my explanations, the company’s head and all my contacts in that company have refused to pick my calls.

“This is exactly the project that would have ensured that I comfortably settle Fast Money’s debt but that company has destroyed virtually all my business openings. I am seriously looking at taking up this issue legally.”

Quick loan firms are everywhere in the country now and they offer enticing loans with little or no paperwork. While some offer 5000 to N5m, there are those whose thresholds reach tens of millions.

Fast Money, managed online by MyCredit Investments Ltd, said it is a licensed online lender that provides instant loans and bill payments, and that its loan disbursement is under five minutes. It states on its website:

“Time is valuable to us, so we’re not wasting yours. It doesn’t take more than five minutes to get a loan on Fast Money. 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.”

Meanwhile, 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.

CDL said its services were trusted by over 300,000 active customers, which is the largest endorsement in the Nigerian public and private sector; and that this had inspired the company to remain the leader in Nigeria’s micro-lending space.

RenMoney, another online quick loan platform, boasts of offering convenient personal and micro-business loans. The firm which is in Lagos 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.

While it is seen as positive for the ease in accessing credit facilities to boost businesses and solve financial needs, economic experts have advised loan seekers to do this with caution to avoid the hurtful traps.

According to Mr. David Akwu, a financial analyst, “Small loans are just a click away now, or with just a mobile app you can take small credits without stress. And if you are faithful in paying, you get more loans even in higher amounts.”

Akwu advised that workers should reduce their appetite for those loans or take them only when absolutely necessary in order not to be choked by the debts:

“With the Global Standing Instruction (GSI) mandate and the BVN, there is no hiding place for loan defaulters. With the GSI any account you have funds in will be debited to repay your loan. So low-income earners should only take loans when absolutely necessary.”

Another financial analyst, Effiong Johnson, also asked, “How can you repay loans when you don’t have a source of income? My advice is you don’t take out a loan above 50 per cent of your income. That’s the only way you can repay unless you intend to steal to repay.”

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From the strange actions of Fast Money, it seems the online quick loan sector is an unregulated one where anything goes. How can a responsible organisation label a client a criminal just because he defaulted on terms of payment and there is no court decision on such a case?

Indeed there is an urgent need for the proper regulation of online credit platforms so that public confidence can be strengthened and all players would be compelled to uphold the right ethics of credit organisation.

Regulators can also set up teams to monitor the online activities of these credit platforms. They should make it impossible to launch such credit applications without proper accreditation from the banking regulators and advertising association, maybe through it, all these abnormal and unethical activities can be put to check.

If this is not done, some credit platforms might soon resort to the type of brute force and theatrics utilised by fee collectors for local transport unions.

One must not wait until debt collectors of online quick loan outfits carry out disturbing moves to compel repayments before CBN and other regulators take action.

Categories: Economy, Features

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