Loans apps as the name implies are are use to collect short-term loans. The come really simple and easy to use, loans through the apps require no collaterals but you need to give some personal information so the user is ascertain.
Whether it’s worth using or not, we’ll arrive at a conclusion after the preceding paragraphs which will add to our knowledge of the loans given by such apps.
Many Nigerians whose finances have reached rock bottom have resorted to using loan apps. Hence, the popularity of loan apps has increased over the years as these financial services offer low-interest loans without going through the rigorous process required by banks. In this article, we will be discussing what loan apps are with a focus on the advantages and disadvantages of these apps and other relevant information.
What are Loan Apps?
Loan apps are financial platforms where individuals who are in need of urgent cash can loan money without having to go through bank procedures. Individuals would receive their loans after applying through the company’s website or mobile app after meeting the requirements laid down by the company. These loans are usually offered with low interests and you may be required to pay your loan in instalments until your debt has been cleared. Examples of loan apps include FairMoney, PalmCredit, Branch, Carbon etc.
Advantages of Loan Apps
- No Need for Collateral or Documentation. Most loan apps in Nigeria do not require you to have any collateral to secure your loans. You don’t need to provide any documents before a loan can be given to you. You may however be required to provide a government-issued ID, proof of income etc. All these can be sorted on the site or the mobile app as you do not need to go to any physical location.
- Fast Disbursal of Funds. One good thing about loan apps is that once you apply for the loans and have met the requirements, the bank account you provided would automatically be credited with the loan amount. Most loan apps process transactions within minutes and so it is a good option when you need money urgently.
- Easily Accessible. Loan apps are easily accessible and you can apply for loans anywhere you are. All you need to do is to download the app from your Google Play Store for Android or Apple Store for iOS, fill in your details and apply for a loan at your own convenience.
- Progressive Loans. As a new user you can only get a small loan amount and as you keep lending money and repaying as and when due, the maximum limit keeps on increasing over time. This is to ensure credibility on the part of the borrower.
- Flexible Repayment Plan. Some loan apps offer flexible repayment plans to their users. This means you get to repay your loans in a way that would be convenient for you within a given period of time.
Disadvantages of Loan Apps
- High Interest Rates .Loan apps are notorious for the high interest rates fixed on loans. These rates are ridiculous are make it hard for people to repay these loans. For example, some loan apps charge as high as 30% on loans per month so if you borrow N10000, you would have to pay N13000 at the end of one month. In fact, you may need to pay additional fees for late payments.
- Short Term Repayment. Apart from charging high rates for loans, these apps only give customers a few days or weeks to repay the loans. This time frame is absurd and would not allow individuals to have peace of mind until the loans have been paid.
- Automatic Deduction from your Account. Users consent obliviously to the automatic deduction of loans from their accounts the moment they start using the app. Individuals are usually lured to enter their bank details on the site thereby unknowingly giving these apps the license to access your account. Hence, these apps would deduct the loans and interests without your express permission and without notifying your bank. This has caused many individuals to be angry when using these online apps.
- Lack of Data Privacy. Loan apps usually request access to your device before you are able to use them. This way, the app has unlimited access to every information on your phone including your contacts, text messages, email addresses, social media accounts, camera etc. Hence whenever you default in payment, this access would be used against you.
- Addiction. Once you start using these apps it can be very difficult for you to stop using them. The cycle never stops as you would keep on borrowing from them to the detriment of your mental health. You may begin to depend on these apps for your daily needs. Even when you have money, it would be used to repay debts and you would go back to borrowing again. You would lack a savings culture and have no money to call your own. This way of living is not good for anyone seeking to thrive in this economy.
- Harassment. As earlier noted, loan apps have unrestricted access to your device and all your data. Once you default in paying the loan they begin to send defamatory and threatening messages to your contacts in a bid to force you to pay the money within a short period of time. They may even go as far as sending messages on your social media accounts to instil fear in your friends and cause them to move away from you. This evil act has caused many to fall into the hands of depression, mental disorders, or even suicide.
Fortunately, the Federal government through the Federal Competition and Consumer Protection Commission (FCCPC) has taken steps to stop the heinous activities of these loan apps. For instance, the government has ordered app stores such as Google Play Store and Apple Store to delete these apps from their platforms so that people would no longer be victimized.
It is also interesting to note that majority of these apps that victimize individuals are not licensed by the CBN as licensed apps would go through the proper route of reporting defaulters to the Credit Bureau instead of harassing them.
When you need extra cash you may turn to loan apps to help you in time of need. This is not a bad idea as you do not need to go through strenuous processes to get the loan which would be sent to you in minutes. However, you may want to think twice before using loan apps as it is advisable to have a source of income where you can pay the loans as and when due to prevent any embarrassment. It is also better to loan money from your friends or family members than to go through these apps.