By Babajide Komolafe

As mentioned in the first part of this article, a lot of people are trapped in loans which come with seemingly low monthly interest rates. Failure to repay such loans within a month or a relatively short period, results in interest payment obligations that eventually exceed the original amount borrowed.

Another danger about these loan offers is that they are offered without consideration for how the borrower will repay. This is a major consideration in traditional banking. While the bank may request for collateral, an asset belonging to the borrower which they can sell and the proceeds used to repay the loan, the priority is how the borrower will repay from either current income or projected income from activity to be funded by the loan.

For example, most banks will rarely grant loan with repayment more than 30 per cent of your current income. This is because you need about 70 per cent of that income for your basic needs and bills.

As a result, the borrower thinks objectively and sincerely considers whether you really need the loan or not, and whether you can really repay the loan without creating a problem for yourself.

Many loan requests have been rejected because the borrower could not provide convincing evidence how he will repay the loan from current and or projected income without major disruption to his ability to provide for his basic needs or that of his family.

On the contrary, this consideration is absent from the approval conditions of the loan offers dangled before Nigerians on a daily basis.
And because it is not a condition, the prospective borrower too does not consider how to repay. Most people that fell into the trap of these loan traps see them as easy money to be used and repaid any time. Most of them just think about what they can use the money for and so they accept the loan.

A significant population of those who fall into these cheap loan offers are youths, who use the proceeds to bet or gamble. Yes, gamble and below is a confession from a victim.
“In July 2024, I went to a friend’s place to sew. While I was there, I saw him playing a visual gambling game and he won N800,000. He explained it to me, and that pulled me in. I had gambled before, but not consistently.

“After that day, I got deeply entangled. I borrowed heavily from loan apps. When I calculated it, I had borrowed over N600,000 and repaid about N800,000 altogether. Yet, I still owe some money to date.”