Steps to Take If You Can’t Repay Your Loan from a Nigerian Loan App
Taking out loans from mobile apps in Nigeria has become quite popular because they offer quick access to funds in emergencies. However, financial challenges, such as job loss or unexpected bills, can make it hard to repay loans on time. If you find yourself unable to meet your repayment schedule, it’s important to handle the situation responsibly rather than avoid it.
Here are some practical steps you can take if you can’t repay your loan from a Nigerian loan app.
1. Understand the Loan Terms and Conditions
The first thing to do is to revisit the loan agreement. Many borrowers often skip through the terms and conditions when taking out a loan, but these details are crucial, especially when you’re facing repayment difficulties. Understanding the terms will help you know what consequences to expect and how best to deal with the loan.
- Check the Interest Rates: Ensure you fully understand how much interest will be added if you delay repayment.
- Know the Late Payment Penalties: There may be fines or extra charges for missing the repayment deadline. You should know what these are.
- Find Out If There Is a Grace Period: Some loan apps offer a grace period where you can still make the payment without facing additional penalties. This can buy you some time if you are struggling financially.
Once you know the exact terms, you’ll be better prepared to manage your situation and make informed decisions.
2. Communicate With the Loan Provider
Avoiding communication is one of the worst mistakes you can make when you can’t repay a loan. Ignoring calls, emails, or text messages from the loan company won’t make the debt disappear. In fact, it could worsen the situation, as the lender might assume you’re trying to run away from your obligations.
- Explain Your Situation: Most loan providers appreciate when borrowers come forward and explain why they can’t pay. It shows responsibility. They may be more willing to work with you if they understand your financial struggles.
- Ask for Options: Many loan apps offer repayment extensions or restructuring plans if you ask. They may allow you to extend the repayment period or reduce the amount you have to pay each time.
- Negotiate: Be open to negotiating a new repayment schedule that works better for your current financial situation. The lender would likely prefer to get the money back slowly than not at all.
Clear communication can help reduce stress and may prevent more aggressive collection methods from the lender.
3. Request a Loan Extension or Restructuring
If you’re unable to make the repayment on time, another option is to request a loan extension. Many loan apps allow you to extend the repayment period by a few weeks or months, though this often comes with added interest or fees. Still, it’s a temporary relief that can help you avoid default.
- Check the Cost of the Extension: While an extension can give you breathing room, it’s important to know how much extra you’ll be paying in interest or fees. Compare this cost to what you can realistically afford.
- Consider Loan Restructuring: Some loan apps offer the option to restructure the loan entirely. This means they’ll give you a longer repayment period with smaller installments. If your financial difficulties are expected to last a while, this might be a better solution than a simple extension.
Extensions and restructuring allow you to manage your payments more comfortably while still meeting your obligations.
4. Explore Other Income Sources
If you can’t repay the loan from your current income, consider finding additional sources of money to help you make the repayment.
- Take on Side Jobs: You could look for freelance work, part-time jobs, or other gig opportunities. Websites like Upwork, Fiverr, and Freelancer offer opportunities in writing, design, virtual assistance, and many other fields that can be done remotely.
- Sell Unused Items: You could sell personal items you no longer need, such as gadgets, clothes, or household items. Platforms like Jiji or social media platforms like Instagram can be good places to sell items quickly.
- Leverage Your Skills: If you have skills in areas like tutoring, sewing, baking, or repairing electronics, you could offer these services to people in your neighborhood or online.
Finding small ways to earn extra income can help you tackle your loan repayments without taking on additional debt.
5. Borrow from Friends or Family
If your financial situation is especially tight and you can’t secure income quickly, another option is to reach out to friends or family for assistance. While this may feel uncomfortable, borrowing money from trusted people can help you repay your loan and avoid additional fees or penalties.
- Be Transparent: When borrowing from family or friends, it’s important to be honest about why you need the money and how you plan to repay them. This transparency can build trust and make them more willing to help you.
- Offer to Repay Gradually: If you’re not able to repay them in full immediately, offer to repay in small amounts over time, explaining your plan.
While borrowing from loved ones can feel awkward, it’s often a safer and less expensive option than taking out another loan.
6. Avoid Taking Another Loan
It may seem tempting to take out another loan to repay the first one, but this is rarely a good idea. Taking more debt to cover existing debt can lead to a vicious cycle that becomes harder and harder to escape. This is especially risky if the new loan comes with high-interest rates.
- Weigh the Consequences: Taking a new loan only shifts the problem forward without solving the underlying issue. If your income hasn’t increased, repaying the new loan will still be difficult.
- Focus on Reducing Your Debt: Instead of taking on new debt, focus on strategies to lower what you owe. This can include cutting down on unnecessary expenses or increasing your income through side jobs, as mentioned earlier.
Borrowing more to pay existing loans will only worsen your financial position over time.
7. Create a Budget
Managing money becomes easier when you have a clear budget. A budget helps you track where your money is going and where you can cut back. If you’re struggling to repay your loan, it’s essential to review your spending and make necessary adjustments.
- Track Your Expenses: Write down all your monthly expenses, including rent, utilities, transportation, food, and other personal costs. This will show you where your money is going.
- Identify Areas to Cut Back: Look for areas where you can reduce spending, such as entertainment, eating out, or non-essential shopping. Even small changes can help free up money for loan repayment.
- Stick to the Budget: Once you’ve created your budget, it’s important to stick to it as closely as possible. This discipline will help you manage your finances better and avoid falling deeper into debt.
Budgeting is a key step in controlling your financial situation and finding ways to repay your loan.
8. Loan Consolidation
If you have multiple loans from different apps or financial institutions, it can be confusing to keep track of them all. Loan consolidation allows you to combine all your debts into a single loan with one monthly payment. This approach simplifies the repayment process and can sometimes reduce your overall interest rate.
- Look for Lower Interest Rates: Consolidation loans often have lower interest rates than short-term loans from mobile apps. This could make your monthly payments more manageable.
- Focus on One Payment: With consolidation, you only need to make one payment each month, which reduces the stress of keeping track of multiple deadlines and payment amounts.
Loan consolidation is worth considering if you are juggling several loans and struggling to keep up with multiple payments.
9. Know Your Rights
In Nigeria, some loan apps have been reported for using unethical methods to collect debts. This includes harassment, public shaming, or constant threats. While lenders have the right to pursue repayment, there are limits to what they can legally do.
- Understand the Law: Nigerian law protects borrowers from harassment. If a loan company threatens you, sends aggressive messages, or contacts your friends or family in an inappropriate manner, they may be violating the law.
- Report Harassment: You can report any unethical practices to authorities like the Central Bank of Nigeria (CBN) or the Consumer Protection Council (CPC). Gather evidence, such as text messages or voice recordings, before making a complaint.
While it’s important to repay your loans, it’s equally important to know your rights as a borrower and protect yourself from unfair practices.
Final thought
If you find yourself unable to repay a loan from a Nigerian loan app, it’s important to remain calm and take responsible steps to manage the situation. Understanding the loan terms, communicating with the lender, seeking extensions, finding alternative income, and avoiding further debt are all critical steps to take.
Frequently Asked Questions (FAQs)
Here are some common questions and answers that can guide you through managing the situation if you are unable to repay a loan from a Nigerian loan app:
Q1: What happens if I can’t repay my loan on time?
If you can’t repay your loan by the due date, the lender will likely charge late fees and additional interest. In more serious cases, they may report you to a credit bureau, which can affect your credit score. Some loan apps might also employ aggressive debt collection methods, such as constant calls and messages. It’s crucial to contact your lender and discuss your situation to minimize these penalties.
Q2: Can loan apps in Nigeria take legal action against me for not paying back my loan?
Most Nigerian loan apps are more focused on recovering their money than taking legal action. However, they can report your default to a credit bureau, which may affect your ability to secure loans from other sources in the future. While harassment or public shaming is not legal, some loan apps may use aggressive tactics to pressure you into paying.
Q3: Can I negotiate my loan repayment terms with a Nigerian loan app?
Yes, you can. Many loan providers are open to negotiating new repayment terms, especially if you are upfront about your financial difficulties. You can request an extension or a restructured repayment plan. It is better to initiate this conversation early before the loan defaults.
Q4: Is it a good idea to take out another loan to repay my current one?
Taking another loan to pay off the first one is generally not advisable. This could lead to a debt cycle where you keep borrowing to cover previous loans. Instead, explore other options like negotiating with your current lender, cutting expenses, or finding additional income sources. Taking on more debt without solving your financial problems could make things worse in the long term.
Q5: What should I do if I am being harassed by a loan app?
If you are being harassed by a loan app, such as receiving threatening messages, constant phone calls, or if they are contacting your family or friends, this behavior is illegal. You can report such actions to the Nigerian Consumer Protection Council (CPC) or the Central Bank of Nigeria (CBN). Keep records of the harassment as evidence and reach out to the appropriate authorities for help.
You can visit the Consumer Protection Council of Nigeria or the Central Bank of Nigeria to file a complaint.
Q6: What are my rights as a borrower in Nigeria?
As a borrower, you are protected from harassment or unethical practices by lenders. Loan apps are not allowed to threaten or publicly shame you. If they breach these rules, you can report them to regulatory authorities like the CPC or CBN. You also have the right to request detailed information about your loan terms, including interest rates and fees.
Q7: Can loan default affect my credit score?
Yes, if you default on a loan, it can negatively impact your credit score. Loan apps usually report defaulters to credit bureaus in Nigeria, such as the Credit Bureau Association of Nigeria (CBAN). A poor credit score could limit your ability to get loans in the future, not just from loan apps but also from banks and other formal lenders.
Q8: How can I check my loan terms and repayment details?
You can typically find your loan details, including the repayment schedule, interest rates, and penalties for late payment, within the loan app under a section like “Loan Details” or “Repayment Terms.” If you can’t locate this information in the app, check your email for any documentation the loan app may have sent when the loan was approved.
Q9: Can I get a loan extension?
Yes, many Nigerian loan apps offer extensions, but this often comes with additional fees or higher interest rates. Contact the loan provider as soon as possible to inquire about extending the repayment period. Be sure to understand the new terms before agreeing to an extension, as this could increase the overall cost of your loan.
Q10: What is loan consolidation, and how does it work?
Loan consolidation involves combining multiple loans into a single one, which simplifies repayment by making just one monthly payment instead of several. This option may also lower the interest rate or extend the repayment period, making it easier to manage your debt. You can look into financial institutions that offer loan consolidation services in Nigeria, but be sure to compare the terms to ensure it’s the best option for you.
Q11: Should I borrow from family or friends to repay my loan?
Borrowing from friends or family can be a viable option, especially if you need to avoid late fees and additional interest from the loan app. If you choose this route, make sure to be honest about why you need the money and how you plan to repay them. Having a clear repayment plan can help maintain trust and avoid damaging your personal relationships.
Q12: How do I file a complaint if a loan app violates my rights?
If a loan app is acting unethically or violating your rights as a borrower, you can file a complaint with the Consumer Protection Council (CPC) or the Central Bank of Nigeria (CBN). Be sure to gather any evidence, such as threatening messages or voice recordings, to support your case.
You can visit the CPC website or the CBN’s consumer protection page for more information on how to file a complaint.
Q13: How do I improve my financial situation after repaying my loan?
Once you’ve repaid your loan, it’s important to make a plan to avoid falling into a similar situation again. You can:
- Create a budget to manage your income and expenses better.
- Build an emergency fund to cover unexpected financial needs.
- Avoid unnecessary loans unless absolutely necessary.
- Look for additional income streams, such as freelance work or part-time jobs, to improve your financial stability.
Planning ahead can help you prevent relying on loans for emergencies and reduce financial stress in the future.
Q14: Can I face legal action for not repaying my loan?
While loan apps don’t typically pursue legal action for small amounts, defaulting on a loan can still have serious consequences. They may report you to credit bureaus, which will affect your ability to access future credit. In extreme cases, some lenders may escalate the issue to formal legal proceedings, though this is rare and usually involves larger sums of money.
