Instant Loan Apps: Things You Should Consider Before Using Them

Nigerians have snapped up the loan offerings from digital lenders with great enthusiasm. That’s partly because loan apps provide something that the banks have scarcely delivered: small amounts of credit that borrowers can access relatively quickly.

If you’re thinking about taking a loan from lending apps, it’s important that you learn their terms and conditions beforehand, and decide whether you’re able to meet them. This could save you a lot of trouble further down the line.

Below, we’ll talk about some points you should consider before deciding whether or not you’ll use a loan app.

What You Need A Loan For

Ideally, you’ll want to take out a loan if you have financial obligations that you urgently need to meet. It could be your child’s school fees, something having to do with your business, or some other important expense you need to cover.

Your digital creditors probably won’t tell you what to do with the money they give you. But this doesn’t mean you shouldn’t be prudent about the way you deploy it. You’ll want to avoid spending quick loans on items you can do without. By cultivating a disciplined approach to loans, you’ll keep yourself from racking up debt for frivolous reasons.

How You Will Repay The Loan

Ideally, you shouldn’t get a loan unless you’re certain that you’ll be able to repay it. Some borrowers may be under such intense financial pressure that they become more concerned about securing credit first, without figuring out how they’ll settle the debt. It’s a difficult situation to be in. Still, lenders will expect them to repay their loans.

If you’re going to use a loan app, be sure that you have a strategy for paying back. The money could come from your income as an employee or entrepreneur. And if you’re using a platform that offers flexible repayment, you might take advantage of that to make the repayment process less stressful for you. There’s more on this below.

Payment Flexibility

Loan apps don’t all provide the same degree of flexibility with respect to loan repayments. The tenure for loans varies quite significantly across the options available. Some offer tenures of between 2 and 12 months; others let you repay within 18 months.

However, remember that the interest you’ll need to repay will accumulate with each passing month. While you’re seeking a flexible repayment plan, be careful to not stretch your repayment beyond the limits of what you can afford.

Typically, interest on instant loans is calculated on a monthly basis. For example, a loan of ₦100,000 may attract a monthly interest rate of between 2% and 4%. The actual interest you’re charged will partly depend on what the standard range is for the particular lender you’re using. Factors like your credit record and the amount of money you’ll be loaned also play a role in determining the interest you’ll be expected to pay.

When comparing loan apps, make sure to check the interest rates they offer. You’ll usually find this information on the ‘about this app’ section of the app’s listing on the Google Play Store.

Additional Fees

Borrowers may incur other charges besides interest rates. Often, these charges will be added to something called the ‘Annual Percentage Rate’ (APR). An APR is a total fee you’ll have to pay on a loan; it’s a combination of the interest rate and other fees that may apply.

Your APR is either equal to or greater than your interest rate. For example, if your interest rate is 24% per annum, your APR could be anywhere between 24% and 30% per annum.

Just like the nominal interest rate, you’ll find the APR on the ‘about this app’ section of the app’s listing on Google Play Store.

Penalties For Late Repayment

You may also incur extra costs if you fail to repay loans within the deadlines stipulated for them. These costs could be heavy, designed to discourage borrowers from exceeding prescribed tenures.

Some digital leaders are also known to have sent messages to contacts of defaulters informing them of the debtor’s failure to repay their loans. This approach has been widely condemned. You may want to ascertain that the lender you intend to use doesn’t do this.

Rewards For Early Repayment

There could be rewards for early repayment as well, including loan discounts. One lending platform offers discounts of up to 90% for early repayments.

Final Words

There’s no shortage of loan apps. But not all of them will deliver the sort of service you want. If you’re seeking a digital lender that’s right for you, try to weigh them based on the criteria we’ve discussed here. Also, ensure that you’re able to repay their loan on time. Following these tips should make your experience with loan apps much smoother.