Everything changed with the introduction of loan apps around 2016. With these mobile apps, one could get a loan within minutes, and the advantage is that it does not require any form of collateral. Due to this fascinating development, many have jumped on the bandwagon and these apps from various service providers have become household names today.
In life, everything that has a good side tends to have a bad side and these loan apps are no slouch. This has been in the news lately as these apps have been accused of being cruel in the way they deal with defaulting customers, calling various people in defaulters’ phone contact and also going so far as to use the picture of defaulters to post obituaries online or a wanted criminal tag.
Privacy groups have denounced this method employed by lending apps and called on the government and other regulators to put an end to this inhumane practice. This is undoubtedly completely wrong, but can lending apps really be to blame for this?
The first and only reason why customers of these loan apps have to experience such horror is that they have defaulted on their payment and the truth is that it cannot be handled with kid gloves.
Traditionally, when a loan is granted, there is a backup guarantee in case the person defaults. In this way, the financial institution does not need to chase the defaulter. In this case, loan applications don’t ask for collateral, meaning they have nothing to fall back on if a defaulter doesn’t pay. So they have to resort to some kind of cruel method that pressures the defaulter to pay, otherwise the loan application providers will run out of business.
Indeed, they will be out of business as Nigeria is not one of the most reliable places in the world when it comes to money management. Many take these loans thinking it’s free money and can get away with not repaying. Why then wouldn’t the loan application come and drive these people away?
There are some who, for a valid reason that is not their fault, are not in default, but these loan applications will hear nothing and continue to harass them. It should be noted that this service is designed so that payment is made no later than the due date. It’s not their problem, we’re going through a challenge. This will only complicate things for a structured system for quick payout, anything other than that is a looming problem. It’s no surprise that the loans target those who have a guaranteed, stable stream of income reflected in their bank accounts, rather than someone the opposite.
As long as one wants to take out a loan from these easily accessible apps, they should never be in default. Before taking out a loan, they need to structure how they intend to repay and where the funding will come from. It must be considered critically, otherwise the ugly will come to visit. If they know they cannot meet the payment, they should refrain from taking the loan, no matter the temptation. Yes, temptation, because more and more loan applications are appearing at a rapid pace.
This is a good development as more funding is made available, but a bad thing in itself because of what is happening at the other end. If one wishes to avoid such a traumatic disaster, the job is simple and left in the hands of whoever takes the loan.