Payday loan in Nigeria. Sometimes you find yourself in a situation where unexpected or needed expenses may arise and exceed your salary or savings, despite your careful budgeting.
It’s at times like these when you’re strapped for cash and only need a little extra cash to get you through to pay day that you may be tempted to take out a payday loan in Nigeria because it can help fill the financial gap.
Payday loan: Definition
A Payday loan is a salary-based short-term loans designed to give you quick access to money when you need that little bit extra to get through to the end of the month.
It can be used to cover medical bills, car repair, plan for your weeding or make some home improvements etc.
These loans are usually repaid within two weeks or on your next payday, at which point the repayment amount is automatically deducted from your account.
But the truth is that payday loans aren’t the convenient and low-cost solutions that they often appear to be.
How a Payday loan in Nigeria Works
Payday loans works in they following ways:
1. Look for the right lender
There are some financial institutions in Nigeria that offers payday loans to individuals such as banks, online lenders, micro-finance, government, peer-to-peer and mortgage lenders.
Search for they right one that will give you loans with much lower interests or you can bank on loansnigeria to help connect you with the best lenders.
2. Obtain a loan
Once you have identify the right lender, obtain a payday loan application form. Different countries have different laws surrounding payday loans, limiting how much you can borrow.
However, to complete a loan application, you will be required to provide your eligibility before granting you loan.
3. High interest rates
Payday lenders often base their loan principle on a percentage of the borrowers predicted short-term income. Other factors influencing your interest rates and fees solely depends on your credit score.
A borrower with excellent credit history can get a loan with an annual percentage rate (APR) of 3% or less. By contrast, someone with bad credit history might be required to pay 25% or more.
If you have a bad credit history, worry not, here’s how you can get a loan with bad credit score and pay lower interest rates.
4. Shorter loan tenor
Once given a Payday loan, you are required to pay-back in 14 days time or on your next payday usually in 30days time.
5. Easy repayment
When given a loan, a borrower will be required to hand over a signed cheque, account details or any other documents that gives the lender permission to take your loan repayment balance out of your bank account.
On your loans due date, The lender will now decides either to cash-out the check or automatically withdraws the money from your bank account.
Please note: don’t borrow any amount of money you know you can’t afford to repay. Even if you do, don’t hesitate to contact the lender before your loans due date, negotiate with him for renewal.
Sometimes people do ask, what are the basic requirements to qualify for a payday loan in Nigeria? If you are among those that are furious to know, here is my answer.
Things Needed Before Getting a Payday Loans in Nigeria
Here are a list of what you are expected to provide, when applying for a payday loans:
• Age limits
Before you apply for a loan, you must not be under the age of 20 or above 60 years. If you are 18 years or above you might be allowed to apply for a loan based on the lender and your country of residence.
• Valid means of identification
In order to prove your identity, you must provide your government issued identity card, simply known as ID card. Or any order valid means of identification.
• Salary earner/Self employed
Some money lenders will only consider your application if you are permanently employed and have been working at a place of employment for up to 3months.
Although some lenders only requires you to have a regular source of income.
To prove that you are a salary earner, you are required to provide the last 3 – 6 months bank statement of account to check the inflow and outflow of funds and to help determine your loan offers and interest rate.
• Bank Details
Before the grant you a payday loan, you have to provide your bank details for loans disbursement and also for easy repayment of loans.
• Credit report
Lastly but not so important is your credit report. Your credit history is use to determine the amount of fund’s you can borrow and the interest rates you shall pay.
If you have a bad credit report, no lender will give you loan, and even if they do, it comes with a higher interest rates and smaller loan amount.
Can i get a Payday loans with bad credit score in Nigeria?
The answer is yes. You can get a Payday loans in nigeria regardless of your credit score.
But one thing to note is that, getting payday loans comes with higher interest rates and shorter loan limits.
But it is advisable to build up your credit score in order to get higher amount with low interest rates. Check out this guide for more tips on how to build your bad credit score.
Who uses payday loans in Nigeria the most?
Payday loans have become increasingly popular in recent years as a way of individuals raising funds.
A loan of this type is typically needed for something short-term, but with bank loans and other kinds of credit harder to come by, talking a Payday loans is a most.
According to reports, more than 100 million Africans take out payday loans each year especially nigerians.
While more than 15 million Americans and those in other parts of the world do take out payday loans at different places. Here are a list of those that uses payday loans in nigeria:
More than half of all payday loan users worldwide are between 25 – 49 years old. About 14% – 15% of people in their 20s, and 20% – 21% of people in their 30s, have used this type of loan in the last 5 – 10 years.
2. Low income earners
The median household income earners make up 75% of payday borrowers, making them 65% more likely to have a payday loan than households making more.
The main point here is that anyone can be a victim of predatory lending through payday loans if care is not taken.
Base on statistics, 58% of those who use payday loans rent their homes than those who own their homes.
4. No four-year college degree
85% of payday loan borrowers did not have a four-year college degree, while 15% of them have a four-year college degree. Beyond that, there isn’t much difference based on level of education.
5. Separated and divorce individuals
In Nigeria, about 13 – 15% of adults are separated and divorced. However, this group makes up 25% of all payday loan users.
Parents are more likely to use payday loans than those without children.
Top reasons for needing a payday loans in Nigeria
1. Emergency situations
With our ever-growing needs and the tougher economy, we all know that our salaries might not sustain us until exactly a month later.
Sometimes you need a Payday loan to ensure you sort out that emergency needs. Emergency needs can be any of they following:
• Medical issues
Medical issues affect almost every individuals at some point in their lives. People may suddenly develop a medical problem and once that happens, they tends to look for a payday loan to take care of their heath.
• Car repairs
Nothing is more frustrating than sitting on the side of the road with a car problem and no cash-at-hand to fix your car. It can hinders you from arriving early at work or meetings.
A wedding is a big life event, and you may start planning for your wedding needs. Due to tougher economy, you realized that the cost is actually more higher than you expected.
In the to avoid being embarrassed at your fast approaching wedding date, seeking for a payday loan will be the only available alternatives to avoid being embarrassed at your wedding day.
2. Loans to pay overdraft
Particularly, when you check the rate of interest that can be involved.
3. Loans for debt consolidation
Debt consolidation is a form of debt refinancing that entails out one loan to pay off another. There is no doubt that many people seek out for a Payday loans to cancel out another debt.
The loan might be used to pay off a loan from another company, or it could be a debt from another source such as a credit card.
4. Loans for Christmas period
Towards the end of the year comes the holidays season, a time of relaxation, visiting with family and friends and gift-giving.
Some parents become desperate at this period of the year as the struggle to buy gifts for their children. Buying gifts can be expensive and a potential budget-buster.
If you want to buy gifts for your children but don’t have enough cash, you might be tempted to use a payday loan to make the difference.
You get the money you need for the Christmas period, and then you can pay-back what you owe in the new year, hopefully, after you have received a pension, or have been paid at work.
How to apply for a Payday loan in Nigeria
To get a payday loan, follow these steps:
1. Look for the right lenders
Looking for the right lender that will give you loan with low collateral should be your first objective, contact up to two lenders, compare and contrast all their loan term’s and conditions.
Look for the right one that offers lower interest rates. If you are having difficulties in contacting one, then you can bank on financewithdes to help get take the frustration out of selecting the right lenders for your needs.
2. Apply for a Payday loan
Once you have compared several companies to each other, choose the one that you think is most reliable and click on “apply” to proceed in your loan application form.
3. Fill out a payday loan application form
Fill out a form by such as; name, phone number, state, bank details etc. Provide/upload your requirements, choose your loans amount and set it’s date and repayment channels.
Please note: when filling out your loans application form, register with the phone number linked to your account.
4. Recheck it’s interest rates
Make sure to read over the lenders term’s and conditions and search for your interest rates. Make sure the interest rates you see correspond with the one that was previously shown to you at the time of loan application.
5. Loan disbursement
6. Repay on time
Try to pay-back your loan balance before it’s due date, or at when due. Usually in 14 days time or on your next payday usually in 30 days time.
Pay up your loans to avoid being penalize. Such as being reported to the national credit authorities. Which might lead to you developing a bad credit score.
Payday loan interest rate
Payday loan interest rates ranges from 29.1% – 54.1% per month. With an annual percentage rate (APR) of 350% – 650% per annum.
Base on a borrowers credit score and repayment history. To pay-back in two weeks time, or at your next payday usually in 30days time.
Payday loan limits
Different lenders has its own limits, but in Nigeria, you are expected to borrow from N10,000 – N200,000 for first timers. If you repay on time, your loan limits increases to N500,000 with lower interest rates.
How to pay-back your payday loans in Nigeria
It’s your loan approaching it’s due date? Or at when due? Quickly make sure that your account is well funded because payday lenders will automatically deducts your loan balance from your account. Or cash-it-out from the cheque note you submitted at the time of your loan application.
Quick reminder: Don’t be confused, remember i said earlier that when given a loan, a borrower will be required to hand over a signed cheque, account details or any other documents that gives the lender permission to take your loan repayment balance out of your bank account.
What happens when you can’t repay a Payday loan in Nigeria
If you found yourself at risk of defaulting on a payday loan due to some financial difficulties, try to contact or write a letter to your lender to explain your situation and attempt to negotiate your payment terms.
Otherwise, when a lender tries to collect your debt and fails. He will continue to try withdrawing from your bank account, using the information you provided.
If the money isn’t there, it can continue trying, sometimes breaking up the loan into smaller parts.
This act will land you in big trouble with your bank as the will charge you an overdraft fees. You might also be reported to a debt collectors which could file a civil lawsuit.
If the lawsuit is successful, the resulting court judgement against you remains public for seven years and can lead to seizure of your assets or garnishment of your wages.
Which creates a negative entry on your credit file that can make it difficult to borrow money in the future.
The Pros & Cons of Payday loans in Nigeria
Here are the advantages and disadvantages of payday loan:
Payday loan offers quick loans application form
- Payday loans offers you quick access to fund’s unlike other loan lenders
- You can apply for payday loan in Nigeria regardless of your credit score
- Payday loans in Nigeria is easy, reliable and extremely convenient.
- Payday loan in Nigeria offers higher interest on fees
- They borrowers are easily Tangled in the debt cycle, and it is hard to take oneself out of it
- Most payday loans in Nigeria offers shorter repayment term
- Less transparency and consumers protection
- They can sue you for the money you owe.
Payday loan in Nigeria are mainly use for short time goal. But it’s disadvantages is that it comes with higher interest rates and shorter repayment tenor unlike seeking for a personal loans.
Try to borrow only what you can afford to repay. If an unforeseen circumstances that can hinder you not to pay off your payday loans on it’s due date. Please try to contact the lender and negotiate with him to help prolonge your repayment tenor