4 reasons why most loan defaulters are fraudsters

In Nigeria and Africa’s credit ecosystem, there’s one thing that stands out more than anything: people just don’t pay back loans. And it’s not for lack of funds, tough times, or unfortunate circumstances.

So, why don’t Nigerians pay their loans? It’s often because they simply don’t want to, and—here’s the thing—they know they can get away with it. Why? Because consequences here are as rare as a Monday morning without traffic.

It’s a free-for-all, and loan defaulters are having a field day. But let’s call a spade a spade— most loan defaulters aren’t just people going through “a rough patch.” Many are fraudsters in disguise, and before you argue, let’s break it down.

Who’s a fraudster? 

A fraudster is someone who takes what doesn’t belong to them using deceit, trickery, and a sprinkle of audacity. They don’t come at you with guns blazing like robbers—they come with all the right excuses and would even sign on all the dotted lines. 

Loan defaulters? They’re the smoothest fraudsters in the game. Why? Because they play on a system that’s soft on consequences. They take loans with no intention of paying back and act like nothing happened. Meanwhile, lenders are left scratching their heads, wondering why they didn’t see the signs.

Now, let’s not confuse these people with genuine cases of hardship. Sure, life happens.

But when someone borrows money knowing fully well you have zero intention of paying it back, they’ve crossed the line from borrower to fraudster. They’ve essentially told the lender, “Thanks for the free money!”—but in a more sophisticated, polite way.

And that’s the problem. By the time you realize what’s happened, they’ve vanished, leaving you with nothing but IOUs and bounced promises.

It’s time we stop sugarcoating this. Loan defaulters, in many cases, are fraudsters and here’s how they reveal themselves as such. 

1. Premeditated fraud with all the right paperwork

Some borrowers come armed with every document under the sun—ID, bank statements, maybe even a few photos of them smiling like a saint. On paper, they look perfect. But behind all that paperwork, they know one thing for sure: they’re never paying you back.

When someone takes out a loan with the full intention of dodging repayment from the get-go, it’s not just a case of “oops, I ran out of cash.” No, this is premeditated.

They’ve got their escape plan ready before the ink on the loan agreement is even dry. It’s like going to a restaurant, ordering a three-course meal, and sneaking out before the bill arrives.

What makes it worse is the audacity. They know the system well enough to fool it—because the system is built on trust. Lenders assume that if borrowers are handing over all the information about themselves, they’re serious about paying back, and that’s what defaulters exploit.

2. Premeditated fraud with false paperwork

These types of defaulters submit documents that are about as real as a Gucci bag from a bend down select stall at Yaba market.

It could be an altered bank statement, or a phone number, address or ID that belongs to someone else entirely. The point is, the paperwork is fake—and they know it.

This is classic fraud, plain and simple. Why? Because they’re securing money under false pretenses. They’re essentially pulling off a financial version of catfishing—convincing you they’re something they’re not to get what they want.

A free ride at the lender’s expense.

3. Loan defaulters who ghost with the goods

The Direct Debit system is one of a lender’s line of defense against loan defaults, and they rely heavily on it for timely repayments.

When a loan is approved, the borrower signs a direct debit mandate, authorizing the lender to withdraw a specified amount directly from their account on a set date. So, there’s no need to constantly follow up with a borrower or keep calling a number that’s probably fake or disconnected from service.

But loan defaulters have found a loophole. They give you genuine documents, real bank statements, and a profile that checks out in every way. They even have the money sitting pretty in their account.

Everything looks perfect, right? Wrong.

The beauty of this scam is in its subtlety. They don’t start out as obvious fraudsters. They had the money, but they made a deliberate choice to move it somewhere else when repayment was due.

4. Delulu borrowers who know, deep down, they can’t pay

Borrowing with the mindset of “God will provide” when you’ve exhausted all possible avenues—family, friends, even your local ajo group—isn’t faith; it’s recklessness. Throwing yourself into chronic debt without a way out is the kind of behavior that leads to fraud.

Daniel didn’t jump into the lions’ den hoping for a last-minute rescue; he was thrown in there. The same way it’s different when a borrower goes through unexpected emergencies and when a borrower knows deep down, they don’t stand a chance of paying you back.

For example, Seun earns $2000 per month and applies for a $500 loan with a 3 months tenure, which seems manageable since it’s just 25% of his income. But, he knows fully well, he will be flat broke in 3 months. In fact, he has already borrowed from several other people, and has nowhere to turn for help.

That, right there, is fraud.

Do these loan defaulters even feel sorry for the act?

They behave under the illusion that they are invincible, no one can catch them or hold them accountable. Is it any wonder when criminals get away with worse crimes?

What’s even more frustrating is when they’re confronted about their non repayment, they make statements like “Am I the only one who owes money?” or “Where did you even get your money from?” It’s as if they’re trying to turn the tables, accusing you of being the problem while they continue to evade their responsibilities. 

They even drag the government into it, claiming that since the government is in debt, they have no obligation to pay back their loans. It’s a classic case of “everybody’s doing it,” a desperate attempt to normalize their behavior.

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Nigeria needs to rip a page from Western countries’ book on dealing with loan defaulters

Western countries like the US, UK, Canada, Germany, etc. take loan defaults seriously. Nigeria and Africa could learn a thing or two from them.

Borrowers feel the brunt of defaulting in every aspect of their lives: seeking a job, renting an apartment, getting a credit card, getting future loans, even to the point of wage garnishments when the court orders the borrower to send a chunk of their paycheck to the lender.

There’s no escape.

If Nigeria and Africa could diligently enforce even one of these punishments, then there is yet hope for lenders to protect themselves against fraudsters and for good borrowers to get the credit they need.