Lending

Word on the street: Loans are bad! Maybe not

Last updated January 29, 2026

Dara

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The Nigerian’s perception of loans can be likened to the human’s fear of wild animals; scary! Okay, maybe that analogy is layered a little too thick, but you must agree that Nigerians hate loans which is ironic because when they eventually get them, they never payback.

To the crux of the matter, why do loans have such a bad rep in Nigeria? Why do people liken loans to entrapment? Let’s dive in and find out why.

Lack of financial enlightenment

The average Nigerian doesn’t know much about personal finances, financial products, etc, and the worst part is we ain’t even sure they want to know. A 2019 article from Geopoll suggests that only 16% of Nigerian adults have the financial literacy to carry out basic financial tasks like opening an account. Without the basic knowledge of finances and loans, Nigerians misuse loans and it backfires, which reinforces the beliefs that loans are bad.

It’s a form of slavery

Nigerians swear that once you have borrowed money, you have sold your soul to the lender. To make it worse, the lender would look at your bank statement, ask all manner of questions, some very embarrassing. And if you dare not pay back on time, their goons can sweep on you any time to take your belongings or any other collaterals you have pledged.

To make it worse, religious leaders preaching prosperity have made it clear that the hand that gives would always be on top, and the borrower would always be the slave of the lender. Oh, by the way, that’s even what the bible says in Proverbs 22:7!

Fear of high-interest rates

Take a look at the interest rates charged by app lenders, and you would have no options to shake your head in bewilderment. The average interest rate is about 20% per month which comes to 240% per year. That is what scares Nigerians because it’s so easy to fall down this rabbit hole of expensive loans.

And if the devil makes you delay your payment, the penal charges layered on the outstanding balance can balloon so fast that it becomes more than the original loan amount itself.

Fear of what people will say

As highly communal people, we are easily perturbed by the opinion of the next person on issues that affect only our lives and which only we should be having a say in. Tying back to the first point about financial literacy in Nigeria being at 16% it makes absolutely no sense to try to get an opinion on these issues from the next person, because they too may not be well informed.

So, who should you ask? Chances are that if you are reading this article, you are already doing your own research, which is the major step to financial inclusion -personal research.

But loans can be good, can’t they?

You would agree that these reasons make absolutely no sense, but if we say loans are not bad when then are they good?

They ease your spending gap.

Loans can mean the difference between your being able to have a better life or not. Loans can mean the difference between life and death. The funding from loans allows you to deal with life’s emergencies and embarrassments before your next cashflow comes in.

Improve your standard of living

Loans can allow you to have access to the good things of life (after all, what are we living for) like cars (with a car loan), an apartment (with mortgages), or electronics and furnishing (asset finance). A good standard of living provides a settled mind that makes living and working worth the effort. Instead of saving forever, a loan can hasten the arrival of the necessities of life.

Provide needed funding for your small business

Entrepreneurs go through hell today trying to figure out a way to source capital for their businesses. This pressure can be eased by getting medium to long-term loans that cater to SMEs.

Business loans have much more flexible payment structures, and they can be tax-deductible. When you have capital, you have enough leeway to experiment, and innovate, which in turn, would bring immense proceeds to your business.

The best part is, business loans give you full autonomy over your business unlike if you had to take equity.

Why we believe in loans at Lendsqr

At Lendsqr, we believe loans are the oil on which economies run, they also do change lives; for good! Because we are passionate about loans and the lending ecosystem in Nigeria, we are providing technologies for digital lenders to provide loans cheaper, faster, and better.

Loans may have a bad name, many times, decidedly so. But access to loans does so much good that it’s almost impossible for anyone to reach their potentials without help from some sort of loan.

No need to agonize about the evil of loans; make some good with it. And while you are at it, you may want to read up on how to restructure your loans to cater to struggling borrowers.