Loan services have been around from time immemorial. Loans play a huge role in stimulating the economy during times of economic downturn. But more importantly, it has become a channel for young people to source for necessary funds.
In Nigeria, the age requirement for processing a loan stands at the legal age – 18. While various economic factors influence how loans are requested, granted, and repaid, the essential purpose remains the same — support.
Here are some of the ways young people are taking advantage of loan services.
1. Starting a small scale business
The current economic situation has awakened the entrepreneurial spirits of many young people. To tap into their talents, they seek support through loans from banks to support their dreams of owning their businesses. PwC reported that in Nigeria, SMEs contribute 48% of the national GDP, account for 96% of businesses and 84% of employment.
2. Payment of bills
Sometimes, events don’t go as planned, as with the issue of delayed salary payments. Some companies in Nigeria have not paid salaries in months due to plummeting sales caused by inflation, COVID-19 complications, a sad culture of non-payment of remuneration in some sectors etc. How do the employees in these firms survive?
In such cases, young employees take advantage of low-interest loans to offset their monthly bills pending their monthly remuneration.
3. Medical emergencies:
You’ll be lucky to have an employer who includes you in a health insurance plan. In some cases, employers don’t cover workers’ health insurance. In instances where employers pay for these health insurance, the plans are limited. In such bleak cases, especially when a health emergency arises, loans are the best options to bail young people out, fast.
4. Financing of weddings
Weddings are memorable events for couples and their families, but often, no one sees what goes behind the scene in terms of the budget.
The truth is, it can be a burden, especially for young couples who are just starting in life. With low-interest rates tied to loans, young couples are now taking advantage of this channel to finance that one special day in their lives.
5. Paying for an apartment
Everyone has been here, especially when it’s a case of a new apartment that requires buying items for interior decoration. Market prices change all the time, and the current budget might not cover this extra cost. That’s where bank loans come in, and young people aren’t shy about taking advantage of it, even if they are taking out a loan to prove how independent they are.
6. Buying a car
Most times, some car dealers’ approach with a payment plan can stretch out into months. While this sounds fantastic, the cumulative sum paid back on the car sees the buyer paying about 15 to 20% more than the original price. Bank loans offered on banking apps like Wema Bank’s ALAT are low or negotiable, giving the loanee a better chance at saving more money.
These are just a few ways young people are making the best out of loan services. But unlike traditional loan application processes that are tedious, the loans from digital apps like ALAT offers unmatched ease and accessibility to loan services.
According to Ayodele, a banker living in Lagos who uses the ALAT app and accesses the loan feature, “getting the loan granted was not a big deal. All that I needed to input was my place of work, statement of account, and all other vital information.”
He continues: “Currently, I cannot count how many times I have collected a loan. If I need a certain amount, I apply and pay back at the end of the month.”
At each point Ogunkele applies for and receives a loan, he has a project or two to attend to. The last time he collected a loan, he channeled it into his part-time job as a photographer. He received the sum of N500,000 at an interest rate of 2%. “One of the times I used the loan was when I needed it to upgrade my camera for my ‘side hustle’. So I took a loan to add to what I have to get a new camera – it’s a bit expensive.”
“The payment model was quite flexible. My payment plan was based on my predicted return on the business. So it was easier to pay back the loan,” he concluded.
While Ogunkele is enjoying a stress-free life, not everyone has had the same experience, especially with traditional loaning systems. Francisca Emeka, a phone accessories trader, collected a loan of N300,000 at the interest rate of 10% from a money lender to augment her business. When she couldn’t meet up with payment a day later than the agreed-upon date, she was charged double of her interest on an already steep interest rate.
“It took so long to gain approval for the loan. That alone disrupted my initial plans. And when I eventually got it approved, prices on food had spiked. I got what I could afford, but due to the dear price, I couldn’t sell my goods as quickly as I had hope,” she lamented.
“If I pay off my loan and the interest accrued, it is as good as not collecting it in the first place. I wished I had a better option presented sooner.”
Young people continue to search for ways to assist with the challenges of ‘adulting’ and finances, loans are shaping up to be one of the easier methods to do this.