4 Institutions Not Good To Access Loans From

Loans are crucial for survival, since it is unlikely anyone would go for it for the fun of it. Finding the right source to access loans is very necessary because it could determine your ability to pay without default. There are several institutions and/or that places that offer loans. Choosing a preferred institution could be difficult most times due to many factors. These factors could be how early the loans are being released as a primary factor, interest rates, which are mostly complicated to understand by loan applicants, documents required etc. The four (4) institutions not good to access loans from are;

1. Money Lenders: If you never access loans from money lenders, ask around the interest they charge and compare them with traditional banks. It is ridiculous to learn that some money lenders charge as high as 25% for a month on the original amount taken. Money lenders also mostly work with compound interest and so the more the applicants default, the more their debt burden increases,

2. Micro-Finance Companies: Micro-Finance Companies are a bit closer to money lenders in terms of the interest they charge. They also charge mostly based on compound interest. Even though Micro-Finance Companies are formalized institutions, their non-performing loans (loans that can not be paid) are usually higher and therefore are factored into the interest of those paying the loans. Comparatively, while the average non-performing loans for the financial sector in February 2021 is 15.3%, that of the Micro-Finance subsector would be more.

3. Mobile Quick Money: Imagine walking to a bank and you are told you will be paying 6.9% a month on any amount taken. That is about Ghc7 for every Ghc100 taken. The 6.9% multiple by 12 months is 82.8% for the year if an individual repeats the taking of the loan every month. Taking compounding into account, that could take the annual interest to over 100%.

4. Money lending apps in playstores, like Sika purse, Fido etc: What would you do if your friends or enemies were asked to encourage you to pay your default loan? Yes, that is what some of the online money lending apps do. They would send messages to everyone of their clients in their database informing them to encourage defaulters to pay. The question is, what made the individual default? The level of interest charged is a major factor. Very high interest and compounded as well.

Taking a loan with an interest above a certain interest would definitely be an albatross around the neck of the individual. To avoid harassment and being in debt for life, even if the debt is forgiven, individuals must prepare themselves for emergencies since it is such emergencies that push them to access those kinds of loans. Even though some take such loans out of ignorance of the opportunities available to them

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