How to read the terms of any loan before you accept it

Before you tap "accept" on a loan, you are making a legal and financial promise. Many people skip the terms because they are long, and then face surprises. You do not need to be a lawyer. You only need to find eight key facts.

The eight points

1. Amount you receive. Is it the full amount, or is a fee deducted first?
2. Total amount to repay. Look for the figure in naira, not just a percentage.
3. Interest method. Is it flat or reducing balance? How often is interest charged?
4. Repayment date or schedule. When is each payment due, and how can you pay?
5. Fees. Processing, insurance, service or collection fees.
6. Late payment penalties. What happens if you miss a date by a day or a week?
7. Early repayment. Can you pay sooner, and does it lower the cost?
8. What the lender can do if you do not pay. For example, report to a credit bureau, charge penalties or contact people you named.

Do the arithmetic yourself

Take the total repayment and subtract the amount you actually receive. The difference is your real cost of borrowing. Divide it by the amount received and by the number of months to see roughly how much you pay per month. If the number surprises you, ask questions.

Verify the lender

Check that the lender is registered and has a physical address and working customer support. Search for the name together with words like "complaints" or "reviews". Be wary of lenders who contact you first, rush you or ask for upfront payment to "release" a loan.

Protect your information

Be careful about the permissions a loan app requests. It should not need access to your photos or all your contacts to assess your application. Share only what is necessary and keep your PIN and OTP private.

Keep a copy

Save or screenshot the terms and the repayment schedule. If there is a disagreement, you will have proof of what was agreed.

Ask before you sign

If anything is unclear, ask the lender to explain in simple words. A good lender will not mind. A lender that avoids questions is a warning sign.

Borrow with a plan

Never borrow just because it is easy. Decide how the money will earn or save more than the loan costs, and write down exactly how you will repay it.

Written by the EarnNaija team at EarnNaija Digital Technologies. Tips are general guidance, not financial or legal advice.

This article is general information, not financial or legal advice. Earnings are never guaranteed. See our fees page for the exact costs.