Bank loans are so easy to get nowadays. Bank loan marketers are as frequently seen on the street as coca cola hawkers. Many mobile applications have been developed basically to bring bank loans as close to you and easy to obtain as it can possibly get. In fact, most banks have up to 50% of their assets in loans.
Despite these shows put up by banks, I’d advise that you take a break before signing those papers. Consider critically that which you’re taking the loan for, whether it is one through which you can gain back the loan at least one and a half times over.
Now, let’s consider some of the clients I worked with in the last three years.
Mr. D approached X Bank for a 5 Million Naira car loan and Mr. O took a 35 Million Naira loan to build a house for himself from Y Bank. These people felt the need to get external funds to better their lives and they went for it. They signed those papers, without really understanding the implications of those bulky terms and conditions.
In Mr. D’s case, the bank charged 29% interest rate on the principal sum and 2% penal rate in case of default, but in Mr. O’s case, the bank charged 31% interest rate on the principal sum and 2% penal rate in case of default.
Mr. D and Mr. O quickly ran into a snag with the banks. They of course applied the money they borrowed into what it was meant for. However, they couldn’t recoup the capital, let alone its interest from their project. They thought they would be able to pay from their salaries, but the recession only got worse and the banks didn’t care. After about 3 years, Mr. D had owed 7.5 Million Naira and Mr. O had owed 43 Million Naira; with interest still accruing.
Mr. D’s loan was secured by the car he bought so when he could no longer pay as and when due, the bank took his car but he still had to offset the balance since interest had already accrued. At the end of the day, we opted for out-of-court settlement and negotiated the interest sum to 1 Million Naira. As for Mr. O, he was lucky: the bank sold the house, got back the principal and the interest, and gave him about 25 Thousand Naira balance.
Don’t get it twisted, the events briefly relayed in the previous paragraph lasted about 5 years in court.
People tend to run to their lawyers when they get hitched. Don’t be like those people.
A free advice from Your Lawyer Friend is that – don’t take a loan for personal projects if you don’t receive salary or income from which you can pay back both principal and interest in one year. Come to think of it, if you received that kind of salary, why take a loan at all? Why not save? Also, remember you could lose your job.
And if you’re taking a loan to fund a lucrative business, ensure you contact your lawyer(s) to read and interpret those terms and conditions for you and help you figure out ditches covered with roses.
Wisdom is the principal thing, in all your gettings, get understanding. There are people who continuously invest their lives into getting understanding of ambiguous, tricky expressions in documents and into knowing the nearest foreseeable future; they are called lawyers. Talk to them.