Managing Mobile Phone Loans

I have noticed a proliferation of various loan services offered by companies through mobile phones. Major telecom companies also have their versions of these loan services. Additionally, there are numerous apps offering quick, easy loans without any form of security.

This development is generally welcome, as it has broadened access to credit for many people, especially those in the informal sector who would otherwise lack such access. However, I have also noticed a growing concern about people borrowing and then failing to pay. For instance, one of my employees is always switching phone lines. Whenever I am about to send him money, I first call him so he can advise me on which line to deposit the money. This is because he has several unpaid loans, and if I send him cash on those lines, it would be automatically recovered by the loan service provider.

I have also noticed cases of predatory lending by some of these service providers. Many of them are not licensed to operate and have very high interest rates. They also use unethical means to recover overdue loans. For instance, a friend of mine narrated an ordeal with one of these companies. She was in a tight spot and needed some quick cash. She managed to get 500k from one of those loan apps. The interest rate was exorbitant, and she failed to pay back on time. The loan company then started harassing her. They sent threatening messages, called her friends, employers, church members, and family to embarrass her, and trailed her to her workplace. Eventually, she paid off the cash but remains traumatized by the ordeal.

There is nothing wrong with borrowing, but you need to be careful. Consider the following before taking out these seemingly easy loans:

1. Ensure that you are dealing with legitimate service providers licensed by a relevant regulatory agency. This offers you some recourse when things turn sour.
2. Do some due diligence on the service provider. Quick online research will reveal any horror stories associated with the service provider you are considering.
3. Carefully read and understand the terms and conditions. For instance, you need to know the interest charged and other associated costs. You also need to understand the repayment schedules.
4. Find out about any privacy concerns. Many of these apps require access to your calling history and mobile money transactions to assess risk, loan limits, and access your contacts to follow up in case of defaults. When you accept terms and conditions, you are giving them full access to sensitive data on your phone.
5. Only borrow what you can easily pay back so you are not distressed.
6. Avoid borrowing from multiple platforms. These loans are just for emergencies and should not become a habit.
7. Pay back as promised; otherwise, these companies will make your life a living hell.
8. Consider alternative options for credit. Try to avoid these mobile loans if you can and explore other alternatives like a bank loan or a SACCO loan.

While mobile phone loans can provide a quick financial fix, they come with risks that necessitate careful consideration. By taking steps to ensure you're dealing with reputable providers and understanding the full scope of the agreement, you can protect yourself from potential pitfalls. Remember, the ease of obtaining a loan should not overshadow the importance of managing debt responsibly.