When in dire need of financial help at very short notice, getting a loan is usually one of the ways of doing so. Back in the day, getting a loan required you to meet up with a money lender or walk into a bank to begin the process. Even so, one has to provide collateral that is at least equivalent in value to the loan amount before banks will even grant you one.
The digital age has opened many doors of possibilities including channels to get quick and easy loans. Many money online lending services have sprung up, including online banking, offering easy and fast loans to individuals. You can apply for a loan right from the comfort of your home without having to walk into a bank or having to provide collateral.
However, what would have been a happy story now has some sad endings as some people have made it a habit to borrow and not pay back. This has brought about stories of loan apps harassing people and hence the question is loan apps can sue you?
Can loan apps sue you?
A legitimate loan app can sue you if you default on paying back your loan. Many loan apps are not legal, approved, or regulated by the Central Bank of Nigeria. They are operating against the directives of the federal government when it comes to loans, and hence cannot sue anyone.
Loan apps taking people to court is not a usual occurrence as loan apps usually opt to use arbitration to resolve this kind of dispute diplomatically rather than a court option. Regardless, they still have the right to sue. The following conditions have to be in place before a loan app can sue
- First, as mentioned earlier, it has to be a legitimate loan company, approved and regulated by the government.
- Loan Agreement Terms. During the process of applying for a loan online, a list of the lender’s terms and conditions is usually presented before you. This contains the terms upon which the loan is being given. Conditions such as the interest rate of the loan, the repayment schedule, penalties for late payment, and the means of retrieval and right of the lender when there is a default to the agreed terms.
Consequences of not paying online loan
Not paying back an online loan has consequences. It is never a good idea to borrow and not pay back, regardless of whether the lender is a legitimate loan company or not. Defaulting to pay back your loan can lead to different actions, even going to jail.
When you default on paying back your loan, the loan company tries different means to recover their money. The common one is the use of arbitration clauses. This is where you and the loan company agree to bring in an impartial third party whose decisions you both agree to as stated in the terms and conditions you agreed to when applying for the loan. These debt collection agencies are usually the ones that call frequently to try and get a defaulter to pay back the loan collected.
- Possible jail time
A legitimate loan company that has exhausted all options to get you to pay back the collected loan, can sue you. If you fail to repay your loan on time, the legitimate loan apps in Nigeria have the right to take legal action against you. They can sue you for breaching the loan agreement and you may end up facing legal consequences, such as being sent to jail.
- Negative credit score
Additionally, not meeting your loan repayment obligations can negatively impact your credit score. Your Bank Verification Number (BVN) will be reported to the Credit Bureau, which will result in a decrease in your creditworthiness disqualifying you from receiving any future loans from other lenders. Therefore, it is important to ensure timely repayment of loans to avoid these potential disadvantages.
- Increased debt
When you default on a loan. There is usually a grace period at the end of which you start incurring extra charges as the penalty for not paying on time. Most online loans come with high-interest rates, and many impose additional fees for late payments or loan extensions. When you miss payments or fail to repay the loan as agreed, your debt can quickly spiral out of control due to the compounding interest and fees. Some loan apps would increase your penalty surcharge as high as 20% every time you don’t repay. Little wonder why a N20,000 loan turns into a N100,000 to be repaid.
- Embarrassment
Illegitimate loan apps or loan sharks take the case of arbitration too far. Defaulters have complained that they have been threatened with different messages including sending defamatory messages to their contacts on WhatsApp and SMS to let them know that you are a fraudster and on the run with company money, and the general public is hereby advised. This form of embarrassment is one of the prices you pay when you fail to pay back your online loan.
- Stress
Lastly, not paying back your loan can put you under both emotional and social stress. Loan interests and fees accumulating every day, coupled with maybe calls from arbitrators daily is not an exciting thing to experience.
Conclusion
Before you go ahead to get a loan, always take time to read and understand the terms and conditions outlined by the lender if it is something you are okay with. If not, you can try to renegotiate times if it is possible to do so. This will help you to avoid dealing with any negative consequences of defaulting.
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