Finance

• Muna Tengi
• 5 Min Read
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How To Get Loans In Nigeria Without Collateral

In Nigeria, the need for financial assistance is a reality for many individuals and businesses. Whether it's to start a business, expand an existing one, pay for school fees, or meet personal emergencies, access to loans is often a necessary step. However, traditional banks in Nigeria typically require collateral to grant loans, making it difficult for many people who don’t own high-value assets to access funding.

In recent years, there has been a rise in alternative financial institutions and platforms that offer loans without requiring collateral. These institutions focus on creditworthiness, income history, and sometimes social capital, to determine a borrower’s eligibility. This guide explores various options and strategies for obtaining loans without collateral in Nigeria.

1. Microfinance Banks

Microfinance banks are one of the most accessible avenues for obtaining loans without collateral in Nigeria. These banks are designed to provide financial services to low-income earners, small businesses, and entrepreneurs who may not have the traditional collateral required by commercial banks.

How Microfinance Loans Work

Microfinance institutions assess loan applicants based on their credit history, business viability, or income potential. Instead of asking for collateral, they may require applicants to have a guarantor or a strong business plan. Some microfinance banks also offer group lending, where individuals in a group guarantee each other’s loans, thereby reducing the risk for the lender.

Examples of Microfinance Banks in Nigeria

• LAPO Microfinance Bank: LAPO (Lift Above Poverty Organization) offers loans to small business owners and individuals without requiring collateral. Applicants need to provide proof of their business or income-generating activity and often must have a guarantor.
• Accion Microfinance Bank: Known for its quick loan disbursement process, Accion also provides loans to small businesses and individuals without demanding collateral. Applicants must show their capacity to repay the loan through income evidence or business records.

2. Online Lending Platforms

Technology has revolutionized the lending industry in Nigeria, with several fintech companies providing quick access to loans without collateral. These online lending platforms use advanced algorithms to assess applicants' creditworthiness by analyzing their financial behavior, such as spending patterns, income, and bank transaction history.

Top Online Lending Platforms

A. Carbon (Formerly Paylater)

Carbon is a popular online platform that offers loans without collateral. The application process is straightforward and can be completed using their mobile app. Carbon considers factors such as your income, banking history, and transaction patterns to determine your loan eligibility.

• Loan Range: ₦1,500 – ₦1,000,000
• Requirements: Bank details, BVN (Bank Verification Number), phone number.
• Repayment Period: 15 – 90 days

B. FairMoney

FairMoney is another reputable online platform that provides instant loans without collateral. Borrowers can access loans for personal use or business purposes. The platform operates using a mobile app, and loans are disbursed into your bank account almost immediately upon approval.

• Loan Range: ₦1,000 – ₦500,000
• Requirements: Personal details, BVN, and proof of income.
• Repayment Period: 14 – 30 days

C. Branch

Branch is an international lending app that operates in Nigeria, offering loans with no need for collateral. It uses data from your mobile phone and bank transactions to evaluate your eligibility for a loan. The platform offers flexible repayment plans.

• Loan Range: ₦1,000 – ₦200,000
• Requirements: Smartphone, BVN, and transaction history.
• Repayment Period: 4 – 40 weeks

Benefits of Online Lending Platforms

• Speed: Loans are disbursed within hours or even minutes of application.
• No Collateral Required: Approval is based on personal data and financial behavior rather than physical assets.
• Convenience: Applications can be made from the comfort of your home via mobile apps.

Drawbacks

• Higher Interest Rates: Due to the unsecured nature of the loans, interest rates on online platforms tend to be higher than those offered by traditional banks.
• Short Tenure: Repayment periods are usually shorter, typically within a month, which may not suit long-term financial needs.

3. Cooperative Societies

Cooperative societies offer a more community-driven approach to borrowing money without collateral. Cooperatives are member-based financial institutions where individuals contribute funds and can access loans based on their savings or membership status.

How It Works

Cooperative societies in Nigeria operate on a savings-and-loan model. Members regularly contribute savings to the cooperative fund, and in turn, can request loans based on the amount they have saved or their membership status. While collateral is not required, cooperative societies may consider your membership track record, financial discipline, and savings history.

Types of Cooperative Loans

• Personal Loans: For meeting personal financial needs like school fees or medical bills.
• Business Loans: For small business owners seeking capital to grow their ventures.

Benefits

• Lower Interest Rates: Cooperative loans usually come with lower interest rates compared to commercial banks.
• No Collateral: Loans are provided based on your savings or contributions to the society, and in some cases, your good standing within the cooperative.

4. Government Loan Schemes

The Nigerian government has initiated several loan schemes aimed at empowering entrepreneurs, students, and individuals without requiring collateral. These programs are designed to encourage entrepreneurship, boost economic development, and reduce unemployment.

Notable Government Loan Schemes

A. TraderMoni

TraderMoni is a government-backed loan initiative that provides small loans to petty traders, artisans, and small business owners. The program is designed to empower low-income individuals and requires no collateral.

• Loan Range: ₦10,000 – ₦100,000
• Requirements: No collateral required, but beneficiaries must be registered under a recognized market association or trade union.

B. NIRSAL Microfinance Bank (AGSMEIS Loan)

The Agri-Business Small and Medium Enterprises Investment Scheme (AGSMEIS) is a government initiative aimed at providing loans to entrepreneurs without collateral. Applicants must undergo training through an accredited Entrepreneurship Development Institution (EDI) before they can qualify for the loan.

• Loan Range: Up to ₦10 million
• Requirements: Business plan and completion of entrepreneurship training.

C. NYIF (Nigeria Youth Investment Fund)

NYIF provides loans to Nigerian youths aged between 18 and 35 who are running or looking to start a business. No collateral is required for loans under this scheme.

• Loan Range: ₦250,000 – ₦3 million
• Requirements: Applicants must have a viable business idea and meet the age requirement.

5. Peer-to-Peer (P2P) Lending Platforms

P2P lending platforms connect borrowers directly with investors or individuals who are willing to lend money without requiring collateral. These platforms act as intermediaries, providing a marketplace where loans can be negotiated between borrowers and lenders.

Popular P2P Lending Platforms in Nigeria

• KiaKia: A leading P2P platform that offers quick access to loans for personal or business use without collateral. The platform matches you with a lender based on your credit profile.
• FINT: Similar to KiaKia, FINT connects borrowers with individuals or institutions willing to lend without demanding collateral.

Conclusion

In Nigeria, there are multiple avenues to explore if you're looking for a loan without collateral. From microfinance banks and online lending platforms to cooperative societies and government schemes, options are available for different financial needs. However, it's essential to research each option thoroughly, taking note of interest rates, repayment terms, and the credibility of the lending institution.

With these alternatives, individuals and small businesses can access the necessary funds to grow or meet financial obligations without the burden of providing physical assets as collateral.