There are different reasons why people take out loans. It could be in the event of an emergency and life needs to be saved. It could be for a business you are sure will bring profit and not some kind of loan for crypto investment, which is quite unpredictable. Some people also take bad loans, maybe for party sake, a total change of wardrobe, or the kind I took the last time. However,the best is to take loans that could be considered good.
I have experienced both the good and the bad loans, and in my bad loans, I learned from the experience. I used to be so scared of taking a loan in the past due to some unpleasant stories I had heard about it. I remember rejecting a loan offer from a friend many years ago when I was still in university out of fear of repayment. It was actually for a business I would have benefited from, but fear couldn't allow me to get into the loan. Then, by the time it felt like I was conquering my fear, I took a bad loan out of high expectations for profit without any form of business analysis. Before I share my bad loan experience with you, let me quickly tell you about a loan I collected one time that I considered a good loan.
An issue came up unexpectedly in my home a few years ago that threatened the life of my husband. There was an urgent need for a huge amount of money to save his life. Bad enough, he didn't have such money at the time, and the only option was to borrow within three hours. We made calls, reaching out to friends, without success. I understand their reasons because the request was quite impromptu. My last option was to get a loan from GTBANK, my first loan ever. I did, and within 5 minutes, the money was credited to my account with a monthly repayment that lasted for 2 years. Because I used my salary to pay it back, it was quite a smooth repayment, and I love the way they spread the payment for me. They will take part of their loan from my salary while I receive the balance. The bank really came through for me when I needed such an emergency loan.
Image taken and edited in canva
Unto my bad loan, I returned to the market one day and was pissed off about how things are unnecessarily expensive over here in my part of Lagos State, Nigeria. I quickly picked up my phone and called my brother, who resides in the north. Food items are being brought down to Lagos from the north, so food is usually much more affordable over there. I inquired about the cost of yam and some other grains, and the difference was big. I quickly thought of making a business deal with it, but I didn't have money. I told my brother to loan me the money while I pay it back after sales. What I didn't calculate were the expenses surrounding the small quantity of goods I bought. I was only carried away by the excitement of the possible profit I would make. I remember my brother telling me to calm down and think things through, but I ignored the idea until the goods came with an exorbitant transportation fee. Same aspect I ignored prior to bringing the goods. It would have been better if I ordered large quantities.
Most people who order from the north buy in large quantities, and making a profit becomes possible; however, I didn't consider such. My people, selling the goods became a trouble. If I sell them to make a profit, then my price will even be higher than those selling here in Lagos. This was when I knew that I had messed up completely, and knowing that the capital was loaned gave me sleepless nights. It was a big loss with that uncalculated business, which took me a longer time to pay back the loan. My saving grace was that the loan this time wasn't from the bank or this loan app but from my brother, who exercised patience with me until I was able to pay it back.
This experience simply taught me to properly analyze every factor surrounding a particular business before getting into it or taking a loan to start off.
My response to the #hivelearners contest on the topic titled, The Bad Loan