Kwaba Blog

Are loans bad? The Pros and Cons of Getting a Loan

When you hear the word loan, what thoughts come to mind? For some, they associate loans with debt and believe everything related to it is negative, while others see loans in a positive light and look at it as a helping hand. These mixed perceptions are why we decided to write this article. Are loans actually bad? And what exactly are the advantages and disadvantages of getting a loan? Find out here.


Let’s start with the basics; What is a loan?


loan is when money is given to another party with the understanding that they’ll pay the money back later with any charges or interest rates applied. You can get loans for your business, your rent, car, school fees and so much more. When and how you pay back your loan depends on on the agreement you had with your lender.
Loans can be secured or unsecured. A secured loan is when an individual puts down an asset such as a car as collateral. If he/she is unable to pay the loan at the required time the lender takes possession of the asset. On the other hand, unsecured loans don’t require you to put down any asset however, if you don’t pay at the required time they can sue you to court.

Pros of Loans

Getting a loan can be a great thing when done the right way. Here are all the advantages of getting a loan

  • Helps improve your credit score; A loan can be a good way to build your credit. If you have no credit history at all or credit that needs a ton of work, start by taking new loans responsibly and paying them off on time. Read; The Beginners Guide to Credit in Nigeria to learn more about the relationship between credit and loans.
  • Helps you in case of emergencies; Life happens and sometimes we’re met with expenses we cannot afford at the time. Whether it’s a medical emergency or your car got wrecked, taking a loan is a great way to help manage the unplanned expenses.
  • Help manage your day-to-day life; As an adult, there seems to be no shortage of bills to pay. From the electric bill to water bill and taking a loan, even if it’s a small one can help alleviate the pressures of all of those expenses.

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On Twitter, we asked our followers if they regret taking loans and 55.6% of them said the loans they’ve taken really helped them.

Cons of Loans

Like everything in life, even loans have their drawbacks. Here are some disadvantages;

  • Can damage your credit score; Getting a loan can cause a hit to your credit score, specifically if you repeatedly default or don’t make payments on time. If you’ve recently taken a personal loan and accidentally made multiple late payments or defaulted on the said loan, you might have to work hard to repair the damage done.
  • Fees and interest rates: Many loans come with interest as well as additional fees that can cover everything from insurance to the processing fee. Of course, this means that at the end of the day you would be paying more money than what was actually disbursed to you.
  • Fixed payments;  Most loan repayment plans have fixed monthly payments. While fixed monthly payments are a plus to some borrowers, this can be difficult for some people to stay consistent with especially, when unexpected expenses come up.


Loans can be a great thing but they can also have its disadvantages. One of the key things to being financially successful is understanding when loans are a good solution for your situation. Loans are never a good idea if you can’t afford to pay back in the required time.

So in conclusion, loans are not bad. It all comes down to how you manage your money. If you are confident in your ability to make payments on time then a loan might be a good choice for you.

69.6 of our Twitter followers agree that loans aren’t bad.


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Abraham Olaleke

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