Loan words, in plain English

The words that appear in a loan agreement, explained without jargon, with the Pidgin for each one. If a lender uses a word you do not know, that is not your failing. Ask.

APR (annual percentage rate)

The cost of a loan for a whole year, written as a percentage, including fees. It exists so you can compare two offers that are quoted differently. A rate quoted per month is not an APR: multiply it by twelve at the very least, and by more if the interest is charged flat.Pidgin: Na the real price of the loan for one full year, fees join. E dey let you compare two offers well.

Flat rate

Interest worked out on the full original amount every month, even after you have repaid most of it. Common in loan apps. For the same quoted percentage it costs close to twice what reducing balance costs.Pidgin: Dem dey calculate the interest on the money wey you first collect, every month, even after you don pay plenty back.

Reducing balance

Interest worked out only on what you still owe, so it falls each month as the balance falls. Standard at banks and microfinance banks.Pidgin: Dem dey calculate interest on wetin remain, so e dey reduce as you dey pay.

Principal

The amount you borrowed, before any interest or fees. Repayments are usually part principal and part interest.Pidgin: The main money wey you borrow, before interest.

Tenure

How long you have to repay, usually in months or weeks. A longer tenure lowers the monthly repayment and raises the total cost.Pidgin: How long dem give you to finish paying.

Processing fee

A charge for arranging the loan, usually deducted before the money reaches you. If ₦5,000 is deducted from a ₦100,000 loan, you receive ₦95,000 but repay on ₦100,000.Pidgin: Money wey dem cut before dem send the loan give you.

Default

Failing to repay according to the agreement. It affects your credit record, and the lender can pursue the debt, but it is not a criminal matter and nobody can be jailed for owing a civil debt.Pidgin: When you no fit pay as una agree.

Collateral

Something of value pledged against a loan, which the lender can take if you do not repay. Most microloans are unsecured, meaning there is no collateral.Pidgin: Property wey you put down say if you no pay, dem fit collect am.

Guarantor

Someone who agrees to repay if you do not. Being a guarantor is a real financial commitment, not a formality, and it can affect their own credit record.Pidgin: Person wey promise say if you no pay, dem go pay for you.

BVN (bank verification number)

The number that identifies you across every Nigerian bank. Lenders legitimately use it to confirm who you are. It is not a password, and no lender ever needs your banking password or your OTP.Pidgin: Number wey dey identify you for all bank. Lender fit ask for am. But dem no suppose ask for your password or OTP.

Credit bureau

A company that keeps a record of how people repay. Nigerian lenders report to licensed bureaus, which is how a missed repayment at one lender affects a later application somewhere else.Pidgin: Company wey dey keep record of how people dey pay back their loan.

Unsecured loan

A loan with no collateral behind it. Most quick loans are unsecured, which is part of why the rates are high.Pidgin: Loan wey no get property behind am.

Moratorium

An agreed pause in repayments. It has to be agreed in writing with the lender. Simply not paying is not a moratorium.Pidgin: When lender gree make you rest small before you continue to pay. Make sure e dey for paper.

Rollover

Taking a new loan to repay an existing one with the same lender, usually with fresh fees. It buys time and increases what you owe. Repeated rollovers are how a small loan becomes an unpayable one.Pidgin: When you collect new loan take pay old one. E dey add fees on top.

Digital lender

A lender operating through an app or website. Legitimate ones are approved by the FCCPC and, where they take deposits, licensed by the CBN.Pidgin: Lender wey dey work through app abi website.

Microfinance bank (MFB)

A CBN-licensed bank serving small borrowers and businesses. Licensed, regulated, and generally much cheaper than app lending, though slower.Pidgin: Small bank wey CBN license, wey dey lend small business and person.

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