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FAQs About Getting a Loan in Nigeria Without Collateral

Getting a loan in Nigeria without collateral may not be as difficult as it seems. This is even more if the prospective borrower asks the right questions.  Loans obtained without collaterals are also referred to as unsecured loans.  

What are non-collateral loans? 

Non-collateral loans are unsecured types of loans that do not require the borrower to declare any existing asset like a car, house, or other landed property as a guarantee.  

Instead of relying on a borrower’s assets as security, lenders approve unsecured loans based on a borrower’s creditworthiness. 

Unsecured loans vs. secured loans 

Secured loans differ from unsecured loans in that secured loans always require collateral. If a borrower won’t agree to provide an asset as insurance, the lender won’t approve a secured loan. 

This loan type exists for a variety of financing options, including mortgages, car loans, home equity lines of credit, and some types of personal loans. 

Getting approved for a secured loan can be easier than getting an unsecured loan because secured loans pose a less financial risk for lenders. Since they require collateral, they typically have more competitive interest rates than unsecured loans. 

How to apply for a non-collateral loan 

Having decided to go for an unsecured loan, it is only right for you as a borrower to familiarise yourself with the steps to apply for one. 

These steps listed below may vary with the different lending platforms: 

  • Determine how much you need 

Only borrow what you need, even if the lender approves you for a higher amount. 

  • Research top lenders 

You can find unsecured loans through national and local banks, credit unions, and online lenders. 

  • Compare unsecured loan offers  

Some lenders offer prequalification so you can see which loans you might qualify for before you apply. Look at each lender’s interest rates, fees, loan terms and amounts, and special features. 

  • Submit an application  

This is mostly done online and includes a simple process of submitting your required details to the lender. 

  • Provide documentation 

If the lender asks for additional documentation, submit it in a timely manner. Also, this is mostly done online.  

  • Accept loan funds 

If you’re approved, the lender will tell you how you’ll receive the loan funds. If it’s an installment loan, you’ll receive the money as a lump sum. For revolving loans, such as a credit card, the lender will issue you a credit card to draw funds from the account as needed. 

FAQs About Getting A Non-Collateral Loan In Nigeria  

As you navigate your way towards getting a loan without collateral, some of the information provided below may prove useful.  

1. What are the requirements for an unsecured loan? 

Generally, borrowers look for a history of responsible credit use, on-time payments, low credit card balances, and a mix of account types. They’ll also check your credit scores, which are calculated based on the information in your credit reports. 

2. What happens if I don’t pay my non-collateral loan? 

If a borrower stops making payments and defaults on the unsecured loan, there’s no collateral for the lender to take to recover the outstanding debt. 

However, most lenders allow a grace period before reporting late payments to the appropriate authorities. If a loan continues to go unpaid, expect late fees or penalties as well as a drop in your credit score. 

3. How long will it take to get the money? 

Loans without collateral usually require little or no paperwork and are made available to the borrower fast. You can save interest by repaying your short-term loan early.  

4. How do I know my current credit score? 

A credit score is a unique credit rating system that shows lenders how risky it is to lend to an individual. Your credit score is dependent on the information on your credit report. 

A credit score is basically a 3-digit number that has a minimum is 300 and a maximum of 850. 

Credit scores are calculated based on certain factors including payment history, and amount owed. 

As a Nigerian, you can get a free credit report annually from any Credit Bureau registered in Nigeria. You can also access a free credit report from nairaCompare. 

5. What is the interest rate on non-collateral loans?  

Getting a loan without collateral in Nigeria may incur interest rates between 10.99% to 32%. The borrowers can get the best interest rate based on their credit profile, income, employment, and age. 

6. How does the loan repayment work? 

Repayment of a loan obtained without collateral in Nigeria has been made seamless using modern-day technology.  

Because such loans are high-risk, the borrower is sometimes made to grant the lender permission to automate the deductions from their ban accounts on specified dates.  

Typically, the return of funds happens through periodic payments, which include both principal and interest. Repayment terms on a loan are detailed in the loan agreement which also includes the contracted interest rate. 

7. Are there fees for unsecured loans? 

Depending on the lending platform, taking a loan without collateral may incur upfront fees, including origination fees, which some lenders charge for processing a loan.  

Origination fees typically range from 1% to 10% of the loan amount. Other loan fees may include late fees, prepayment fees — where a lender charges you for early repayment — and fees for an unsuccessful payment. 

8. How do I know a trustworthy lender? 

Legitimate lenders must register with state agencies before soliciting or giving out loans.  

As a borrower, you owe it to yourself to check testimonies from previous customers and go through positive and negative reviews to know whether a particular lender is trustworthy.  

A credible loan company provides verifiable information about themselves like an office address. They also provide working contact details like email or phone number.  

9. What is the eligibility for getting an unsecured loan?  

The actual eligibility criteria depend on the type of unsecured loan and the lender. However, the general rules are: 

The borrower’s age must not be below 18. The applicant must be employed or must run a business. Generally, borrowers are required to have a verifiable source of income.  

The applicant must have a good credit score and credit history.  

Keep in mind that the eligibility requirements vary from one lender to another, hence, it’s always good to check with the lender before applying for the loan.  

Other things to note about Getting A Loan Without Collateral 

Although non-collateral loans are said to be high-risk for the lender, they also come with a number of benefits. 

Some advantages of an unsecured loan are listed below; 

  • Short loan application procedure  

The unsecured loan does not require collateral. This means that the lender does not have to examine an asset to determine its worth. It can be time-consuming and difficult.  

This cuts down the application and approval time to anything between minutes to a couple of hours for a first-time borrower.  

  • No collateral needed 

As repeatedly stated, these kinds of loans do not require collateral. This is particularly beneficial to business owners who do not have assets.  

  • Can be used to build a credit history 

One more advantage of using a business loan is building a credit history. If the borrower repays the loan amount successfully, it will develop the credit history for their business.  

This would make the process of getting the loan simpler in the future.   

  • No risk to assets 

With an unsecured business loan, you would not risk your property. The secured business loan is protected with an asset. The financial institution would be able to attack your asset if you don’t repay the loan. There is no chance of an attack on the collateral in an unsecured loan.  

  • Flexible repayment options 

Many lenders provide flexible repayment options that allow the borrower to repay the loan amount quickly.The lenders usually offer several repayment options so borrowers can select the schedule that fits their finances. 


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