How to Stop Relying on Mobile Loans and Live Within Your Means

Mobile loans are a convenient and fast way to access credit in Kenya. Thanks to their presence, millions of people who were previously unable to access credit can now do so. You can borrow money from your phone without any collateral or paperwork and get it within minutes. However, they also have some serious risks and drawbacks. For example, they can trap you in a cycle of debt and damage your financial health. In this article, we will discuss the risks and drawbacks associated with mobile loans and how to stop relying on them.

Risks and drawbacks of mobile loans

Mobile loans may seem like an easy and quick solution for your financial needs, but they have many disadvantages that can outweigh their benefits. Here are some of the risks and drawbacks of using mobile loans:

• High fees and penalties: When compared to other forms of credit like bank loans or SACCOs, mobile loans have higher interest rates and fees. Mobile lenders also impose hefty penalties for late or missed payments. These charges can increase your debt burden and make it harder to repay.
• Short repayment periods: Mobile loans have short repayment periods, usually between one week and one month. This means that you have to pay back the loan quickly to avoid penalties. This can strain your cash flow and leave you with little money for other needs.
• Predatory practices: Some mobile lenders engage in predatory practices that exploit borrowers’ vulnerability. These practices include misleading advertising, unfair terms and conditions, and invasions of privacy. For example, some mobile lenders access borrowers’ contacts without their consent and use them to collect their debts.
• Debt traps: Mobile loans can trap borrowers in a cycle of debt and poverty. Since they are easy to access, many borrowers take out multiple mobile loans from different lenders to meet their needs or repay their existing debts. This leads to over-indebtedness and defaulting.

How to stop relying on mobile loans

If you rely on mobile loans to survive, you have to reconsider your financial choices and habits. Mobile loans are not a sustainable or healthy way of managing your money. They can put you in more debt and financial trouble than you started with. Here are some practical steps you can take to stop your dependence on mobile loans:

1. Assess your current situation 

The first action you should take is to assess your current financial situation. Understand how much you owe and how much you earn. Make a list of all your debts, including the principal amount, interest rate, due date, and monthly payment. Then make a list of all your income sources, including your salary, business income, remittances, and any other income. Compare your income and expenses and see how much money you have left after paying your debts and essential bills.

2. Cut down on unnecessary expenses 

Reduce your spending habits and eliminate any unnecessary expenses. These are the expenses that you can live without or reduce without affecting your quality of life. You can do this by tracking your spending for a month and identifying where you can save money. For example, you can cook at home instead of eating out or use public transport instead of taxis.

3. Increase your income streams

Increasing your income streams can also help you stop your dependence on mobile loans and avoid being trapped in a debt cycle. Find ways to increase your income; for example, you can ask for a salary incremeny or promotion at your current job, look for a second or part-time job, or start a side hustle. However, you should be careful not to fall for scams or schemes that promise quick and easy money. Always do your research and verify the legitimacy and credibility of any opportunity before you join.

4. Build an emergency fund

To avoid borrowing expensive short-term mobile loans in case of an emergency, why not build an emergency fund? An emergency fund is money that is set aside to cover unexpected expenses, such as medical bills, car repairs, or school fees. Having an emergency fund can provide you with a source of cash that you can use to cover unexpected expenses without going into debt.

Final thoughts

Mobile loans are a convenient and accessible form of credit, but they also have many disadvantages. If you want to stop relying on them and start living within your means, you need to take some practical steps to improve your financial situation and habits. The tips in this article can help you break free from the cycle of mobile loan debt and achieve financial freedom and peace of mind.