What is a collateral-free loan?


A collateral-free loan, also known as an unsecured loan, is a type of loan that doesn’t require borrowers to provide any asset as security. These loans are granted based on factors like creditworthiness, age, income, employment stability, and net worth. Due to the increased risk for lenders, collateral-free loans often have higher interest rates, potentially up to 35% APR. The borrowing amount can range from ₦5,000 to ₦5,000,000, with repayment periods varying from short-term (1-5 years) to long-term. These loans are easily accessible online, offering quick processing and flexibility in usage. FinTech companies and banks in Nigeria, such as Carbon Paylater and KiaKia, offer such loans to individuals and businesses that may lack collateral but have viable business ideas.

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Are you in need of a personal loan to take care of a medical emergency or some other urgent matter? You may have heard the term ‘collateral-free loan’ but have no idea how it works or how to access it.

Traditionally, collateral is required before a lending institution can disburse funds to individuals or businesses. However, loans can be granted based on other factors that determine creditworthiness. This is referred to as an unsecured loan.

Note: Loans without collateral mean that the lender has no asset to take possession of should the borrower fail to repay.


Since the lender is taking on considerable risk, collateral-free loans usually come with high-interest rates, sometimes up to 35% APR, depending on the lender and your credit history.

Other factors, such as your age, income, employment stability, net worth, and purpose of the loan also determine the amount you can borrow (this could be as low as ₦5000 and as high as ₦5,000,000).

The repayment period can be short term or long term (1-5 years) depending on your needs.

You may have to pay establishment fees, monthly fees, and annual fees. So make sure to check with the lender before you apply.


    • Quick loan access: Unlike secured loans, applying for a collateral-free loan typically takes place online. All you have to do is provide the required credentials and the funds will be sent directly to your bank account, sometimes within 24 hours.

    • Flexibility: You have the freedom to use the money however you need. It could be to settle an unexpected expense or even go on a luxury trip.

    • No security needed: You don’t have to present an asset before your loan can be sanctioned.

    • Easy repayment options: You can choose for the funds to be deducted automatically from your account once the tenure is due. Repayments can be also made online by entering your debit card details.


Several banks and FinTech companies have made obtaining loans easy. With your Bank Verification Number (BVN) and a mobile phone, you can quickly get funds in the comfort of your home. It usually involves downloading a mobile app or dialling a USSD code.

Some of these Fintech companies have been springing up like weeds in recent times. Some popular ones include:

    • Carbon Paylater

    • KiaKia

    • Aella Credit

    • Page

    • Renmoney

    • Kwikmoney (Mines)

These are not only available to individuals. Business can also apply. Some banks in Nigeria have realized that most businesses have a solid idea but lack funds and the collateral to obtain a loan.

These banks, therefore, grant unsecured loans ranging from ₦100, 000 to ₦1, 000, 000, depending on the scope of your business and industry risks:

    • First Bank of Nigeria PLC

    • Stanbic IBTC Bank

    • Wema Bank

    • Heritage Bank

    • Guarantee Trust Bank PLC


Defaulting a loan means that you have failed to meet your repayment obligations. The Central Bank of Nigeria (CBN) and commercial banks have determined that defaults will be settled using the deposits in accounts you have with other banks. Your BVN and TIN details make this possible.

Also, not repaying a loan greatly affects your credit history, making it very difficult or impossible to apply for loans in the future.

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