MTN MoMo Loans Killing Customers with Shocking 125% Interest Rate!

The adage “All that glitters is not gold” still holds true today, as MTN MoMo Loans are crippling customers with a shocking 125% interest rate over a 12-month period if they choose the same credit facility.

But how many of us are carefully smart enough to detect that we are being betrayed and that Momo loans without collateral are extremely expensive in Ghana?

When you’re in a pinch and need a loan for an emergency, MTN’s quick loan process through the MTN Momo platform can cloud your judgment and lead you to believe it’s cheap.

It is not cheap given that if you take the same amount as a loan each month for twelve months, you would be paying so much as you ever imagined.

Let us look at the reality and the fundamentals that make MTN Momo Loans appealing.

Getting access to emergency credit facilities is not easy for many banking and non-banking persons in Ghana, but the introduction of the MTN Mobile Money Loan Services in Ghana has altered the narrative.

The offering of one-month period credit facilities to MTN users has been a lifesaver for many Ghanaians who, at one point in time, need money to meet one or two financial obligations.

If you have accessed the loan facilities offered on MTN before, you would agree that they have really helped in many instances. A common saying in Ghana and among credit providers is that the “mouth used for accessing credit is not the same used for paying.” Load seekers often deceive loan providers by promising to pay off their credit quickly, but once they have access to the money, they struggle to make payments, which can potentially damage their relationships and creditworthiness.

The partnership between MTN Ghana and Afb Ghana led to the introduction of “Qwikloan,” which is a convenient fast loan service accessible to all MTN users who meet the basic qualification to access credit on the network.

The fact that one does not need to provide any form of collateral in order to access the loan makes it more accessible to many. The facility allows Ghanaians on MTN to access credit worth GHS1000.00. When the repayment period reaches its due date and the account has sufficient funds, an automatic deduction processes the payment. However, one can also decide to start payment in installments before the due date.

Qwikloan is a 30-day loan. After 30 days, you can repay the loan in a single amount at a 6.9 percent fee, and you don’t need a bank account to access it.

On the MTN, there are several loan options. The following are the current loan types.

1. QwikLoan
2. XpressLoan
3. AhomkaLoan
4. XtraCash
5. Device Pick and Pay later

To get any of these loans, you have to follow the simplified process below.

1. Dial *170#

2. Select option 5: Financial Services.

3. Select option 3: loans.

4. Select option 1 to register for free or option 2 to view terms and conditions.

MTN MoMo Loans Are Killing Customers

Why is the 6.9% monthly interest charged when you take out a loan through the MTN Momo Loan so expensive?

Every month, MTN charges you 6.9% for taking out a loan. Let us assume that, in January 2024, you took a loan of GHS100.00. After 30 days, you will pay GHS69.00 in interest. Your monthly principal and interest payments will be GHS1069.00.

If you take the same amount each month for 12 months, your total interest under Cedi terms will be GHS69.00 x 12, or GHS828.00, for a total loan of GHS12,000 per month. This translates to an effective annual interest rate of 125.51%.

Let us make things a bit simpler and friendlier with a nominal annual rate. In that case, our yearly interest rate would be 6.9%×12=82.8%.

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Conclusion

The MTN loan is very expensive compared to standard bank loans, with an effective annual interest rate of 125.51% and a nominal annual rate of 82.8%, while bank loans range from 34% to 43%.

This means that the 6.9% is too high for ordinary Ghanaians. It is very expensive to access credit from MTN Loan services such as QwikLoan, XpressLoan, AhomkaLoan, and XtraCash. The best rate to charge those who access such a credit facility should be between 2 and 4 percent a month.

Clients face not only a high interest rate but also a 1% service charge, MTN’s cash out fees, and the government’s e-levy.

Regrettably, the Bank of Ghana appears indifferent to the daily exploitation of Ghanaians through easy credit facilities without collateral. Something needs to be done about the deceptive MTN MoMo Loans Killing Customers with a shocking 125% Interest Rate.