consumer debt
Consumer debt is money you owe from buying things for yourself, like a phone on instalment or a car loan, rather than for running a business.
In plain English
Tolu works in a bank in Lagos and earns a decent salary, but by the twentieth of every month her account is already thinking about the next payday.
There is the ₦25,000 she owes her colleague from a phone she bought on a payment plan, the ₦180,000 car loan instalment due next week, and a credit card balance from a Christmas she still remembers fondly.
None of that money went into a business or an investment. It went into living, into a phone, a car, a nice detty December. That is consumer debt in one sentence, borrowing to fund personal spending rather than to make more money.
It is different from a working capital loan a trader takes to restock her shop, because that debt is meant to pay for itself through sales. Consumer debt just sits there, calmly waiting for your salary.
In the United Kingdom, someone sending money home might also be carrying a store card balance from Argos or a car on finance, all while wiring ₦200,000 to their mother in Ibadan every month. Both loyalties pull on the same pocket.
Consumer debt is not a bad word. Life happens, and sometimes you need the loan to buy the fridge or fix the generator. The trouble starts when it piles up faster than your income can carry it.
Uche takes a signature loan of ₦300,000 from his bank to buy a laptop and pay for his sister's school fees. He repays ₦30,000 monthly for twelve months. That ₦300,000 is pure consumer debt, borrowed for personal use, not for a business that generates income to cover it.
Questions people ask
Is a car loan considered consumer debt?
Yes. Even though a car can help you earn money through work trips or deliveries, a car loan is generally classed as consumer debt because it is taken out for personal use rather than as direct business financing.
How is consumer debt different from a mortgage?
A mortgage is sometimes treated separately because it builds an asset over time, but in everyday terms things like credit cards, personal loans, car loans and instalment purchases all fall under consumer debt because they fund personal spending.
Does having consumer debt affect my credit score?
Yes, lenders and credit rating agencies look at how much consumer debt you carry and whether you repay it on time, which affects your ability to get approved for future loans or credit facilities.
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