SHORT-TERM LOANS, LONG-TERM TRAUMA? EXPLORING THE MENTAL HEALTH EFFECTS OF DIGITAL LOAN APPS AMONG YOUTH IN NIGERIA.

Abstract

The rise of digital loan applications in Nigeria has provided unprecedented financial access to young people, many of whom face barriers to formal credit systems. While these platforms offer convenience and immediate relief, they have also introduced significant mental health challenges. This study investigates the psychological impact of digital loan app usage among Nigerian youth aged 18–35, using a mixed-methods approach. Quantitative data from 600 respondents revealed high levels of borrowing, frequent defaults, and moderate to high psychological distress, especially among those with repeated borrowing or delayed repayments. Qualitative interviews highlighted emotional distress stemming from harassment by debt collectors, fear of reputational harm, and a lack of coping resources. Findings underscore a significant association between digital borrowing behaviors and adverse mental health outcomes, pointing to systemic regulatory gaps, exploitative lending practices, and limited mental health support. The study calls for urgent policy action, ethical fintech design, and integrated mental health and financial literacy interventions to protect vulnerable youth from the long-term trauma of digital debt.