Why You Should Never Borrow to Pay Off Loans

If you’re a student or working professional in Nigeria, Ghana, Kenya, or Uganda, you might feel pressure to borrow money to pay off existing loans. You’re not alone. Many people think: “If I borrow one more loan, I can clear the first loan, then I’ll be free.” But often this path leads to deeper debt, stress, and financial problems. In this article we’ll explain why you should never borrow to pay off loans, especially for young people, students and working class citizens in Africa. We’ll use simple, clear English so anyone can understand.

We will cover:

What it means to borrow to pay off loans
Why people do it
The main dangers and traps
Better alternatives (how to pay off loans without borrowing more)
Pros & cons (yes, there are some rare situations)
Examples and comparisons
Specific tips for African contexts (Nigeria, Ghana, Kenya, Uganda)
A summary table
Frequently asked questions (10+).

What Borrowing to Pay Off Loans Means

Definition of Borrowing to Pay Off Loans

Borrowing to pay off loans means you take a new loan or borrow money – either from a bank, loan app, friend or family – to use those funds to immediately pay off one or more of your existing debts. Instead of using your own savings or income to repay the old loan, you simply shift the debt to a new lender. In effect you’re replacing Loan A with Loan B.

Why People Think It’s a Good Idea

Here are some reasons you might consider this:

You have one loan with high interest, and you think a new loan might have lower interest or better terms.
You are behind on one loan and fear defaulting, so you borrow to avoid late fees or penalties.
You want to consolidate several smaller loans into one bigger loan, hoping it will be easier to manage.
You feel trapped and think borrowing more will “reset” your debt and give you a fresh start.

But – and this is the vital point – borrowing to pay off loans often postpones the real problem rather than solves it.

How It Works in Practice

Suppose you have Loan A with a loan app in Nigeria owing ₦50,000 and the interest is rising or you can’t keep up. You take Loan B for ₦60,000 from another lender and use that to pay off Loan A. Now you owe ₦60,000 (plus interest) to Lender B instead of ₦50,000 plus interest to Lender A.
You might think “Ah, now I only owe one lender, it’s simpler.” But the new loan may have higher fees, longer term, variable interest, or stricter penalties.
Unless you change what caused you to need the loan in the first place (low income, spending too much, not budgeting) you end up with the same or worse debt situation.

In many African markets, this cycle is common and is sometimes called a debt trap.

Key Reasons Why Borrowing to Pay Off Loans Is Risky

It Can Increase Your Total Debt

When you borrow to pay off loans, you often end up owing more than you did originally. Here are why:

The new loan may have a higher interest rate than your original.
There may be extra fees or charges (application fee, processing, higher penalties).
By borrowing more, you stretch out the repayment term, meaning you pay more interest over time.
If you keep borrowing new loans to pay older ones, you keep piling up debt.

For example, one personal finance article shows that using a personal loan to pay off other debt “might mean you borrow more than you want and pay unnecessary interest charges.”

It Doesn’t Solve the Root Cause

Borrowing a new loan to pay off an old one is like changing the name on the invoice but not reducing the amount owed. The root causes that got you into debt remain:

Income might still be low.
Expenses might still be high.
You might not have a budget or savings cushion.
The old behaviour of borrowing to cover spending may continue.

Unless you fix those issues, you might find yourself repeating the pattern.

Repayment Pressure and Stress Increase

Instead of easing the burden, a new bigger loan may bring:

Higher monthly repayments, making your budget tighter.
Increased risk of missing payments, leading to penalties and even blacklisting in some countries. For example, in Nigeria many loan apps penalise missed payments harshly.
If you borrow from informal or unregulated lenders, you may face even harsher consequences (higher interest, aggressive collection).
Emotional and mental stress – always worrying about the next payment, phone calls, contacts.

Loss of Financial Flexibility and Future Options

When you shift debt but borrow more, you may:

Lose ability to respond to emergencies (if most of your income is tied up in repayments).
Be unable to access better loans because your debt-to-income ratio is worse.
Have fewer savings or investment possibilities because you’re servicing debt.
In some cases, provide collateral (assets, salary deductions) for the new loan, putting your future at risk.

Danger of a Debt Spiral or Trap

When borrowing more to pay old loans becomes regular, you can fall into a debt spiral:

Borrow → pay old loan → borrow again → old loan payment is done, but new loan has started → repeat.
Over time the total owed increases, interest accumulates, you may miss payments, you may default.

In Kenya, Uganda, Ghana, Nigeria, etc., financial advisers warn: “Avoid borrowing to pay another loan” because it is exactly the path to a debt trap.

Hidden Terms and Conditions

Often the new loan used to pay off old ones has hidden downsides:

Pre-payment penalty on the old debt may still apply.
The new loan may require collateral (house, land) meaning you risk losing it if you default.
The repayment schedule may be rigid with no flexibility.
You might not read the fine print (especially in fast loan apps).

Remember: just because you can borrow doesn’t mean you should—always read terms carefully. In India one source notes pre-payment penalties of 2–5% for early closure of loans.

Comparing Borrowing to Pay Off Loans vs Other Options

Borrowing to Pay Off Loans (What It Looks Like)

Pros:

May provide short-term relief: you settle one loan, you feel immediate relief.
Consolidates multiple debts into one loan (in theory may simplify repayment).
If the new loan has lower interest and better terms, it could be helpful in specific cases (we’ll examine this).

Cons:

Risk of ending up with more debt, higher interest.
Doesn’t fix the underlying problem (budget, income, spending).
Potential loss of asset or collateral.
Increased stress and risk of default or blacklisting.
May incur extra fees or penalties.

Alternative Option: Use Own Income + Budget Discipline

Instead of borrowing, you focus on:

Making a realistic monthly budget.
Cutting back on non-essential expenses (e.g., reduce entertainment, eat home instead of outside).
Prioritising repayments: paying the loan with highest interest first (debt avalanche) or smallest loan first (debt snowball).
Negotiating with the lender for better terms (longer term, lower interest) so that your repayments are manageable.
Increasing your income (part-time job, freelancing, gig work) so you have extra to pay down debt faster.
Building an emergency fund so you’re less likely to borrow again.

Pros of this approach:

You reduce debt without adding new loans.
You build good financial habits.
You gain more control and less stress.
You avoid risk of assets being used as collateral for new debt.

Cons:

It may take longer to become debt-free.
You need discipline and commitment.
It may require temporary sacrifice (less leisure, tighter budget).

Alternative Option: Refinancing / Consolidation Under Strict Conditions

In some limited cases, borrowing to pay off loans might be okay—but only if the new loan has genuinely lower interest, fees are minimal, and you have good discipline.

For example: you may have several high-interest debts from quick-loan apps, and a bank offers a single loan at lower interest that pays off those. Then you have one manageable loan.

But even then, you must ask:

Is the new rate significantly lower?
Are the terms good (no hidden fees, penalties, collateral)?
Will your monthly repayment be manageable?
Will you avoid going back into new borrowing?

Because many people who try this fall into the trap anyway. One article says: “Taking new loans to pay old ones just delays your freedom from debt.”

Specific Risks and Realities for Nigerian / Kenyan / Ghanaian / Ugandan Students & Working Class

High-Interest Loan Apps and Informal Lenders

In Nigeria, Kenya, Uganda and Ghana, many people use fast-loan apps or informal lenders which may have very high interest rates, fees and harsh collection methods. One article warns: “Borrowing from one loan app to pay another app is quick way to get stuck in endless cycle.”

For students or working class with limited income and irregular cash flow, the risk is higher because:

Your repayment may be dependent on irregular side-income.
Late payment penalties may be extreme.
Your future borrowing ability may be damaged.
You may lack financial literacy about terms and conditions.

Unpredictable Income & Lack of Emergency Fund

Many young people or workers in Africa may have unstable income, side-jobs, or gig work. If you borrow to repay a loan and your income drops, you default, and the new loan becomes a burden. Without an emergency fund you’re exposed. Financial advisers say you should not borrow just because others are doing so, or because you feel you must.

Impact on Credit Reputation and Future Opportunities

If you default on loans, especially with digital lenders, you may be blacklisted or your contacts may be notified. This impacts future ability to secure loans (when you genuinely need them), buy things on instalment, or start a small business. Borrowing to pay debt when you are already tight financially increases the chance of default.

Education Loans and Student Debt Context

If you’re a student, you might feel you need to borrow to pay off existing student debt or living-expenses loan. But adding more borrowing before you’ve graduated or secured income means your starting post-school life may begin with larger debt stack, making it harder to save or invest in your future.

Cultural & Social Pressure

In many African societies, there is pressure to maintain appearances (clothing, gadgets, social life). Borrowing to pay off debt may mask the problem but social spending continues. Real change requires adapting lifestyle and expectations. Borrowing to pay another loan just keeps you running.

Step-by-Step: How to Avoid Borrowing to Pay Off Loans & Get Out of Debt

Step 1: Accept the Reality and Make a List

Write down all your debts: lender, amount, interest rate, monthly repayment.
Write down all your monthly income (salary, side-hustle).
Write down all your expenses (rent, transport, food, utilities, leisure).
Identify how much is left (income minus expenses). If it’s negative or very small, action is needed.

Step 2: Create a Budget and Free Up Money

Use your remaining funds to pay debt first (treat debt like a monthly bill). One article says: “Allocate funds to loan repayment. Avoid paying the minimum only.”
Cut non-essential expenses: maybe fewer outings, cheaper transport, cook at home instead of eating out.
Consider generating extra income (side-gig, freelancing, part-time work).
Automate your payments if possible so you don’t miss.

Step 3: Prioritise Loans Smartly

Use the debt-avalanche method: pay highest interest loan first to minimise total cost.
Or the debt-snowball method: pay smallest loan first to build psychological momentum.
Continue making minimum payments on other loans while focusing extra payment on one.

Step 4: Talk to Your Lender for Better Terms

Reach out and explain your situation. Ask: Can you extend the term, reduce interest, allow smaller monthly payment?
Some lenders will restructure debt rather than have you default.
Get any new terms in writing.

Step 5: Resist the Temptation to Borrow More

Anytime you feel tempted to borrow to repay another loan, STOP and ask: “Will this make me borrow even more? Will I owe more total interest?”
Remember: borrowing to pay another loan only helps if the new loan is significantly better and you commit to not borrowing again.
Consider that the borrowed money is not “free” – it is more debt.

Step 6: Build an Emergency Fund

Even a small fund (e.g., the equivalent of one month’s expenses) helps you avoid having to borrow when a crisis happens.
Gradually grow the fund as you pay off your debt.
This gives you real financial freedom and reduces risk of future debt trapping.

Step 7: Learn Financial Habits and Stay Committed

Track all spending.
Avoid lifestyle creep (just because you have borrowed more doesn’t mean you should spend more).
Celebrate when you pay off one loan and move to next.
Adjust budget over time as your income changes or you get promotions.

Pros & Cons of Borrowing to Pay Off Loans

Below we list the advantages and disadvantages of this strategy.

Pros

Immediate relief: One loan is closed, so you may feel less stressed.
Simplified payment: Instead of managing many small loans you may have one bigger loan.
Potentially lower interest: If you find an excellent loan with much lower interest, it can reduce cost.
Short term fix: If you have a very stable income and are sure you can pay the new loan, this may work.

Cons

Higher overall cost: Because of extra fees, longer term, more interest.
Risk of bigger debt: If you keep borrowing again you’re worse off.
Doesn’t solve root issues: Income/expenses still remain.
Increased risk of default: If the new loan is large and you lose income the stress is greater.
Collateral risk: Some new loans may require assets, putting your future at risk.
Emotional burden: The stress of one larger loan may be worse than several smaller ones.
Potential damage to credit reputation: More debt means higher risk.
You’re still in debt: Borrowing to pay off doesn’t make you debt-free — you have only shifted the burden.

Examples of Borrowing to Pay Off Loans (and What Went Wrong)

Example 1: The Student in Lagos

“Chinedu” is a university student in Lagos with a part-time job. He had borrowed ₦200,000 from a loan app at 30% monthly interest to cover living expenses. Repayments were rising and he could see no end. He borrowed ₦300,000 from another lender to pay off the first loan, thinking he’d then repay the second one at a slower rate. But the second loan had higher interest and hidden fees. He ended up paying for longer and owing more. He also struggled to make the monthly payment. Eventually he defaulted and was blacklisted, making it harder to get student finance later.

Example 2: The Working Clerk in Nairobi

“Mercy” in Nairobi works as a clerk. She had three small loans from different lenders (for phone, transport, small side business). She borrowed one larger loan to consolidate. The idea seemed good: one repayment instead of three. But because she stretched the term out to 5 years, she paid way more interest. She also didn’t change her spending habits. A job cut meant she struggled, and the larger loan became a burden.

Example 3: The Graduate in Accra

“Kojo” graduated and took a good job. He had already taken a loan during school for living expenses and had started repaying. He was tempted to borrow again to clear the student-loan so he would feel “clean”. He did, but the new loan carried collateral on his micro-business. When the business had a bad month, he defaulted and lost his business equipment. The loss of those assets set him back significantly.

These examples show that even when the idea of borrowing to pay off other loans seems reasonable, it often ends up being a worse situation. The key lessons: check interest & fees, term, your income security, spending habits.

How to Recognize If Borrowing to Pay Off Loans Might Be Acceptable

Let’s be realistic: there are some very rare situations when borrowing to pay off current debt might make sense—but only under strong conditions.

Conditions That Might Make It Acceptable

The new loan offers much lower interest rate and fewer fees than your current loans.
The new loan term is shorter (so you pay less interest overall), not longer.
You have a stable, reliable income and you are confident you can meet repayments without borrowing again.
You commit to not increasing spending or taking more loans.
You have fully understood the terms and conditions, including penalties, collateral, possible risks.
You are using the borrowing as a strategic tool, not just to mask the debt.

When It’s NOT Acceptable

The new loan has equal or higher interest than what you owe now.
You are borrowing just to gain time because you have no plan or budget.
You still have weak income or irregular pay.
You are borrowing from an unregulated lender with high risk.
You intend to continue spending at the same rate or borrowing further.
You have not fixed your spending habits, you haven’t built a budget or savings.

If the situation is “it’s okay to borrow to pay off debt” – then you should still treat the new loan as debt and not “free money”.

How to Talk to Friends/Family and Lenders About Your Debt (Instead of Borrowing More)

Communicating with Lenders

Be honest: Tell them your income, your expenses. Ask for a payment plan you can afford.
Ask: “Can you reduce my interest rate or extend my payment term?”
Ask in writing for any changed agreement.
Maintain contact: Avoid letting them think you’re ignoring them (which may raise penalties).

Talking to Friends or Family When You’re Tempted to Borrow from Them to Pay Debt

Explain your situation clearly.
Ask for help in a structured way (not just a “give me money” without reconciliation).
If they lend you, treat it like a formal debt: Agree repayment schedule, interest if any, terms.
Avoid borrowing from many friends/family simultaneously, which can strain relationships.
Consider that borrowing from a friend to pay debt still is borrowing and carries risk.

Sharing with a Peer or Mentor

If you’re a student, talk to your student-finance office or a financial advisor.
Sometimes student groups or church youth groups offer peer support or financial workshops.
Having accountability – telling someone your plan and progress – helps you avoid traps like borrowing more.

Practical Tips and Checklist Before You Consider Borrowing to Pay Off a Loan

Checklist

Before you take any new loan to pay off another loan, ask:

What is the exact interest rate, fees, and term of the new loan?
Will the monthly payment be less than what I am currently paying?
Will the total amount I repay (principal + interest) be less than the total on my current loan(s)?
What happens if I miss a payment on the new loan? (penalty, default, asset loss)
Am I borrowing more than I need? (Avoid overshooting)
Do I have a budget showing I can afford the repayment plus other expenses?
Am I committing to not borrowing again and changing my habits?
Have I talked to my current lender about restructuring before taking a new loan?
Do I have no other better option (like negotiation, extra income, budget cut)?
Do I understand every term and condition (collateral, early repayment penalty, interest changes)?

If you answer No to any of these, you should not proceed with borrowing to pay off loans.

Useful Tips for Students & Working Class in Africa

Start small: even paying a little extra amount every month helps reduce principal faster.
Use side-hustles: many young Africans earn extra online, deliver goods, tutor, freelance. That additional income can speed up repayment.
Sell unneeded items: unused electronics, clothes, etc. Use proceeds toward debt.
Use free resources: many financial literacy workshops, apps and NGOs help people manage debt and budgeting in Africa.
Be careful with loan apps: Read reviews, check interest, ask about penalty fees before borrowing.
Build an emergency fund: even saving a small amount each month helps ease borrowing pressure when a surprise cost appears.
Set a debt-free date: visualising when you will finish helps you stay motivated. Tell someone about it.
Reward progress: When you clear a loan, do something small (not expensive) to celebrate your success. This builds positive habit.

Summary Table

Situation	What Borrowing to Pay Off Loans Looks Like	Better Alternative
One high-interest loan that’s hard to repay	Borrow new loan to pay the old one	Negotiate with the lender, budget, side-income
Several small loans, many payments each month	Consolidate into one bigger loan	Prioritise the smallest or highest interest and pay them off one by one
You have stable income, found a loan with much lower interest	Might consider a new loan only after checking terms, ability to repay	Use extra income to pay off current loan, build savings
You plan to borrow again or your salary is unstable	Likely a debt trap	Avoid borrowing more, fix root cause (budget/spending)

Frequently Asked Questions (FAQs)

1. Q: Can I ever borrow to pay off another loan?
A: Yes, in very limited cases—if the new loan has much lower interest, you have strong income, and you commit to not borrowing again. But for most students and working class people in Africa, it is high risk and not advisable.

2. Q: What if the new loan has lower interest than my current loan?
A: Then you may benefit, but only if the total cost (interest + fees) is lower, your monthly repayment is manageable, and you won’t borrow more. Always calculate carefully.

3. Q: I’m behind on payments; is borrowing to pay off the old loan worse than defaulting?
A: Borrowing adds risk of more debt and possibly worse terms. Instead, talk to your lender about delay or restructuring before borrowing. Avoid borrowing out of desperation.

4. Q: What is debt consolidation? Is it the same as borrowing to pay off loans?
A: Debt consolidation is when you take one loan to pay several others, to simplify payments or lower interest. It can involve borrowing to pay off loans, so yes – it’s similar. But effective consolidation requires good terms and plan.

5. Q: My loan app says I can borrow to pay off other apps—should I?
A: Be very cautious. Many loan apps in Nigeria and elsewhere charge high interest and fees. Borrowing one loan app to pay another is regarded as a major warning sign.

6. Q: Will borrowing to pay off loans improve my credit score?
A: Not necessarily. If you repay the new loan on time, yes you may improve. But if you borrow more or struggle to pay, you may damage your credit and worsen your financial position.

7. Q: If I borrow to pay off a loan and then default, what happens?
A: You risk penalties, additional debt, asset loss (if collateral), blacklisting, wage deductions (depending on jurisdiction), and more stress. The new loan may put you in a worse position.

8. Q: What should I do instead if I’m struggling with loan payments?
A: Make a budget, prioritise payments, cut expenses, increase income, negotiate with lenders, build emergency savings. Avoid adding more debt as a solution.

9. Q: For students in Ghana/Kenya/UG Uganda, is there special advice?
A: Yes. Manage part-time work or freelancing to earn extra, avoid using loans for living expenses without plan, learn financial literacy early. Build a repayment plan before you finish studies if possible.

10. Q: How long will it take to become debt-free if I avoid borrowing more?
A: It depends on your income, expenses, total debt, and interest rates. But if you commit to paying extra each month and reduce expenses, you’ll likely finish faster than if you borrowed more. Every extra amount you pay reduces interest and speeds the process.

11. Q: Is there ever a “good debt” and a “bad debt”?
A: Yes. Good debt is borrowing for something that will earn you income or increase in value (education, business, property). Bad debt is borrowing for things that don’t yield value and when you are already stretched. Borrowing to pay off loans falls into the bad debt category usually.

Conclusion & Call to Action

Borrowing to pay off loans might look like a quick fix, but for students and working class in Nigeria, Ghana, Kenya and Uganda it is almost always a risky move. Unless you carefully assess, plan and commit to change your habits, you may end up with more debt, greater stress and fewer opportunities.

The best path is: budget wisely, cut unnecessary spending, prioritise loan repayments, negotiate with lenders, build extra income and savings. Use borrowing only when absolutely necessary, under very strong conditions.

Take action now: Start by making your debt list and a monthly budget. Commit to a plan that avoids borrowing more. Download our free Debt-Freedom Checklist eBook (link below) and join our newsletter for monthly tips on managing loans and building financial freedom.