Do you really need a short-term loan if it leaves you with in crippling debt? And if you really must take a loan, which are the best companies out there?
Over the past 10 years mobile loans have grown in Kenya. It is estimated that there are over 49 loans platforms in Kenya. The mobile loan services have become possible by the surge of the financial technology sector (fintech), largely due to large vast amounts of funding for the fintech industry. What also supported the increased access to mobile loans, is the fact that the industry is largely unregulated and include major banking companies such as Commercial Bank of Africa, Equity Bank and Coop Bank.
Loan companies are clever and often rely on desperate young Kenyans looking for access to quick cash. According to a study, 6.5 million Kenyans have borrowed previously. Another three million borrowers reported late loan repayments that attracted hefty penalties with nine per cent of defaulters being reported to the credit reference bureau (CRB). High interest fees have resulted to borrowers, many of whom are youth, having to borrow even more to pay original debt, borrowers forced to borrow from Peter to pay Paul, resulting in an endless circle of debt. It is was found that default was a major reason for poor business performance and loss of jobs in 2017.
Yes, loans are loans. Used properly can alleviate immediate cash deficiency, however it is still borrowed money therefore every borrower should think it through before taking a loan outside of friends/ family.
Many mobile loans can have extortionate interest rates, and most loans can have interest rate ranging from 4% to 352%.
For example, a Tala loan cost between 5% to 14% for a 21-day loan. A loan of KSH 10,000 with Tala for 21 days charged 14% will amount to KSH11400 once paid back. Umba, on the other hand charges 1-15% interest monthly depending on the size of a loan.
A 10K loan from Umba paid over 2 months using their highest interest rate of 14% (could be lower) will cost you KSH1400 per month. In total you would need to pay back KSH12800. Whereas a 10K Zenka loan will result in paying back 12900 over a period of 60 days based on their processing fee which cost between 9-29%.
All loans offer different loan interest rates, repayment periods for the same amount, so research must be carried out beforehand
To decide between loan companies, you need time to shop around, (go to Uunzi/loans) review the cost of several loans, the loan repayment period, check for service fees and the outcome of late payment etc.
With Uunzi you can search for the cheapest loan on our search facility and also use our loan calculator on each loan companies page
Even though mobile loans are low value, they may represent a significant share of your income. This means you will struggle to repay them.
Do not take any loan without fully understanding the terms and conditions.
Use Uunzi to search, review, calculate the best loan for you.
A good loan is money borrowed to finance an income-generating activity. For example, borrowing to stock up your business, or start a business. From these activities, you can recover the money needed to repay the loan.
A bad loan is money borrowed for paying house rent, buying groceries or paying for your home’s satellite TV subscription. The borrower will have difficulties repaying the loan.
Understand why you are taking the loan- If you have to take loans every month just to pay house rent, then you are living beyond your means. You must cut down on living expenses or increase your income generating activities. Constant borrowing is not the solution to a low-income problem.
Make a repayment plan- Whether you take a loan of 1000 KSH or 100,000 KSH, you must have a plan on how to repay it. Calculate how much money you must have each day or each week so that you can repay the loan on the due date. If the amount of money that you must have is higher than your income, please don’t take that loan because you will fail to repay on time.
Avoid borrowing from one to repay the other- Some mobile loan tempt people to borrow from one to repay another mobile loan. Do not do this! It’s a debt trap waiting for you! This is a sign that your income cannot support your lifestyle. Eventually, you will default on repaying the loans and it will become impossible to borrow anymore and could result to being blacklisted at the Credit Reference Bureau (CRB).