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Debentures are important sources of finance for large companies. They help companies raise capital or funds in order to run their businesses more efficiently. Besides that, companies do not use a debenture to invest their profits. And this is just like other types of bonds, they document them in an indenture. 

Debentures do not have collateral. Just like loans without collateral where they do not require an asset as a backup for loans. As you read along, you’ll know more about debenture, how it works, its features and so on.

What is a Debenture?

A debenture is a type of bond or other debt instrument that corporations do not secure by collateral. Because of this, they rely on the creditworthiness and reputation of the issuer. Corporations and governments usually issue it to raise capital or funds. Debentures that have fixed rates of interest can help companies raise funds. So, debenture holders are, therefore, creditors of the company.

In other terms, it is an acknowledgement of the organization’s debt to the public. Therefore, a company issues it to admit that the company has borrowed an amount of money from the public. And they promise to repay it on a future date. It helps businesses to raise long-term debt capital.

How do debentures work?

Having known the meaning of debentures, you would need to know how they work. It is through an agreement they call an indenture that the borrower issues them. This agreement specifies specifics such as the loan amount, convertibility, interest rate, and maturity date. However, this depends on the country of issue. Thereafter, the investor lends the money to the borrower with the expectation of return at the interest rate they agreed on.

Case study of debentures

This case study will help you have a better understanding of what debentures are all about.

If a company X in Ghana issues a GH₵100,000 debenture that matures on December 30, 2025. This is the date the company expects to receive the loan back. And it has a 5% interest per year, payable on 30 September every year. Then, an investor agrees to offer the loan at a fixed charge. If company X defaults on the payment, the investor may now sell the company’s assets. They’ll sell these assets in order to raise the capital they need to fulfil the loan.

What are the features of a Debenture?

Debenture has essential features investors or the issuers must note. When companies issue it, they will first draft a trust indenture. And this trust represents an agreement between the issuing corporation and the trustee that manages the interest of the investors.

The following are its features:

1. Interest Rate

They determine the coupon rate, which is the rate of interest that the company will pay its holder or investor. This coupon rate could either  be fixed or floating. They may tie a floating rate to a benchmark such as the yield of the 10-year Treasury bond. Because it’s floating, it will also change as the benchmark changes.

2. Credit Rating

This credit rating has to do with the company’s credit rating. However, its credit rating affects the interest rate that investors will receive. Credit-rating agencies assess the creditworthiness of government and corporate issues. They give investors the overview of the risks in debt investment.

3. Maturity Date

The maturity date is essential because it dictates when the company must pay back its holders. The company has options on the form to choose from and it will help arrange how the repayment will take place. However, it is a redemption from capital, in which the issuer pays a lump sum payment upon the debt’s maturity. 

Alternatively, they could make the payment via a redemption reserve. Reserve in which the corporation pays certain sums each year until they fully repay the loan at the maturity date.

The types of debenture charge

It can grant one or both of the following charges, with lenders typically seeking one or both of them.

1. Fixed charge

The fixed charge helps a lender to ensure it’s the first creditor to recoup any outstanding debt. Especially if a borrower cannot repay a loan. It gives a lender control and ownership of a borrower’s asset when the borrower cannot repay. Then the lender will use the money from the sales of the asset to repay the outstanding debt. It is very common for fixed charge to be against property.

A fixed charge can cover building fixtures, trade fixtures, etc as well as covering the freehold or leasehold of a property. With a fixed charge, the borrower cannot sell the asset without the lender’s approval. And they typically direct the revenues to the lender or use it to purchase a new asset. Which is the asset the lender places a fixed charge on.

2. Floating charge

They can attach a floating charge to all of a company’s assets, or specific classes of asset. These assets include stock, raw materials, debtors, vehicles, fixtures and fittings, cash, and even intellectual property. Because the charge is ‘floating,’ these assets may change over time, with the borrower having the ability to shift or sell any assets in the normal course of business.

When the lender attempts to enforce it in a default situation, the floating fee “crystallizes” and effectively becomes a fixed charge. The borrower won’t be able to deal with the assets in question. Unless the lender gives them permission to do so. A floating charge gives a lender priority over unsecured creditors for payback allocation in an insolvency or liquidation.

3. Multiple debentures

Multiple debentures on the same borrower are workable for a lender or lenders. These could either be multiple fixed debentures against different specific assets, multiple floating debentures, or a mixture of both. When a company’s first lender issues it, they frequently block a second lender from issuing another without their permission.

When many lenders have debentures having recourse against the same borrower’s assets. Then they will agree on a payment priority. And they frequently use a Deed of Priority to document this between the lenders and the borrower.

Types of Debenture

There are types of debenture for lenders and borrowers to explore. They include:

1. Secured and Unsecured: A secured debenture imposes a charge on the company’s assets, effectively mortgaging the company’s assets. An unsecured debt does not charge or secure the company’s assets.

2. Registered and Bearer: They record a registered debenture in the register of debenture holders of the company. And they require a regular instrument of transfer for their transfer. Whereas bearer debentures are debentures, they can transfer simply by delivery. A registered debenture is one that they enter the company’s debenture holder registry. For their transfer, they require a regular instrument of transfer. Whereas bearer debentures are debentures, they can transfer simply by delivery.

3. Convertible and Non-Convertible: After the expiry of a specific period, they can convert a convertible debenture into equity shares. Whereas non-convertible debentures are those that they cannot convert into equity shares.

4. First and Second: The first debenture is the one they repay before the other. Whereas the second debenture is the one they pay after the repayment of the first debenture.

What are the pros and cons of debentures?

Debentures have their pros and cons; they’ll guide both borrowers and lenders in making specific goal-oriented decisions.

The following are their pros:

1. They pay investors a regular interest rate, sometimes known as a coupon rate.

2. Convertible debentures are more appealing to investors because they can convert it to equity shares after a specific period.

3. Companies pay debentures before common stockholders in the event of a corporation’s insolvency.

4. Investors who desire a steady income with less risk prefer them.

5. Because they do not have voting rights, financing through them does not reduce control of equity shareholders authority on management.

6. Because the interest paid on them is tax deductible, financing through them is less expensive than financing through preference or equity capital.

7. The company does not use them to invest its profits.

8. When sales and earnings are typically consistent, they are a good financing option.

The following are their cons:

1. When the market interest rate is rising, it may expose fixed-rate debentures to interest rate risk.

2. Creditworthiness is essential when considering the chance of default risk from the underlying issuer’s financial viability.

3. They may be subject to inflationary risk if the coupon payments do not keep pace with inflation.

4. Each company has a specific amount of borrowing power. When they issue debentures, it reduces the capacity of the company to borrow further capital.

5. With a redeemable debenture, they required the firm to make plans for repayment on the designated date, even if the company is experiencing financial difficulties.

6. With redeemable debenture, the company has to make provisions for repayment on the date they specified. Including periods the company faces financial difficulties.

7. They permanently constrain the earnings of a company. Because of this, there is a bigger risk when the company’s earnings fluctuate.

Is a debenture different from a bond?

A debenture is a sort of debt instrument companies or other entities issue as an unsecured or non-collateralized debt. And it typically refers to bonds with longer maturities.

Are debentures risky investments?

Debentures are less risky than investing in the same company’s common stock or preferred stock because they are debt securities. With bankruptcy, they’ll regard holders of debentures as more senior and prioritize them over other types of investments. These debts, however, are riskier than secured obligations because they do not back them by any collateral. Because of this, interest rates on them may be higher than on other identical collateral-backed bonds from the same issuer.

How are debentures structured?

They structure all debentures in the same way, and they have the same qualities. 

The following is the structure of a debenture:

1. Preparation of a trust indenture, which is an agreement between the issuing business and the entity that manages the bondholders’ interests.

2. They then determine the coupon rate, or the interest rate that the corporation will pay the debenture holder or investor.

3. This rate could be a fixed or floating rate and they determine it by the credit rating of the company or the bond.

4. To common stock, debentures can be convertible or non-convertible.

Is debenture good or bad?

Debentures are a fundamental part of raising capital for a firm. Without debenture, some lenders won’t lend more than a specific amount. Therefore, no matter how much you want to borrow, prepare to put your assets up as collateral.

If you don’t want to risk putting your company’s assets on the line, an unsecured loan may be a better fit for you, even if it means borrowing less and paying a higher interest rate.

Conclusion

Companies issue debentures when they lack cash flow. Especially when they need to raise capital along with other long-term finance sources. Companies will always prefer to issue the debenture with fewer troubles. This is the reason they will need to follow the regulations and procedures that come along with issuing debentures. Besides that, they must ensure that the debenture bears the features discussed in this article.

A corporate loan is a loan that is available to businesses rather than private individuals. It is for this reason that corporate loans differ from personal loans. Depending on how much money your business needs, you can choose from a variety of different methods. You may wish to reinvest the profits from your business. Or you can find a partner or investor who will invest some money in your company. However, in this article, we’ll discuss corporate loans. Which are common ways for businesses to raise funds.

What is a corporate loan?

Often, people use corporate loans interchangeably with a business loan or enterprise loan. Corporate loans are two types available on the loan market. A retail loan, and a business loan. A retail loan is one that is given to an individual consumer. Loans for personal use, such as home loans, auto loans, student loans, gold loans, credit cards, loans against property. They fall into the category of retail loans. We can further divide a secured loan into a secured loan and an unsecured loan.

It is possible to get a secured or unsecured corporate loan. Secured loans require a business asset as collateral to ensure their repayment. Nonpayment of a loan can cause the lender to seize the property in order to claim its value. You can borrow more and repay it over a longer period with secured loans, as compared to unsecured loans, which offer a higher interest rate and shorter payment terms.

Businesses often use unsecured loans for urgent funding needs. A financial institution does not require any kind of security or collateral. However, businesses with poor credit ratings can’t apply for unsecured loans.

Types of corporate loans

You can choose the appropriate corporate loan depending on your needs. Financial institutions in Ghana offer the following corporate loans.

1. Business term loan

An inexpensive term loan provides capital for purchases of property, renovations of properties, buying of new machinery, and updating technology. There is usually a fixed repayment schedule and fixed interest rates for term loans.

2. Loan against securities

Pledging securities is one of the many ways you can raise funds for your business. If you have financial investments such as mutual funds, insurance policies, bonds, shares, fixed maturity plans, and/or exchange-traded funds. It is possible to renew the term of a loan against securities every 12 months.

3. Letter of credit facility and bank guarantee

An installment loan is a type of credit facility in which a bank is going to guarantee to the seller you will pay on time for the estimated amount. The bank will cover the balance if you cannot pay for the purchase.

4. Cash credit facility

As a business owner, you can get cash credit by pledging business assets like receivables or inventory. An asset that is pledged for cash credit has a limit for withdrawal of 70% to 80% of its value, and the loan is renewed every year.

5. Overdraft facility

With an overdraft facility from a bank, you can deduct funds from your current account below zero, with a specified limit. The pledged securities determine your overdraft limit. They will charge you interest on the amount that you have used. Banks reserve the right to request short notice repayment of funds.

For more on business loans you can read:

1. Business start-up- Everything you need to know
2. SME loans in Ghana
3. Business loans in Ghana-How to apply

What is the interest rate on a corporate loan?

A company’s credit score, loan repayment history, debt, and other factors may influence the interest rate. Business requirements and the financial stability of the organization may also affect the rate.

What is the eligibility for a corporate loan?

For you to be eligible for a corporate loan, there are certain criteria that make you eligible. They include:

1. As a loan applicant, you need to have an established business for at least 5 years.
2. Profitable business or enterprise for the last two years.
3. An established business with good credit ratings and a history of success is most desirable.
4. The bank will examine your credit history and repayment status if you have applied for one previously.
5. A default-free applicant who has never defaulted on any loan.
6. A citizen of Ghana who has never been convicted of a crime.

What are the requirements for a corporate loan?

The requirements include:

1. An outline of your business plan.
2. Form and passport-size photos with a duly completed application.
3. Application and business cards.
4. Documents of identification.
5. You can provide proof of address by supplying electricity or water bills, ration cards, trade licenses.
6. The bank’s account statement.
7. Proofs of the business address and vintage.
8. Financial statements and records for the last three years.
9. A tax certificate for income tax and a tax return for sales tax.
10. Certificate of incorporation.
11. Registration and licensing.

How can I apply for a corporate loan in Ghana?

Financial institutions and banks offer corporate loans. Depending on your convenience and resources, you can either apply online or offline for the loan. Do the following to apply online:

1. Visit the official website of the lender.
2. Fill out the application form correctly.
3. Upload your documents.
4. Submit and wait for feedback.

Alternatively, you can visit the nearest branch and speak with a representative. They will consider you for both grants if you meet all the requirements and submit all necessary documents.

Advantages of a corporate loan

Small, medium and large businesses benefit from business loans.

1. It is possible to borrow a large sum of money for major business projects.

2. Borrowing money is fully under your control.

3. The funds are easily accessible.

4. There is usually a low interest rate.

5. Tax deductions are available to you.

6. There will be no repayment due if your business fails.

7. Enhance your working capital.

9. You won’t have to share the profits of your business.

10. Credit score for your business will improve

Disadvantages of a corporate loan

Corporate loans also have some disadvantages that might discourage an applicant from applying.

The following are some of these disadvantages of corporate loan are:

1. Loans are not available to all businesses
2. Assets are typically used to secure them
3. Lenders rarely grant the full amount you requested.

Conclusion

Existing businesses and industrial companies apply for corporate loans when they need working capital or funds. Besides helping the company function smoothly, this loan also covers long-term and short-term expenses. You can use the fund for a variety of expansion-related activities, including paying for daily expenses, financing working capital, upgrading machinery. Both commercial and government lenders offer corporate loans. In borrowing money, you must make sure that your business is always careful. A loan can be the perfect solution for businesses that don’t want to deal with the hassles of finding a business partner or investor. If you cannot make your monthly repayments, you could lose your assets as collateral. So ensure that you will pay back the amount you borrow before you borrow it.

Progress Savings and Loans have flexible investment and loan products to satisfy diverse customers’ needs. Relying on the funds from financial institutions around you wouldn’t be a bad idea sometimes. Especially when you do not have any option of getting financial help from a friend or family member. Therefore, you must need money to meet your financial obligations. Progress Savings and Loans can help you out with personal loans, car loans and other financially related services.

So, as you read along, you’ll know more about Progress Savings and Loans, their products, and so on in this article.

About Progress Savings and Loans

Progress Savings and Loans Limited is a Ghanaian company incorporated on December 8, 2011. The Bank of Ghana licensed it on 12th February 2016 under the Non Bank Financial Institution Law 2008 (Act 774). Allowing it to provide financial services to the public. Consequently, the Bank of Ghana supervises Progress, therefore it is authorized to take deposits from the public and institutions. And it can give out loans and offer other financial services just like other banks.

The head office of Progress Savings and Loans company is at the Zion House, Shiashie Road, East Legon. Its first branch is on the ground floor of the Zion house. However, its approach to products and services is largely driven by its ability of clear understanding of the specific needs of its clients. Besides that, it will help provide tailor-made services to meet the needs and challenges of its customers.

What are the products of progress savings and loans?

They have various products they offer to their customers. These products have features, benefits and requirements that will help the customers to select the product that suits their needs.

1. Susu/ savings account

They designed this innovative savings product for small cash holders and savers. Especially those who cannot leave their homes and workplaces to come to the bank. Here, without penalty, depositors have easy access to their savings. After saving for a period of 8 weeks, they can offer you the opportunity to access loans. With this savings arrangement small savers mobilize enough capital to start small businesses.

The benefits

1. Earn attractive interest on Susu deposits
2. Easy access to loan
3. Use savings as collateral
4. Building substantial bulk deposit

The target market

1. Individuals
2. Traders
3. Groups

2. Current Account

They also offer current account products to their customers.

The following are the current account products progress savings and loans offer their customers:

• Corporate/ current account

They recommend this demand deposit account for prospective corporate clients and big time enterprises. Especially those who undertake quick business with Progress. Because it’s a cheque account, they issue the corporate clients corporate cheque books. In this type of account, customers can withdraw however they wish to.

The requirements

1. Completed account opening form.
2. A Certificate of incorporation.
3. Certificate to begin business
4. Get the company regulation
5. Get the company resolution to open an account and Mandate
6. Proof of business address.
7. Get your national identification and key details of principal directors and key management staff. 

• Individual/SME Current Account

They open this demand deposit account for individuals, SMEs (Enterprises), Clubs and Societies, Schools etc. And they issue account holders cheque books and they can make deposits and withdrawals however they want.

3. Savings account

This is a savings passbook account which every customer can access. Especially those who wish to raise capital or save for investment for any purpose. So, customers who need it can open an account with any amount. Customers’ access to their cash in this account is unlimited.

The benefits

1. Safe custody of your money
2. Earn competitive interest rate
3. Statement of accounts on request
4. Flexible cash withdrawal terms.

4. Progress junior account

This is a savings account product which encourages parents to save on behalf of their children below 18years. Parents or guardians who wish to secure the future of their kids and inculcate the habit of savings in them. They can operate this account on behalf of their children/teens.

The benefits

1. A great opportunity to save for your child’s future.
2. Inculcate the habit of savings in children.
3. Competitive interest earning.
4. Educational clubs/ trips for the kids.

The features of progress savings and loans junior account:

1. Savings account for children/teenagers below 18yrs.
2. Minimum opening balance-  GH₵50.
3. Minimum monthly contribution of GH₵20.
4. Twice the normal savings account rate of the bank is the interest earned.
5. No charges on account.
6. They can use the account as collateral for loans to pay child school fees.
7. The parents/guardians will hold the account in trust until the child turns 18yrs.
8. The permit withdrawal twice a year.

5. Fixed deposit investment account

This product lets customers place their funds with Progress for a fixed tenure. 

The benefits

1. It has a 91 day Treasury bill rate and premium which is an attractive interest rate.
2. It has a negotiable premium rate and changes upwards with larger amounts and longer periods.
3. You can start the investment amount with a minimum amount of GH₵1,000.00 upwards.
4. There is no penalty for early liquidation.
5. For all early liquidation of investments they require 24 hours notification.
6. You can use the investments as collateral.
7. You can benefit from the provision of free investment advisory services to their clients.

The features of progress savings and loans fixed deposit investment account:

1. It has a flexible investment period of 30 days, 60 days, 91 days, 182 days and 365 days.

6. Repo investment account

Repo is a loan they collateralize and arrange between a dealer and a counterparty. Here, a dealer will borrow from his or her counterparty. Then the dealer will lend its security as collateral at a rate they agree on and for a given period. When the term ends, the dealer will pay back the money at repurchased rate. Then take back his or her security from the counterparty.

Repos have types namely; reverse repo, an overnight repo, term repo and open repo.

Reverse

There must be an agreement for a repo to work effectively. When a dealer lends money to the counterparty, they know it as a reverse repo.

Overnight Repo

Overnight repo is what they call a loan agreement with one day duration.

Term Repo

The agreement is a term repo where the term is over one day. Mostly, term repos have durations within three months.

Open Repo

The term of open repo is renegotiable, and it is an overnight repo. 

7. Personal loans

They give personal loans to workers of reputable companies. Also, individuals with regular income can also access it to meet their needs. Such as payment of school fees, home improvement, purchase of land and so on.

The requirements of progress savings and loans personal loans:

1. Application letter.
2. Copy of National ID card.
3. 2 Passport sized pictures.
4. Proof of applicant’s address and workplace address (utility bills).
5. Bank statement for the past 6 months.
6. Letter of introduction from employers.
7. Copy of applicant’s pay slip for at least 3 months.
8. Copy of guarantor’s National ID card.
9. Present copy of guarantor’s pay slips for the past 3 months.
10. Any other document they may require.

8. Group loans

The formation of Group is very simple. And the group size shall be about 10 to 15 members. The members should have sustainable economic activity preferably traders, artisans, tailors, etc. But for church groups, they shall draw membership from the various church organizations. Church elders will play a key role in the lending process as a requirement.

Societies and clubs will make up the groups and they will have their membership coming from the catchment area. That is, where a branch of the company is sited. They shall draw Executives and Guarantors from the communities. And it will only take 8 weeks for Members to make savings.

The members must have a savings lien of 25% of the loan size and have group guarantee.

Also, the loan duration is 6 months and a repayment on a weekly basis. For the first cycle, the loan size would be GH₵2,000.00, then the second cycle GH₵3,500.00. But for the third and fourth cycle and above GH₵5,000.00.

9. Auto loans

The cost of the vehicle with the loan amount approved shall be in tandem for this vehicle loan product. They give the beneficiary owner the vehicle. And they require the beneficiary to do daily sales of an amount they agreed as repayment.

They insure the vehicle comprehensively in the company’s name. And they can change ownership after full payment of the cost of the vehicle. Along with interest and other charges like insurance.

They can lodge the repayment of the auto loan in a savings account opened for the beneficiary for this purpose. The loan tenor is 36 months. The company will cease the vehicle when there is a default in repayment. And they can sell it to cover the outstanding loan amount.

10. Salary loans

In order to assist salaried workers to get loans with ease. They grant this loan to salaried account holders whose salaries pass through the bank.

The features

The employer of the worker shall sign an undertaking. As assurance of the continued channel of the applicant’s salary through the company. Workers in recognized institutions are the targets if this loan product. To assist beneficiaries in the acquisition of plots of land, fixed assets or meet the personal needs of workers.

What are progress savings and loans limited services?

They offer some services to their clients. Which include;

1.  Business Advisory Service

2.  Business Planning

3.  Financial Planning

4.  Cash Flow Forecast

5.  SME

6.  Service and Price Guide.

What are progress savings and loans contact details?

For further enquiries, you can contact them through:

1. Head Office:P.O.Box ST 237, Accra,Ghana.

2. Address: NO. 7 Nii Yemoh Avenue, 3rd Floor, Zion House,Boundary Road,Shiashie,East Legon.

3. Digital Address: GA-287-8384

4. Phone: +233 (0)50 167 8289

5. Enquiries: +233 (0)50 1579646, 050 151 1551

6. Email: info@progressghana.com

Conclusion

You can secure the lifeline to funds to make quick financial expenses. In the end, what matters most is whether you make an efficient use of the loan. That is, meeting all the financial obligations you needed the loan for. This is because if you cannot use the loan responsibly, you could be caught up in a rat race. Where you’ll always come back for loans which will not allow you to have enough money to save or invest.

However, Progress Savings and Loans offers loans and other finance products to the people of Ghana. And they designed these products to meet the different needs of the people.

Long-term loans are contracts between a lender and a borrower for 5 to 15 years. Usually, financial institutions provide long-term loans to help people break financial barriers. While you can use this loan for a variety of purposes, it doesn’t have a fixed term. They are necessary when it’s impossible to pay back a short-term loan. The major differences between financial institutions are in terms, conditions, interest rates, and agreements. This article discusses what long-term loans are, their features, requirements, benefits, and disadvantages.

What is a long-term loan?

A long-term loan is a loan that an individual borrows from a lender for a specific purpose. As long as the repayment options range from 5 to 15 years, you may be in for a long-term loan. Also, they refer to loans that a borrower will pay back over a long period. The interest rate on long-term loans is competitive. An interesting aspect is that you can use them for any purpose. As per the conditions of the loan, you will repay interest and principal over time regarding the loan contract.

Features of long-term loans in Ghana

It is possible to get long-term loans at low-interest rates. It motivates most of the people who use it. The following are a few of the features:

1. The loan amount ranges from GH¢500 to GH¢100,000.
2. Repayments of the loan are monthly.
3. Processing loans quickly and conveniently.
4. The loan will last between twelve and thirty-six months.
5. A successful application results in immediate disbursement of funds.

What are the requirements?

Every application for a loan is subject to certain criteria. If getting this loan is your last resort to meet your financial needs. Here are the requirements you need to meet in order to get this loan.

1. Accurately filled loan application form.
2. Two passport-sized photos.
3. A valid national identification card.
4. An approved guarantor.
5. You need to provide proof of employment.
6. A passport-sized photo of the guarantor.
7. National identification card of the guarantor.

When can one get a long-term loan in Ghana?

Individuals in Ghana with good credit are more likely to benefit from this loan. When you need a loan for an expensive, but valuable move, take out a long-term loan. These moves could include merging debt, improving your home, or hosting an event. Having a bad credit score can cause high interest rates. However, these loans are also good options when taking out a large sum of money and needing more time to pay it back. 

What are the chances of getting a long-term loan with bad credit?

When applying for this loan, getting a good credit rating is helpful. Prospective borrowers should compare rates and terms of lenders before taking out this loan. You may be ineligible for a loan if you have bad credit. Poor credit history can prevent a person from qualifying for this loan with low interest. Hence, credit score requirements are specific to many financial institutions. Therefore, borrowers with poor credit may find it difficult to find a financial institution or lender willing to approve them. Also, we always recommend getting pre-approval before starting an application. Thus, the borrower can find out from whom and at what cost he or she may receive a loan. Also, without negatively affecting their credit scores.

Which financial institution offers a long-term loan in Ghana?

In Ghana, there are many financial institutions that offer this loan. These loans are available from 

1. Credit Union
2. Banks
3. Savings and Loan companies
4. Alternative lenders in Ghana. 

Uses of a long-term loan

1. Mortgage purchase
2. Home improvement
3. Car purchase
4. Business investment
5. Debt consolidation
6. Personal needs
7. Business start-up

What are the benefits?

There are several benefits with this loan. While paying it back gradually over time, you can solve that long-term need.

Some advantages are:

1. Getting it is straightforward.
2. The loan has multiple purposes.
3. The repayment option is flexible.
4. It meets a variety of needs.
5. Payments are lower each month.
6. Interest rates are lower.
7. You can improve your credit rating with them.
8. The long-term personal loan gives you more borrowing power and allows you to merge more debt.
9. You can make your major purchase with it.

What are the disadvantages of taking a long-term loan?

The downsides include:

1. A high rate of interest.
2. Long-term repayment causes a change in finance.
3. You will need collateral.

Conclusion

When you have an unstable financial situation, it is not advisable to apply for a long-term loan. However, you will have a lower credit score if you do not repay this loan, which financially affects you. Also, these loans are an affordable option when you need a loan in Ghana, but you may be perpetually in debt if you choose to take out a longer-term loan. If you are considering this loan, remember that debt is an additional financial burden. Your loan requires constant attention until you pay it back. They are more beneficial since they stretch out repayments.

A line of credit is a type of credit that banks or credit unions often issue to borrowers. And if you qualify, you can borrow up to a certain amount for a set period. You’ll only have to pay interest if you take out a loan from it. Once you repay the money you borrowed, you’ll be able to borrow it again. You have complete control over when you take out the money, pay it back, and repeat. This would be possible if you adhere to the terms, which include repaying what you borrow on time and in full.

As you read along, you’ll learn more about the line of credit, how it can impact your credit score and so on.

What is a line of credit?

A credit line is a revolving credit that you can use again and again. It’s a sum of money that a financial organization, such as a bank, has extended to you and from which you can withdraw funds as needed. Your credit score will determine how much they will allow you to get. It varies from a loan in that you can withdraw any amount up to the maximum at any moment, rather than receiving a lump sum payment as with a loan. So, if you have a GH₵10,000 credit line, you can use GH₵5,000 to fund a new home repair project when you need it while still having GH₵5,000 available on it.

So, a bank or financial institution’s line of credit is a flexible loan. It is a fixed amount of money that you can borrow as you need it. Then repay immediately or over a certain length of time. This is like a credit card that allows you a specific amount of cedis. You can use it when and how you like. Like a loan, it will accrue interest as soon as you borrow funds. And as a borrower the lender must approve you based on your credit rating and/or relationship with the bank. It’s important to remember that interest rates are often changeable, making it difficult to forecast how much money you’ll end up owing.

How do lines of credit work?

There are company lines of credit, but we’ll focus on personal lines of credit here. Personal lines of credit are normally unsecured, which means you don’t have to put up any collateral to get one. Secured lines of credit are secured loans that are backed by assets such as your home or a savings account. Better credit ratings may help you qualify for a lower annual percentage rate when applying for a line of credit. Some lines of credit have fees, such as an annual charge, and limits on how much you can borrow.

After they’ve approved you for it. You’ll have a specific time frame during which you can withdraw funds from the account (known as the “draw period”). A draw phase can last a long time. When you’re ready to borrow money, the bank may issue you special checks or a card, or transfer the funds to your checking account.

When you borrow money from it, interest typically accrues. So, they’ll require you to make minimum payments. And this is the amount of which they’ll remit to your available line of credit as you make them. When your draw period finishes, though, you’ll enter the repayment period, during which you’ll have a specific amount of time to pay off any outstanding amounts. Keep in mind that making merely minimum payments may end up costing you more in the long run in terms of interest.

Where can I get a line of credit?

You can apply for it at a financial institution such as a bank or credit union if you need one. You’ll want to browse around for the greatest deals and make sure you’re aware of any restrictions or qualifying requirements. So you could be able to secure several thousand cedis or more of it. Check your credit report before applying for it at the bank. Credit bureaus use the information in your credit report to calculate your credit score. So you want to double-check that everything is in order. You have the option to contest any mistakes.

Ways a line of credit impacts your credit scores?

Your credit score informs a lender about your creditworthiness and can influence the size of your credit line. You can apply for it after reviewing your credit. The financial institution will approve you for a particular amount. And a draw time during which you can use money from it once they’ve approved you. The duration of the draw varies, although it might last up to several years.

The financial institution may provide you a special card or checks once they’ve accepted you and are ready to draw money from your credit line. In other circumstances, they may transfer the money to your checking account by the banking institution.

Interest will accrue when you borrow from it, and you will make payments. Your available credit from your credit line will increase as you repay it.

The lender may conduct a hard inquiry on your credit reports as part of the application process for it. It’s possible that your credit scores will drop a few points because of this. When they approve you and you accept the line of credit, it usually shows up as a new account on your credit reports.

It is possible to minimize your credit usage rate and boost your credit scores if you never use your available credit or only use a small fraction of the total amount available. Your usage rate shows how much of your available credit you are using. If you borrow a large percentage of the credit, your utilization rate will rise, lowering your credit score. In addition, if you make late payments, your credit score may decrease.

What are types of lines of credit?

They come in different forms, and they include;

1. Secured lines of credit

They back secured credit lines by an asset that serves as collateral, such as a car or a home. They do not back unsecured credit lines, such as most credit cards, by any collateral.

A Home Equity Line of Credit, sometimes known as a HELOC, is a popular type of credit. A HELOC allows homeowners to borrow money against their home’s equity. Because you use your home as security for it. They refer to it as a secured credit line. If you need a secured line of credit, a home equity line of credit, or HELOC, is one alternative. HELOCs allow you to borrow money against the value of your property and use it as collateral for a line of credit. They usually have a variable interest rate, so your payments may go up.

In most cases, the bank will limit the amount you can borrow to up to 85 percent of the appraised value of your house. This doesn’t include any outstanding debt on your first mortgage. Banks consider other characteristics, like your credit history and income, when determining your interest rate. If you don’t own a property and don’t want to put your house up as collateral, you might get it secured by a savings account or certificate of deposit.

Read also: Loans in Ghana without collateral

2. Unsecured lines of credit

If you default on an unsecured line of credit, you may not lose your home or money. However, with unsecured loans, the lender is taking on more risk, which could cause higher interest rates than with a secured line. Each unsecured line of credit has its own set of terms. The limits might be in the thousands to hundreds of thousands of dollars. Some of them come with fees. For example, you may have to pay an annual charge just to keep your account active.

Other types of unsecured lines of credit, such as some personal ones, do not require any assets as security. But they may charge fees, such as an annual fee or upfront expenditures to open the account. You may use one to pay for school tuition, automobile upkeep, or a business-related project. As long as you know you’ll repay the loan.

The difference between a credit card and a line of credit

Lines of credit are like credit cards. Both are revolving, which means you can borrow money up to the credit limit. After that, you pay it back (plus any interest) and borrow it again. Credit cards and lines of credit are also two distinct products lenders offer. Besides that, there are some significant variations between them.

There is no draw period with credit cards; you can use them as long as the account is open and in good standing. Many have rewards programs, and if you can pay off your debt in full each month and your card has a grace period, you may avoid paying interest entirely. This means that, if used appropriately, credit cards may be a better alternative for everyday expenditures.

The disadvantage of credit cards is that they may have higher interest rates than lines of credit. So carrying a balance on one may cost you more money. They may also have lesser credit limits than personal lines of credit. And if you wish to take out cash with a credit card cash advance, you could face exorbitant costs and APRs.

When you shouldn’t use a line of credit

1. If you know you won’t be able to make payments or your income is uncertain, a line of credit may not be the best option. If you don’t pay your bills on time, your credit will suffer. Besides that, the lender may take control of the collateral on a secured line of credit.

2. Depending on your creditworthiness, you may get an unsecured personal loan with better rates than an unsecured line of credit if you know exactly how much you need and don’t want to use collateral.

3. If you’re using it to pay for necessities or short-term spending like dining out and vacations, it could be a sign that you’re in financial trouble and shouldn’t take on new debt.

When to use a line of credit

1. A HELOC or secured line of credit may be an excellent idea if you need money for a home renovation project. Also for college expenditures, or other enormous expenses as long as you know you’ll return it. Bonus: You may tax-deduct the interest you pay on your HELOC.

2. An unsecured personal line of credit may help you consolidate several small debts you’re paying off into one payment. This gives you a lower APR, while avoiding using collateral. And this depends on the terms of each of them and your creditworthiness.

The comparison of lines of credit to other types of borrowing

There are many resemblances between lines of credit and other types of borrowing, but there are also several key differences that borrowers should know. They include:

1. Credit Cards

Lines of credit, like credit cards, have borrowing limits. They can approve you to borrow a particular amount of money and no more. Also, similar to credit cards, regulations for exceeding that limit differ by lender. Although banks are less likely than credit cards to allow overages right away. Instead, they often look to renegotiate the line of credit and increase the borrowing limit. They essentially pre-approved the loan, just like with cards. And they may retrieve the money whenever the borrower wishes, for whatever purpose. Finally, while both credit cards and lines of credit incur annual fees, neither charges interest unless you owe an outstanding amount.

You can backup lines of credit with real estate and this is unlike credit cards. Home equity lines of credit (HELOCs) were immensely popular with both lending officers and borrowers prior to the housing meltdown. While HELOCs are becoming more difficult to get, they are still available and have lower interest rates. They’ll always require minimum monthly payments on credit cards, and if you do not make those payments. The interest rate will skyrocket. Lines of credit may or may not have comparable criteria for prompt monthly payback.

Read also: How to get a credit card in Ghana

2. Loans

A line of credit, like a regular loan, needs good credit and return of the monies borrowed. Besides that, it also involves charging interest on any funds borrowed. Taking out, using, and repaying a line of credit, like a loan, can help a borrower’s credit score.

A line of credit, unlike a loan, is for a fixed amount for a specific time. It also has a repayment schedule they have predetermined. Besides that, it has more flexibility and, in most cases, a variable rate of interest. When interest rates rise, your line of credit will cost more, whereas a fixed-interest loan will not. There are usually fewer limits on how you can use the cash you borrowed under a line of credit. For example, you must use a mortgage loan to purchase the property you listed. And your auto loan to purchase the vehicle you specified. Whereas a borrower can use a line of credit for whatever he or she desires.

Finding the finest location to borrow money if you determine that a loan is the best option for you can be stressful, especially if you have a financial emergency and need money quickly. Accessing cash quickly may appear even more difficult for those with less-than-ideal credit. Fortunately, even if you have credit concerns, there are a range of emergency loan options available to you.

Read also: Loans in Ghana

3. Payday and Pawn Loans

Although there are some apparent similarities between lines of credit and payday and pawn loans. This is because many payday or pawn loan borrowers are “frequent flyers” who borrow, repay, or extend their loans. And they do this regularly, also paying very high fees and interest along the way. A pawnbroker or payday lender is carefree about what a borrower does with the money. As long as the borrower repays the loan and all other costs.

The differences are significant. The cost of cash for anyone who qualifies for a line of credit will be far lower than a payday or pawn loan. Similarly, the credit evaluation process for a payday or pawn loan is more simple and less demanding. So there may be no credit check at all, and you get your funds much faster. Payday lenders and pawnbrokers rarely offer the enormous sums of money that are frequently accepted in lines of credit. Banks rarely deal with credit lines as short as a typical payday or pawn loan.

What are the pros and cons of lines of credit?

Just like every other form of loans, lines of credit also have their pros and cons.

The following are the pros of lines of credit:

1. You can only borrow only the money you need.
2. They have flexible repayment options.
3. You’ll have constant access to funds.
4. Where the ultimate costs are variable, it becomes ideal for long-term projects.
5. May draw up to 100% of credit limit without restrictions.

The following are the cons of lines of credit:

1. If you default on your payments, the lender may seize the collateral that secured the loan.
2. The variable rate on the line of credit also increases if interest rates increase.
3. Annual/monthly maintenance fees regardless of use.

4. It may be difficult to forecast the amount of interest they charged.
5. Requires a good credit score to qualify.

Conclusion

If you need money, you might be curious about the options available to you. While there are loan options, such as SME loans to expand your business. There are other loan options you could get from financial institutions to meet your needs. So you can apply for a line of credit from financial institutions around you. It can offer you access to the capital you need and could be a flexible option to consider. If you require it, ensure you can repay it. Know how much interest you might pay over time and what the lender’s terms and conditions are. If you can handle money responsibly, borrow wisely and can pay it back. Then it could be a viable funding choice for you.

A loan calculator helps in paying off high-interest credit card debt or to tackle enormous expenses wisely. Meanwhile, it is important to take loans seriously. But before applying for any type of loan, a loan calculator helps you determine what you will need to borrow. Also, what you can afford to pay back each month. You can estimate your loan payments with loan calculators. However, this article contains details on what you need to know about loan calculators in Ghana.

What is a loan calculator?

A loan calculator shows you how much your monthly loan payment will be and what the total loan cost will be. There are a variety of loan calculators available online, including ones for mortgages or other types of debt.

Categories of a loan calculator

There are three major categories of a loan based on a loan calculator they include:

1. Amortized loan.
2. Deferred payment loan
3. Bond loan

1. Amortized Loan 

In this type of loan, there is a fixed amount you pay periodically. This category of loans includes many consumer loans with regular payments that are amortized uniformly over the life of the loan. You pay your principal and interest routinely until the loan matures. Personal loans, mortgages, car loans, and student loans are among the more common types of amortized loans. 

2. Deferred Payment Loan

At the maturity of the loan, you pay back this category of a single lump sum.

Often, short-term loans or commercial loans fall under this category. When these loans mature, they have a single, large lump sum payment, unlike the first calculation, which is amortization. Meanwhile, inclusive in this calculation is a loan with smaller routine payments during its lifetime. But it only applies to loans with a single payment of all principals and interest at maturity.

3. Bond

They predetermine the loan for a lump sum repayment at loan maturity. Also, loans are rare unless they issue them as bonds. Borrowers make fixed payments at maturity on bonds rather than more conventional loans. Assuming the borrower does not default, the face value of a bond is the amount the borrower pays when the bond matures. An instrument’s face value shows how much it will yield upon maturation.

However, interest rates, market forces, and many other factors will affect the bond’s value after a borrower issues it. Regardless, the market price of a bond can change during its life, even if it does not affect its value at maturity.

How to use a loan calculator

As straightforward as using a usual calculator, a loan calculator makes calculating loans easy. Data input and results are the only two major differences between the two programs. This calculator is easy to use; all you need to do is;

1. Open the loan calculator interface.
2. Filling the fields with your information
3. Verify that the values are accurate by double-checking.
4. By clicking the “Calculate” button, you can find out how the math works.

Note: Users enter information into loan calculators and the information they enter determines the result. Using these inputs usually calculates, measures, and provides accurate results in the blink of an eye.

How to calculate a loan

Basically, every loan type and loan company has its own way of calculating a loan. Usually, you start by entering how much you want to borrow in the field marked loan amount. Then use the app to:

1. Calculate the payoff period in months or years
2. Use the interest rate calculator to determine what the right rate is for your loan
3. Check out the interest and principal payment amounts
4. Also, you may select an amortization schedule to see how many payments and interest you must make until you pay off your loan.
5. Compare the best loan offers from Bankrate’s lending partners. 
6. You can choose the terms and interest rates that best suit your ideal plan.

Benefits of a loan calculator

Some pros of a loan calculator include:

1. It allows you to find out whether a personal loan is ideal for your situation.
2.  You can use a calculator to determine whether a lower interest rate on a longer loan is better for you.
3. It helps your repayment strategy depending on what you can afford.

Conclusion

Inevitably, risk comes with debt. Make sure you negotiate for the best loan deal possible when calculating a loan. These loans can help you get the financial help you need at all times. But these loans can quickly spiral out of control when you don’t use a loan calculator before applying for a loan. It is important to always calculate your loan options to see what you can afford.

Afb mobile money loans offer financial support to individuals, small businesses or startups. Financial constraints are an inevitable experience both businesses and individuals pass through in life. Therefore, it’s natural to access money to solve your needs. And most especially when you have a pressing need you can go for a quick loan. They now know Afb Ghana as LetsHego Savings and Loans. They have carefully created loans for Ghanaians to benefit from the Afb mobile money loans.

As you read along, you’ll know more about Afb loans, the loans they offer, how to apply and so on.

What are Afb loans?

Afb Ghana, now known as LetsHego Savings and Loans, has carefully organized loans for Ghanaians to benefit from. AFB is an online platform for consumer loans with presence in over 23 locations in all 10 regions across the country. 

They founded Afb loans in 2010.

It offers various forms of loans such as payroll loans, direct loans to salaried employees. Also, it offers SmartCash loans to informal or market traders, and more. Besides that, it offers credit life insurance on selected products. And this covers the customer’s outstanding balance when he or she dies or comes disabled or critically ill. Afb loans also offer prepaid cards for payrolls & direct loans.

It has partnered with companies like Controller and Accountant General (CAG), Ghana Police. Also on the list are Ghana Armed Forces and Volta River Authority to offer Afb loan products to their staff.

Afb loans introduced the MTN Mobile Money Loan some few years back. They pay your loan in no time if you meet their eligibility criteria.

What are the loans Afb offers its customers?

Afb provides her customers with a range of loan products to help them with cash flow. They include:

1. Afb smartcash loans

They designed this loan product for informal workers or market traders. The loan term is short and up to about 30 days. It is an instant loan and one of the popular mobile money loans in Ghana. They pay it onto your MTN Mobile money wallet or Vodafone Cash wallet.

2. Payroll loans

They specially created this loan product for government salaried workers. Here, borrowers must repay the loan amount directly from their salaries on payday.

3. Land loans

Afb (Letshego) Ghana uses the land loan to assist customers who want to purchase land. Especially those who do not have the full financial strength to do so.

However, Smartcash mobile loans is the biggest loan product of Afb Ghana. They are among the top reliable mobile money loans in Ghana. This is because you can apply for a loan easily at any time. Thereafter, you’ll receive the loan in a minute stress-free. You can do all this with your phone or laptop.

How can I apply for the Afb smartcash loan?

There are certain steps you have to take in order to land the Afb smartcash loan. They include:

1. Download Creditum Prime the Afb app loan app. In order to do this, you must have a good internet connection. Visit your Google play store and search for Creditum Prime, then download the app. This app is the only mobile app Afb developed to enable customers to access loans easily. This app is just about 6.6mb and it is compatible with almost all smart phones.

2. Create your own profile with a strong password that you can easily remember.

3. Apply for the loan by following the steps in the application, you can apply for the mobile loan using smartcash.

4. Request for the loan amount you need but know that every lender has a minimum and maximum loan amount they will offer.

5. With the app, you can also apply for withdrawals using and also purchase shares.

6. If you face any difficulty or are unhappy with the service, you can publish a complaint on the app and request for help.

What are the installation steps of Creditum Prime?

There are steps you need to install the app and apply for your loan through the app. They include:

1. Download the app from playstore
2. Launch the app
3. Insert your login details
4. Choose the loan you want to apply for
5. Key in all required details
6. Click next to proceed
7. Then expect them to pay the money into your mobile money account.

They have made the Afb instant mobile money loans payment modes flexible to suit everyone.

Note: You can easily access the application form of all loans at Afb using this app.

What are Afb loans contact details?

For further enquiries, you can contact them through:

1. Phone number: 0 302 208 342
2. Street address: 4th Floor, COCOSHE House, Street No. 1328. A, off Agosthino Neto Rd., Airport City Accra – Ghana.
3. Email address: info@afb.com.gh
4. Website : http://www.afb.com.gh

Conclusion

Sometimes your family members or close friends may not be financially buoyant enough to support you always. This is when trying out loan offers from reliable lenders makes sense. And you can not overlook the pressing needs you have which could require you to get a student loan to pay your tuition, etc. Besides that, you can get SME loans to expand your business.

Therefore, if you need a loan from Afb loans (letshego savings and loans), the information in this article will guide you appropriately.

Short-term loans in Ghana are very useful for small businesses and individuals. The services may be helpful for businesses whose cash flow has suddenly dwindled. Meanwhile, emergency funds are available through such loans for individuals. In this article, you will discover the meaning of short-term loans. However, you do also get to know the financial institution to get them in Ghana.

What is a short-term loan?

Short-term loans are simply loans that when you borrow, you pay back within a year from the day you got them. Low borrowing amounts make this loan ideal for individuals and small businesses that are not entitled to bank credit. You can use a short-term loan to finance short-term working capital gaps for your business. 

If your small business is still establishing a credit line with a bank, a short-term loan is a valuable option. Borrowers will have to borrow smaller amounts, ranging from ₵100 to ₵100,000 for this type of loan. Besides businesses, individuals experiencing a temporary cash-flow crisis can also use short-term loans.

Characteristics of short-term loans

The reason short-term loans have such a short term is that they need to be repaid quickly. In most cases, you must repay it within six months to a year, but not over 18 months. Usually, any loan term that exceeds that we refer to it as a long-term loan. A short-term loan may not specify a specific due date or payment schedule. They simply let the borrower pay back the loan at his or her own pace.

Types of short-term loans in Ghana

Short-term loans can come in various forms like:

1. Merchant cash advances

This type of short-term loan is actually a cash advance but one that still operates as a loan. The lender loans the amount needed by the borrower. The borrower makes the loan payments by allowing the lender to access the borrower’s credit facility. Each time there is a purchase by a customer of the borrower, the lender takes a certain percentage of the proceeds. This continues until the borrower repays the loan.

2. Lines of credit

Using this card is much like using a business credit card. The lender sets a line of credit up, and the business can access it as needed. They will base your monthly payments on the amount you borrow. Thus, the amount of the line of credit you have access to determines how much you have to pay each month. 

3. Payday loans

A payday loan is a short-term emergency loan that is relatively simple to get. However, most lenders in Ghana offer them. One drawback to this type of loan is that you pay the entire amount in one lump sum when the borrower’s next payday comes around. The lender typically withdraws the repayment amount from the borrower’s bank account using the continuous payment authority. It is common for payday loans to have very high-interest rates.

4. Online or Installment loans

You can also apply for and approve a short-term loan online, as they do everything online. Within minutes of getting approval for the loan, they credit the borrower’s account with the funds.

5. Invoice financing

A business can secure an account receivable loan by using unpaid invoices from customers that have not yet received their pay. Depending on how many weeks the invoices remain unpaid, the lender lends the money and charges interest. Also, upon repayment of an invoice, a lender will cut off the payment of the invoice. They also deduct interest from the payment before returning what they owe to the business.

Where can I get a short-term loan in Ghana?

Short-term loans in Ghana are easy to access, as you can get them from financial institutions like

1. Smartcash

2. Mtn Qwik Loan

3. Access Bank PayDay Loan

4. Bayport Ghana

5. Blue Financial Services

6. Stanbic Bank

7. Standard Chartered Bank

8. Fidelity Bank

9. First Merchant Bank

10. Fido Micro

11. SRF Micro Credit

List of short-term loans in Ghana and their requirements

Here is a list of financial institutions in Ghana that offer short-term loans and their requirements.

1. Smartcash

Requirements 

1. To use Smart Cash, you must be a subscriber.
2. You can apply by visiting their homepage.

2. MTN Qwik Loan

Requirements 

1. MTN mobile money subscribers only.
2. Get a loan by registering.

3. Access Bank Payday loan

Requirement 

1. Only dial *901*11# on any smartphone or mobile phone.

4. Bayport Ghana

Requirements 

1. The organization you work for must be a partner of Bayport.
2. The most recent payslip.
3. A national identification card.
4. Two passport-sized photos.
5. Your bank statement showing proof of income.

5. Stanbic Bank Ghana

Requirements 

1. Age must range between 21-60 years.
2. Fill out the application form completely.
3. Stanbic Bank should benefit the organization in which you work.
4. It must have been six months since you were in employment.
5. You must be a Ghanaian resident.
6. A copy of your last three payslips.
7. An identification card.
8. Utility bill from last month.
9. Consent letter from the employer.

6. Standard Chartered Ghana

Requirements 

1. National ID card.
2. Statements of the past three months of your bank accounts.
3.  Filling out the application completely.
4. It is essential that you have a job
5. There must be a scheme agreement for salaried employees in your organization.
6. The most recent payslip.
7. Undertaking letter.

7. Blue Financial Services

Requirements 

1. Applicants must be an employee either in the public or private sectors.
2. There must be a partnership between Blue and your company.
3. Identification documents that are valid.
4. Statements of accounts.
5. A copy of a recent pay stub.
6. Document proving residence.
7. You must provide two passport-sized photographs.
8. Confirmation from the employer.

8. Fidelity Bank

Requirements 

1. You must be a Ghanaian resident.
2. Salary employees only.
3. A valid form of identification.
4. Detail about a residential address. 
5. Document proving residential details.
6. Two referees (relative or non-relative).
7. An employer’s consent.

9. First National Bank Ghana

Requirements 

1. Valid identification card.
2. Residential details.
3. Information on employment.
4. A good credit history.
5. A stable source of income is essential.

10. Fido Micro Credit

Requirements 

1. Download and install the Fido app on Google Play Store.
2. Fill in the application form accurately.
3. Valid means of identification.
4. You must be a resident of Ghana.
5. They must register the account in your name for 8 weeks on Airtel Tigo money or MTN mobile money.

11. SRF Micro Credit

Requirements 

1. A copy of valid identification. 
2. The letter of employment.
3. Three months’ worth of payslips.
4. Statements of bank account for the past three months.
5. A guarantor.
6. Valid identification of the guarantor.
7. Payslips or bank statements showing the guarantor’s income for the past three months.
8. SRF will require the applicant to show proof of employment. 

Requirements for a business owner

For you to be eligible for a short-term loan in Ghana as a business owner, you will need:

1. Certificates of registration for businesses.
2. Stock insurance.
3. A six-month statement from another bank.
4. Cash flow statement for the last three years.
5. Collateral accepted by the lender includes, but is not limited to, landed property, cash or investments. Also, a bank guarantee.
6. A favorable credit bureau report.
7. The specific borrower conditions may require you to meet additional conditions or submit additional documents.

Repayment of a short-term loan

Short-term loan repayment plans allow for manageable amounts to be repaid over 1, 3, or 6 months.

Uses of short-term loans in Ghana

Short-term loans can help you to:

1. Pay medical bills that arise unexpectedly.
2. Take care of the cost of a wedding, a family event, or a funeral.
3. Getting rid of debt (debt consolidation).
4. The farming and planting of crops.

Benefits of short-term loans in Ghana

Ghana offers many advantages to its citizens for short-term loans, including 

1. Fast approval process.
2. Funding time is quick.
3. It helps increase your credit score when you repay the loan early.
4. The acquisition is easy.
5. Their interest rates are lower.

The disadvantages of a short-term loan

Smaller loan amounts characterize them as their major disadvantage. Also, because they require you to return or pay off early, they involve small amounts. Hence, making it more affordable for borrowers.

Conclusion

Short-term loans are ideal for those who require a quick boost in cash. It is a contract between a bank and a borrower where the bank provides the borrower with a loan. This could be in local or foreign currency for a specified time period. But does not exceed one year. They usually charge interest on the individual drawings. Which they make under the loan at a rate agreed at the time of the drawing.

In recent times, the government of Ghana has made loans available through many programmes in order to ease poverty. Therefore, Masloc loans is a microfinance loan programme for start-ups and small businesses. They modestly established it to finance the poor in the various sectors of Ghanian economy. Essentially, this Masloc loan is targeted at reducing poverty, creating employment and wealth.

About the company 

MASLOC stands for microfinance and small loans center. A top microfinance body in Ghana that implements government microfinance programmes aimed at reducing poverty. Their goal is to provide entrepreneurs with micro- and small-scale loans. 

They specialize in quick, easy, and accessible micro-loans. This leads to increased employment and wealth generation. So many have benefited from this programme and people are still benefiting.

What is the work of Masloc in Ghana

Masloc is a microfinance bank programme for the less privileged known for several things, such as:

1. Implementing the government of Ghana’s microfinance program to reduce poverty
2. A provider of small and micro loans for start-ups and small businesses 
3. Provides easy loans.
4. Enhances job creation and wealth creation through small business growth. 

Masloc loan interest rate

The interest rate applicable to Masloc loans is basically 1% per month for all loans. However, one thing is certain, which is the fact that they would state the interest rate for each type of loan and the duration. 

Masloc loan requirements 

With Masloc, each loan had its own minimum requirements. However, most of each loan product includes the compulsory qualification that the borrower must use the money to fund or scale a small business to enhance economic growth.

Masloc loan products 

Masloc loan scheme helps in business growth and property alleviation. Their loan products remain the programme’s major selling point. Therefore, the loan services they provide include:

1. Group/micro loans
2. Car loans
3. Small loans
4. On-lending loans

Masloc group/micro loans

Micro-credit schemes focus on groups/cooperative societies, whose members are typically between five and twenty-five. The maximum limit for an individual within a group is GHC 1000. This credit scheme uses the group sharing principle. The entire group is liable for repaying the loan.

Note: There are no MASLOC loans that exceed 12 (twelve) months in terms of repayment and interest. 

Basic application requirements

1. Application Letter
2. 2 Passport photograph from each individual in the same group
3. National ID card
4. Business registration Documents 
5. Business plan

Masloc car loans 

The Microfinance and Small Loans Centre (MASLOC) offers saloon vehicles to unemployed persons looking for work under its vehicle hire purchase program.

Through the scheme, individual taxi drivers, especially the young, who belong to taxi and drivers’ unions, will own their own vehicles after paying the loan facility within a four-year period.

Basic application requirement

1. Application Letter
2. 2 Passport photograph
3. National ID card

Masloc small loans

Individuals can apply for a minimum loan of GHC1,000 and a maximum loan of GHC10,000. They require a loan beneficiary to provide adequate security. In addition, a guarantor who can redeem the loan will be provided too.

Application requirement

6. Application Letter
7. 2 Passport photograph
8. National ID card
9. Business registration Document
10. Investment plan
11. Management Account with Two (2) years financial statement
12. Document of land ownership
13. Resolution letter from Board of Directors

Requirement for Guarantor:

1. Three (3) guarantors
2. One (1) passport picture
3. Photocopy of national ID
4. Three (3) months’ pay slip

Masloc on-lending loan

Microfinance Institutions (MFIs), Departments and Agencies (MDAs) and rural banks can get loans for business expansion. Here, all MASLOC loans have a limited term of only 12 (twelve) months.

Application requirement 

1. Application Letter
2. 2 Passport pictures
3. Photocopy of any National ID card
4. Company and Management Profile
5. All business registration Document
6. 12 months bank statement of business
7. Business plan
8. Financial Statement (2 years)
9. List of Assets
10. Document of land ownership or rental agreement document
11. Collateral
12. Copy of operational manual

Requirement for Guarantor:

1. Five (5) guarantor (Where applicable)
2. One (1) passport picture and photocopy of national ID each
3. 6 months bank statement

Masloc loan application 

Application for Masloc loans is very easy. You can apply through their website or by visiting their office. Follow the steps below: 

1. At any Masloc office near you, submit a properly filled out application form. State the loan amount and the purpose of the loan.
2. One of the loan officers will invite you for a preliminary assessment. They will reveal all other information you need to know about the loan to you.
3. lf you qualify for the loan, they will process your application
4. As soon as they approve your application, you receive your loan within a short time.

Masloc loan calculator 

This is the online tool used in calculating and checking the interest rate and the amount due for each type of loan. It is very easy to use. We advise that rather than complain that you don’t know the amount due for each loan, use the online loan calculator and find out all you need to know.

Masloc loan office

For further enquiries, kindly contact the call centre on the following numbers: 

Telephone: +233-302-782527 or +233-302-782528 or +233-302-782643

Head Office: 29 Third Circular Road, Cantonments.

Postal Address: Private Mail Bag 261

Fax: +233-302-782532

Email: info@masloc.gov.gh

Conclusion

As one of the microfinance lenders in Ghana, Masloc loans are relatively easy to get as long as you qualify. Their loan services are available mainly at business levels, providing just what you need. It is a scheme mainly to ease poverty, create employment and help startups scale up their businesses.

Without the interest rates that come with loans, It wouldn’t be too odd to say that lenders wouldn’t be lending money to borrowers. Interest rates serve as a pat on the back of lenders for so many reasons. It serves as a consolation for the risk of giving their money to other people. Remember that they could have invested their money and made returns on their investments.

However, as you read along this article, you’ll know more about interest rates, how they work, and so on.

What is an Interest rate?

The interest rate is the amount a lender charges a borrower for using assets that is expressed as a percentage of the principal. They typically note the interest rate annually as the annual percentage rate (APR). Large assets such as vehicles or buildings, or cash and consumer goods can be borrowed assets. The interest rate is commonly referred to as the ‘lease rate’ in the case of larger assets.

The amount of risk associated with the borrower gets a proportional rate. The interest serves as compensation to the lender for giving the loan to a borrower. This is because the lender would have invested the money to yield money instead of giving it out to a borrower.

Lenders can place interest rates over different periods; such as monthly, quarterly, or bi-annually. However, most times they annualize interests. Besides that, interest rate can also be the rate a bank pays their clients for keeping deposits in the bank.

How do interest rates work?

You already know that interest rate is the charge a borrower requires from a lender for using his assets. Lease rates serve as the interest rate in the case of a large asset, such as a vehicle or building.

When the lender considers the borrower as low risk, the borrower will usually have lower interest. But if the lender considers the borrower as high risk, the borrower will charge the lender higher interest rate. This implies that lenders typically assess risk when they look at potential borrowers’ credit score. So it is essential you have an excellent credit score to qualify for good loans.

Most commonly for loans, they apply the interest to the principal, which is the amount of the loan. You can also see it as the cost of debt on the side of the borrower. Whereas it’s a return for the lender.

When do they apply interest rates?

Most lending and borrowing transactions usually bear interest.

In order to purchase homes, fund projects, pay tuition fees and so on are what individuals borrow money to do. Whereas businesses get loans to fund their capital projects and expand their business operations. They usually do this by purchasing fixed and long-term assets like land, buildings, and machinery. Thereafter they’ll repay the money they borrowed in a lump sum by a predetermined date or periodic installments.

So the money borrowers repay is usually more than the amount borrowed since lenders require compensation. This is because of their sacrifice for opting to lend their money instead of investing it during the loan period. 

Case study of interest rate

In order to understand how interest rate works, a case study will help explain it better.

For example, if an individual takes out a GH₵300,000 mortgage from the bank. And the loan agreement stipulates that the rate on the loan is 15%. This means that the borrower will have to pay the bank the original loan amount of GH₵300,000 + (15% x GH₵300,000) = GH₵300,000 + GH₵45,000 = GH₵345,000.

Whereas, if a company secures a GH₵1.5 million loan from a lending institution that charges it 12%. Then the company must repay the principal GH₵1.5 million + (12% x GH₵1.5 million) = GH₵1.5 million + GH₵180,000 = GH₵1.68 million.

What are the kinds of interest rates?

There are kinds of interest rates and there are situations that could require any of them in a transaction. They include:

1. Fixed-rate

This rates protect the borrower from rising interest rates. The rate doesn’t change notwithstanding inflation in the market. But sometimes it could become worse for borrowers if the rate falls. For example, if the rate is 10% and the reference rate falls, the borrower must continue to pay the 10% instead of the lower rate.

2. Variable-Rate (Floating)

This type of rate protects the borrower from falling interest rates. This is because they can easily adjust the loan rate. However, this type of loan is worse for the borrower. This is because it does not have a fixed rate of interest over the life of the loan. So you might end up paying way above what you paid initially depending on the current state of the economy (inflation).

What are the two types of interests?

There are types of interest that apply to loans. They are:

1. Simple interest

They calculate this type of interest on the original or principal amount of loan. You can calculate simple interest with the following formula:

Simple Interest = Principal × Interest Rate × Term of the Loan

For example, if the simple interest rate is 5% on a loan of GH₵1,000 for a duration of 4 years, the total simple interest will come out to be: 5% x GH₵1,000 x 4 = GH₵200.

2. Compound Interest

They calculate compound interest not just because of the principal amount. But also on the interest of previous periods that have accumulated. Because of this, they also call it “interest on interest.” You can calculate compound interest with the following formula:

Compound Interest = P(1 + i)ⁿ – P

Where:

P = Principal amount

i = Annual interest rate

n = Number of compounding periods per year

The compound interest will not be the same for all years just unlike simple interest. This is because it considers the accumulated interest of previous periods as well.

Note: The interest charged is the difference between the total repayment sum and the original loan. Then they apply the interest charged to the principal amount.

What are Real and Nominal Interest Rates?

A nominal interest rate does not have adjustments planned for inflation. Regardless of the rate of inflation that the economy faces. For example, the interest attached to a deposit will be the same even after several years.

Whereas the real interest rate considers the inflation rate. They measure the repayment of principal plus the interest because of real terms. Then compared against the buying power of the amount at the time they borrowed it.

It’s important to know the effects of inflation on purchasing power. This is because that’s the only way to know if you’re really earning a return from the interest. For example, if you deposit money with a lender (bank) and earn a nominal 2% annual interest. So, if the inflation rate is 4%, then in terms of purchasing power, the money you have on deposit will be actually losing 2% of its value every year. 

The nominal interest rate minus the rate of inflation is the real rate of return on an interest-bearing account. So the rate stated is just the “nominal” rate. Which means “in name only” i.e. not the REAL rate being earned.

What are the factors that affect interest rates?

There are some factors that affect interest. They include:

1. Forces of demand and supply

Demands for and supply of credit in an economy influence interest rates. The price of borrowing or rise in interest occur because of an increase in demand for credit.

Contrarily, when the supply of credit rises, it leads to a decline in interest rates. And the credit supply increases when the total amount of money that’s borrowed climbs.

For example, banks invest or lend out the money that individuals deposit in the banks. So as banks lend more money, there will always be more credit available, therefore, borrowing increases. Consequently, the cost of borrowing decreases as this occurs (just like the normal supply and demand economics).

2. Inflation

The higher the inflation rate, will cause higher interest rate rise. Logically, the interest earned on money loaned must compensate for inflation. Lenders charge higher interest as compensation for a decline in the purchasing power of money that will be repaid.

3. Government

The government’s monetary policy most times influences the amount of interest. Besides that, when the government buys more securities.

Banks have more money they use for lending, and because of this interest decrease. So, when the government sells these securities, money from the banks gets sapped. Thereby giving banks less money for lending, which will therefore lead to a rise in interest.

What is APR?

The APR is the acronym for Annual Percentage Rate (APR) which means the total cost of the loan. It comprises interest rates plus other costs. Also, the biggest cost is usually one time fees they call “points.” A percentage point of the loan is what the bank calculates them as. Brokers fees and closing costs are also what APR includes.

The APR and interest describe loan costs. The interest rate lets you know what you will pay per month. However, the APR goes further to tell you the total cost over the loan life.

What is the impact of high versus low-Interest rates?

There are impacts of both high and low interest rates on loans. Naturally, high-interest rates make loans more expensive. And when interest rates are high, there’ll be only fewer people and businesses that can afford to borrow. Consequently, it will lower the credit amount available to fund purchases which will slow down consumer demand. Because of this, many people will have to save as they have more in their savings rate. 

Besides that, high-interest rates also reduce the capital to expand businesses and this strangles supply. And this reduction in liquidity surely slows down the economy.

The low-interest rates have the opposite effect of what high-interest rates have on the economy. 

Lower housing prices have the same effect as low mortgage rates as they stimulate demand for real estate. However, low-interest rates can prompt inflation. Demand outstrips supply and prices usually rise if there is too much liquidity. This causes inflation.

Conclusion

Having read this article, before borrowing from any lender, ensure you carry out exhaustive research to know their interest rates. This is because failure to do so, you might get into more complicated financial problems than you were. Beside that, beware of loan sharks, who would always offer loans with hidden charges and unspecified interest rates. However, even after getting the loan, ensure you repay your loan completely according to your loan repayment terms. So that you’ll stand a better chance of getting another loan from your lender in the future. Especially should you find yourself in an emergency situation.