Types of loans in Ghana – Meaning and advantages


There are various types of loans in Ghana, and this depends on your needs for a loan. Also, the type of loan you crave still depends on your affordability and credit history/score. The daily increase in the need for loans is increasingly leading to seeking help from lenders in Ghana. However, this help rarely comes from family relations or friends. They come from financial institutions as loans. Loans can be a grand thing, though they can also get you into trouble. This only happens when not properly handled. Also, one key to being financially outstanding is understanding when loans are a wonderful solution for your situation. Let’s explore the meaning of a loan, the types, pros, and cons in this article.

What is a loan?

A loan is a sum of money that an individual or company borrows from financial institutions. This money helps them sort planned or unplanned events and other needs. Hence, the borrower incurs a debt. Have you ever been in debt? Click here to read more on the differences between loans and debt. The borrower has to pay back with interest within a stipulated time. It can also mean money you receive from a bank, friend, or financial institution with a future repayment of the principal and interest.

There should be an agreement between lenders and borrowers regarding the terms of the loan. They do this before they give the money to the borrower. Most times, financial institutions in Ghana require the applicant or borrower to present an asset as collateral. They always outline the collateral in the loan document.

Financial institutions give loans to individuals, business owners, companies, and governments. The major reason for taking out loans is to get funds to solve one’s needs. The interest rates and additional fees are a source of revenue for the financial institution/lender.

Forms of loans you can get in Ghana

There are many forms of loans operating in Ghana. You apply for a particular type of loan based on the purpose of the loan. They categorize loans in Ghana into secured and unsecured, open-end and closed-end, and conventional types.

1. Secured and Unsecured Loans

A secured loan in Ghana is a loan with some form of collateral. For example, many financial institutions require applicants/borrowers to bring documents that show ownership of assets. They hold on to this asset as collateral until the borrower repays the loans in full. Assets that serve as collateral include personal property, stocks, and bonds. Many individuals and companies apply for secured loans when they want to borrow enormous sums of money. The asset/collateral serves as a guarantee.

Features of secured loans include:

  1. Borrowing limit
  2. Low interest rates, and
  3. Long repayment duration.
  4. Examples of secured loans are car loans and mortgages.

Invariably, an unsecured loan in Ghana is a loan with no asset as collateral. That is why the name “unsecured loan”. The financial institution assesses the borrower’s financial background before giving out the loan. They do this to ensure the borrower’s capability of repaying the loan. The major deal is not in borrowing, but repayment. This is because the posterity of most financial institutions that offer loans is in interest and recovery of money.

Features of unsecured loans include:

  1. Borrowing limit
  2. Short repayment period
  3. Competitive interest.
  4. Examples of unsecured loans are education loans, credit card purchase, and personal loans.

2. Open-end and Closed-end Loans

An open-end loan is a loan where an individual has the liberty to borrow over and over. Examples of an open-end loan are lines of credit and credit cards, though there are credit restrictions. The highest sum of money that you can borrow at a time is what we know as a credit limit.

Closed-end loans do not allow individuals to borrow when they have borrowed until they have repaid them. As a borrower, make repayments of the closed-end loan. There is a decrease in balances. Hence, whenever the borrower wants more money. He/she will apply for another loan from scratch. However, the borrower needs to present documents to prove that they are credit-worthy. Some examples of closed-end loans include student loans, car loans, and mortgages.

3. Conventional Loans

This is a loan in Ghana that we use when applying for a mortgage. This loan has no insurance for government agencies. One example of a conventional loan is Rural Housing Service (RHS).

What are the things to consider before applying for any type of loan in Ghana?

As a prospective applicant, there are few things you need to consider before you apply for a loan in Ghana. Some of these considerations are:

1. Income

Income is a major consideration and assessment before applying for any kind of loan. For instance, an employee needs to submit payslips. Also, a salary letter from their employer. However, if the applicant is a business owner. He/she needs to submit his tax return for the past one or more years. They can require your invoices sometimes.

2. Credit History and Credit Score

An applicant’s excellent credit history and score are a sign that he/she can pay back within the agreed time. Hence, the chances of getting your loan approved solely depend on the credit score. Also, good credit history and score attract a favorable term.

3. Monthly Obligations

This is another major key consideration when applying for loans in Ghana. Meanwhile, apart from income, it is of utmost importance to assess monthly obligations. Financial institutions will not be willing to approve your loan when your monthly obligations are equal to your income. However, this is the basic reason most financial institutions require a list of monthly expenses. 

Types of loans in Ghana

The loans in Ghana vary regarding the purpose of the loan. There are various types of loans in Ghana, with different terms and conditions. Types of loans in Ghana include:

1. Personal loans

Almost all financial institutions offer personal loans. This type of loan can serve various purposes. You have the liberty to use it however you like once it is your personal needs. Personal loans are often easy to get when you have an average credit score and history. Although they are most insecure. It is usually a small amount of money with a high-interest rate. For more information on personal loans in Ghana and how to apply.

2. Cash advances

This is money you get in advance from payday loan institutions or your credit card company. Borrowers apply for cash advances when they need quick money. Cash advances are easy to get, though they come with a high-interest rate. It is also a small amount of money with a high-interest rate.

3. Mortgage loans

This is a loan with an enormous amount of money. It is a loan for real estate or the purchase of a house. A mortgage loan is a secured loan. The property you are purchasing can be the security for the loan. This means that if you don’t repay back on time, the financial institution can take back the property. Mortgage loans in Ghana help you purchase a house that takes many years to save for. They come with a long-term repayment period. The interest rate is relatively low and tax-deductible. However, you can find this on the meaning, types, and how to apply for mortgage loans in Ghana.

4. Home-equity loans and lines of credit

This is the type of loan where homeowners can borrow against the equity. The loan amount or equity is the difference between the key value of your home and the debt of your mortgage. These loans are good for home improvements or debt consolidation. It has a low-interest rate. See also the meaning of lines of credit and how it works.

5. Student loans

These are loans that help you finance a college education. One benefit of this loan is that you don’t have to pay it back while a full-time college student. It has a competitive interest rate. It comprises student loans in Ghana for students in Ghana. You can read on how to apply for a student loan. Also, student international loans for students in Ghana that prefer to study abroad.

6. Debt Consolidation loans

A consolidation loan is the combining of multiple bills for credit cards into a single debt. The repayment is by one monthly payment. This means lower interest rates and fewer payments each month. For more details, read on debt consolidation loans.

7. Payday Loans

This is a short-term loan with a high-interest. They design payday loans to bridge the gap from one paycheck to the other. They use payday loans by repeat borrowers living paycheck to paycheck. Interest rates on payday loans are very high.

8. Small business loans

Many financial institutions in Ghana offer this loan as a start-up for businesses. Small business loans have security. You will need to submit some personal assets as collateral. They require a business plan as evidence. Small business loans come with low-interest rates. You can also check on SME loans in Ghana to find out how you can apply for this loan.

9. Car loans or Auto Loans

This is a secured type of loan for a property. They use it for the purchase of a vehicle. You can also lose the vehicle to the financial institution when you don’t pay back as supposed. Apart from financial institutions, this loan can come from dealerships. Auto loans from dealerships always have a high-interest rate. Read on how you can apply for Car loans in Ghana.

What type of loan should I apply?

After you have taken a decision to source for a loan. There is a need to understand the agreement of that loan. Also, you need to consider what personal belonging you are using as collateral. Make more inquiries in any part of the agreement you don’t understand. Also, always bear the repayment terms, your monthly obligation in mind, not forgetting the consequences of missing payments.

Advantages of the loans in Ghana

Various types of loans in Ghana have a lot of advantages. These benefits motivate Ghanaians to source for loans when facing financial limitations. Some benefits of loans in Ghana include:

  1. Convenient and quick application.
  2. Competitive interest rate.
  3. Fast documentation process.
  4. Considerable repayment period.

List of financial institutions that offer the above loans in Ghana

Below are financial institutions in Ghana that offer various loans mentioned earlier.

  1. Fidelity Bank Ghana
  2. CalBank Plc
  3. Republic Bank Ghana
  4. Fido Money Lending
  5. Bayport Ghana Savings and Loans
  6. SamBoad Business Group LLCF
  7. GN Savings and loans
  8. SRF Money lending services
  9. Jireh Microfinance Ltd
  10. Izwe Savings & Loans Ghana
  11. Quick Credit & Investment Micro Credit Ltd.
  12. Dalex Finance and Leasing Company Ltd
  13. Christella Software Solutions
  14. SIDE Capital Campus Loan
  15. CIANO loans
  16. SIC & SIC Life Insurance
  17. BayPort Financial Services
  18. Kokomlemle
  19. Multiseed Micro Credit Services Ltd
  20. STAR Microfinance
  21. Best Trust Capital
  22. Bimicrofinance


A loan is a sum of money that an individual or company borrows from a financial institution. Also, loans link borrowers and lenders in Ghana. There are many types of loans depending on the purpose you are applying for it. However, regardless of the type of loan that one applies for. There are certain things that you should assess and they include expenses, income, credit score, and credit history. Also, a repayment schedule is very necessary in order not to fall out with lenders.

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