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Debt Consolidation Loans in Kenya Explained

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Imagine being able to take a loan to cover your debts and liabilities. As strange as it sounds, it’s real as it gets. With favourable terms of the loan which include a lower interest rate, lower monthly payment, or both.

Individuals can use debt consolidation loans as a tool to deal with student loans and other forms of liabilities.

What is a consolidation loan? 

We can see the term debt consolidation as the act of taking out a new loan to pay off other liabilities and consumer debts. These loans are generally unsecured ones. Here they combine multiple debts into a single, larger piece of debt, usually with more favourable payoff terms. These favourable payoff terms include a lower interest rate, lower monthly payment, or both. Consumers can use debt consolidation as a tool to deal with student loan debt, credit card debt, and other liabilities. 

Key things to know about consolidation loans?

  • Debt consolidation is means taking a loan to pay off other debt and liabilities. 
  • Debt consolidation loans do not entirely erase the original debt. They only transfer a benefactor’s loan to a different lender or type of loan.
  • There are two major types of debt consolidation loans. They include secured and unsecured.
  • Benefactors can apply for debt consolidation loans, lower-interest credit cards, and special programs for student loans.

How does debt consolidation loans work?

As stated above, debt consolidation is the act of using a different form of financing to settle other debts and liabilities. When a consumer is saddled with different debts, they can apply for a loan to merge those debts. Those debts are standardized into a single liability and paid off. They then make payments to the new debt until the debtor settles it in full.

Most consumers can apply through their bank credit union, or credit card company as the first step of the application process. A consolidation loan is a great way to start, especially if you have a great relationship and payment history with your institution.

An important point to note is that debt consolidation loans do not entirely erase the original debt. Instead, they simply transfer the benefactor’s loan to a different lender. For actual debt relief/ or for those that don’t qualify for loans, it’s advisable to look into debt settlement. Debt settlement is available to reduce consumer’s obligations rather than the number of creditors.

2 Types of Consolidation loan

There are two major types of debt consolidation loans. They are secured loan and unsecured loans.              

Secured loans are usually backed by the borrower’s assets, such as a house or a car. The asset here works as collateral for the loan.

Unsecured loans are not backed by any asset. This type of consolidation loan is usually very difficult to get. They also have higher interest rates and lower qualifying amounts compared to other forms of loans. 

With either of the loans, interest rates are typically lower than the rates charged on credit cards and other forms of loans. Also, in most cases, the rates do not fluctuate, so they do not vary over the repayment period.

Requirements for getting a debt consolidation loan?

Before qualifying for a consolidation loan, applicants must;

  • Possess a letter of employment,
  • Have two months’ worth of statements for each credit card or loan you wish to pay off.
  • Possess letters from creditors or repayment agencies.  
  • Provide a copy of the latest bank statement, reflecting three salary deposits 
  • Have the income and creditworthiness needed to qualify, especially if you’re going to a brand new lender.

Although the documentation you will need often depends on your credit history, the aforementioned documents are quite essential.

Advantages of consolidation loans

The following are the major importance of consolidation loans;

  • Debt consolidation is a great tool for people who have multiple debts with high-interest rates or monthly payments.
  • Debt consolidation loans can help your credit score. Settling the portion of the principal loan sooner can keep interest payments low. This means less money out of your pocket. This can help boost your credit score, making you more attractive to future creditors. 
  • Taking a debt consolidation loan can give you a tax break chance. The internal Revenue Service permits deduction of interest on any unsecured debt consolidation loans.
  • Going through the debt consolidation process can reduce calls or letters from the collection process. As long as the new loan is kept up to date. 

Disadvantages of consolidation loans

Debt consolidation loans have their downsides too. These disadvantages include;

  • Debt consolidation loans have longer payment schedules. This means that applicants might pay more in the long run.
  • By transferring existing loans into a brand new one, there may initially be a negative impact on the consumer’s credit score. This is because credit scores favor longer-standing debts with longer, more-consistent payment histories.
  • Ending the old credit accounts and opening a single new one may reduce the total amount of credit available, raising the debt-to-credit utilization ratio.
  • Consolidation loans can also cause potential loss of special provisions such as interest rate discounts and other rebates.

Conclusion 

Debt consolidation rolls and tackles multiple liabilities and debts, typically high-interest debt such as credit card bills, into a single payment. Debt consolidation might be a great idea for you, especially if you can get a lower interest rate. That will help you reduce your total liability and reorganize it so you can pay it off faster.

Unsecured Loans in Kenya – Everything You Should Know

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Unsecured loans in Kenya are loans that are granted with no collateral. If a borrower defaults on the loan, it leaves the lender with few options to get paid outside of filing a lawsuit.

In the course of this article, we will be looking more into unsecured loans and if they’re right for you.

What is an Unsecured Loan?

unsecured-loans-in-kenya

As stated above, an unsecured loan is a form of loan that doesn’t need collateral or a security deposit to receive. With an unsecured loan, instead of pledging assets, borrowers qualify based on their credit history and income.

Lenders do not receive the right to take physical assets if borrowers stop making payments on unsecured loans. You promise to repay, but you don’t back up that promise by pledging collateral. 

An unsecured loan generally comes in three forms:

How Unsecured Loans in Kenya work

When applying for an unsecured loan, most lenders check applicants’ history to see if you’ve successfully paid off loans in the past.

Based on the information in your credit report, a computer creates a credit score, which is a shortcut for evaluating your creditworthiness.

Lenders will also want to be sure that you have the financial capacity to repay any new loans. When you apply for a loan, whether secured or unsecured, lenders will ask for proof of income.

Then, evaluation is done to ascertain how much of a burden your new loan payment will be relative to your monthly income. They typically do this by calculating a debt-to-income ratio.

Documents required for obtaining an unsecured loan

The following document requirements are obtainable with most unsecured loan providers;

  • Office address proof for self-employed individuals
  • Proof of continuity of business
  • Processing fee cheque
  • Duly filled loan application form
  • Couple of passport-size photographs of loan borrower
  • Identity proof – passport, driving license, voters ID, PAN card (any one proof)
  • Proof of residence – utility bill, passport, etc.
  • Salary slips for last 3 or last 6 months

How to Apply for Unsecured Loans?

The following are ways to apply for unsecured loans;

Company website: A great percentage of lenders in the market now provide their services through their websites. You can visit the official website of the bank and apply for a loan with your credentials.

Loan aggregators: These are third-party loan aggregators that can help you find the best deals available in the market. With them, you can compare the different loan products and choose the best product that suits your specific needs.

Branch office: Lastly, you may also visit the lender’s branch office and apply for a loan in person. With the Internet, this choice of application is gradually going extinct. However, if you are not Internet savvy, you may use this option to apply for a loan.

Top banks in Kenya that offer Unsecured loans

Knowing the fact that a great percentage of the risk involved in granting an unsecured loan rest on the shoulders of the lender.

Not every credit provider out there welcomes the idea of granting unsecured loans. The following banks offer unsecured loans in Kenya;

  • ICICI Bank

ICICI is one of the top private banks in the country. The lender is known for providing a wide range of loan products, including personal loans.

Benefits

  • Loan disbursal within just 3 seconds for pre-approved customers
  • Flexible loan repayment tenure up to 60 months
  • Minimal documentation and hassle-free application process
  • HDFC Bank

HDFC is one of the biggest private lenders in the country. The transparent process in offering loans helps customers with easy access to unsecured and other forms of loans.

Benefits

  • Loan disbursal within just 10 seconds for pre-approved customers
  • Loan disbursal within 4 hours for other customers
  • Optional insurance coverage for customers
  • Hassle-free application process

Yes Bank

Yes Bank is also one of the top-notch credit providers with a top-notch collection of loan products in its line-up. The personal loan offered by the bank comes with flexible terms for the benefit of applicants. They include;

Benefits

  • Repayment tenure ranging from 12 months to 60 months
  • Speed and hassle-free application process
  • Option for transferring existing loans (with high interest) from other banks to Yes Bank

IDFC First

Capital First is one of the major financial institutions that offers loans to small and medium enterprises in Kenya. The personal loan offered by the company comes with the following terms:

Benefits

  • Flexible repayment tenure ranging from 1 year to 5 years
  • Online approval in just 2 minutes
  • Hassle-free loan application process

How can I ensure my Unsecured loan application is approved?

Applicants can follow the steps mentioned below to ensure that their unsecured loan applications do not get rejected:

  • Bills and existing loans should be paid on time to maintain a high credit score.
  • In case a customer has a low credit score or has never applied for any credit before, he or she can build his/her credit score or enhance it over time.
  • Ensure your earnings match or exceed the minimum income criteria of the concerned lender before applying for an unsecured loan.
  • Having a stable and regular source of income also increases the chances of an unsecured loan application getting approved.

Pros and Cons of Unsecured Loans

From the borrower’s perspective, the main advantage of an unsecured loan is the fact that it is risk free. If you receive an unsecured loan and can’t make payments, you don’t risk losing your assets. You just put your credit score at risk.

For people and businesses with unsecured loans, there is a high chance that your debt will be discharged if you file for bankruptcy.

Additionally, since unsecured loans don’t require any collateral, the lender takes on more risk. This generally translates to higher interest rates and less favorable terms.

While unsecured loans may be less risky for the borrower, it’s important to know how much more it could cost you over its duration. You may find that putting an asset down as collateral is more beneficial than the extra money you’ll pay in interest.

Conclusion

An unsecured loan can be one of the best loan options for blacklisted people. The fact that you don’t have to provide any form of collateral is definitely an advantage to the borrower. Especially in a situation the borrower has little or nothing to offer at all.

5 Types of Loans You Can Apply for in Kenya (2024 Updated)

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We have up to 5 types of loans you can apply for in Kenya. You can use borrowed money for different purposes, which must fall in alignment with our needs. This is the best time for us to answer questions like, “What are the types of loans?, which is the best? And what purposes match the different types of loans?”.

Therefore, the need to start a business, solve a personal pressing need, and buy a home or a property, there are loans made for these varieties of needs. 

Furthermore, each type of loan solves a peculiar problem, and hence, none is the best when it is being matched with our different needs. This article will reveal the types of loans we have in Kenya and all you need to know.

type-of-loans-in-kenya

What you need to know about the types of loans in Kenya 

For whatever you may be needing funds for, try to find out the type of loan suitable for your needs. However, if it is your first loan, ask around and do your findings. You can not need a business loan and go for a personal loan, which often attracts a relatively high interest rate.

5 types of loans you can apply for in Kenya

The different loans we have in Kenya are:

  1. Personal loans 
  2. Secured loans
  3. Unsecured loans
  4. Fixed-rate loans
  5. Variable-rate loans

1. Personal loans

Personal loans are one of the 5 types of loans you can apply for in Kenya. This is a type of loan used in solving personal pressing needs. Personal loans can clear household bills, buy foodstuffs, pay off church dues, etc. A personal loan permits you to borrow cash from a lender for almost any personal purpose, mostly with a fixed duration, a fixed interest rate, and a regular monthly repayment. No collateral is required and banks, online lenders, and street lenders offer this type of loan. It is for those who need a relatively small amount of money.

2. Unsecured loans: 

They offer this type of personal loan without collateral and approve it based on your credit score. The pros of this kind of loan are that there is no collateral involved. The disadvantage is a slight increase in interest rates. If a borrower defaults on a personal loan, it leaves the lender with few options but to involve agents or debt collectors. These people help in recovering bad debts. However, Lenders do not have the right to take your assets, land, etc as collateral. You promise to repay and show proof of solid income and excellent credit history. 

3. Secured loans

Secured loans are obtained with collateral. Because it has recovered some part of the loan risk if the interest goes down. The advantage is a partially low interest rate and losing collateral in the case of loan default. Where your credit scores aren’t excellent enough to qualify for your unsecured loan, they request collateral. Secured loans show a lower risk rate to the lender or bank.

4. Fixed-rate loans

Fixed-rate loans are one of the 5 types of loans you can apply for in Kenya. In this type of loan, the interest and the monthly repayment remain the same till you pay off the entire amount. A fixed-rate loan is a type of personal loan where the interest rate stays unchanged for the entire duration or for a part of the loan period. Most citizens of Kenya go for fixed-rate loans for long-term loans. To an extent, they have a clear view of the future costs and monthly repayments.

5. Variable-rate loans: 

The interest rate of this type of loan can go down or up depending on the marketing structure. A variable-rate loan is a type of loan or personal loan where the interest alone changes according to changes in market structure It is in most cases called an “adjustable” or a “floating” rate. 

Note: Unsecured loans, Secured loans, Fixed-rate loans, and Variable-rate loans are seen as types of personal loans in Kenya.

Examples of loans you can apply for in Kenya

  1. Business loans
  2. Home loans
  3. SME and agricultural loans
  4. Home equity logbook loans
  5. Car loans
  6. Student and education loans
  7. Salary advance

1. Business loans:

Business loans are offered to entrepreneurs and startups. They also offer it to business people who will go into expansion. It comes with an average low-interest rate. It is mainly offered by banks because it often requires huge capital. 

A business loan is a loan specifically for business purposes. Such loans come as asset-based loans, invoice financing, micro-loans, and business cash advances.

2. Home loan: 

They offer home loans to customers who want to purchase a home. The borrower in most cases goes to find a home and then meets the financial institution for the loan. The financial institution takes the title of the home till the borrower makes the final payment. It comprises an adjustable or fixed interest rate and repayment duration. They mortgage the home in question to the lender, mostly banks as a security till the final loan repayment.

3. SME and Agricultural loans: 

SME loans are offered to small and medium enterprise individuals who are looking to start up a business to boost the economy. They offer it on the basis that you pay little or no interest depending on the platform. Agricultural loans are for farmers and Agribusinesses to further turn their crude way of farming to a mechanized way in order to boost the agricultural sector. They in return make a repayment by the due date.

4. Home equity logbook loans: 

This type of loan requires the borrower to submit all documents of his home to the bank to raise a loan. The loan might be 50% monetary value of the home. Landlords benefit a lot from this type of loan especially when they want to embark on a new project. Projects like education loans, re-roofing, property acquisition, etc. Moreover, the amount of the loan will be based on the value of the property.

5. Car loans: 

This is a loan given to borrowers for them to own their dream car. There are terms and conditions you need to fulfill before you can get this type of loan. Often 80% to 90% of the value of the car is financed by the bank or the lender with an interest rate attached. It requires the borrower to pay back the loan and possess full ownership of the car. 

6. Students and education loans: 

There was a certain time when education was expensive, but the acquisition of loans has come to subsidize it. Lenders offer student loans to students or parents to finance their education. In return, the students graduate, get a job, and start paying off their loans. 

In addition, they use student loans to clear tuition fees, books, and supplies, living expenses, etc.

7. Salary advance: 

A salary advance is a type or form of a loan to salary earners who need cash and in return payoff at the end of the month. Monthly earners who need loans and can not wait till month end, go to acquire salary advance.

They give it to employees who receive wages or salary every month. It is simply a loan to an employee, and they pay it back immediately after the salary enters the account. 

How to apply for any of the types of loans

Applying for loans in Kenya is generally the same procedure as all lenders. Except for slight differences. The procedures are:

  1. Download the loan app on the Play Store or visit the lender’s website and fill out the application form. Or visit the lender or the bank’s physical office and fill out your application form 
  2. Create an account on the loan app and submit all your personal details. 
  3. Wait for the app to read your details. Here you are to also submit your documents if requested.
  4. Wait for loan approval and have your loan.

General eligibility for different types of loans

To be eligible for a particular type of loan you need to be:

  1. Be 18 years and above
  2. Have a national ID 
  3. Possess an active phone number 

Conclusion

In the past few years, digital loans have changed the market for credit in Kenya. We have up to 5 types of loans you can apply for in Kenya. What should be of great concern to you is to identify the type of loan you need. 

However, It is pertinent to do proper findings and comparisons and also know the type of loans your loan falls under. When you want to take out a loan for an emergency or business expansion, know the type of loan you would go for. Know the requirements and eligibility attached to each type of loan because in Kenya each type of loan has its own peculiar features.

Instant Unsecured Loans in Kenya Explained

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Instant Unsecured loans are loans that are granted with no collateral and within a few minutes. If a borrower defaults on the loan, it leaves the lender with few options to get paid outside of filing a lawsuit.

In the course of this article, we will be looking more into instant unsecured loans and if they’re right for you.

instant-unsecured-loans-in-kenya

What is an instant unsecured Loan?

As stated above, instant unsecured loan is a form of loan that doesn’t need collateral or a security deposit to receive and is disbursed immediately.

With instant unsecured loan, instead of pledging assets, borrowers qualify based on their credit history and income. Lenders do not receive the right to take physical assets if borrowers stop making payments on unsecured loans.

You promise to repay, but you don’t back up that promise by pledging collateral. 

An unsecured loan generally comes in three forms:

  • Personal loans
  • Student loans
  • Unsecured loans

How instant unsecured loans work

When applying for an instant unsecured loan, most lenders check the applicant’s history to see if you have successfully paid off loans in the past. Based on the information in your credit report, your credit score is created, which is a shortcut for evaluating your creditworthiness.

Lenders will also want to be sure that you have the financial capacity to repay any new loans. When you apply for a loan, whether secured or unsecured, lenders will ask for proof of income.

Then, evaluation is done to ascertain how much of a burden your new loan payment will be relative to your monthly income. They typically do this by calculating a debt-to-income ratio.

Documents required for obtaining instant unsecured loan

The following document requirements are obtainable with most unsecured loan providers:

  • Office address proof for self-employed individuals
  • Proof of continuity of business
  • Processing fee cheque
  • Duly filled loan application form
  • Couple of passport-size photographs of loan borrower
  • Identity proof – passport, driving license, voters ID, PAN card (any one proof)
  • Proof of residence – utility bill, passport, etc.
  • Pay slips for last 3 or last 6 months

How to Apply for instant unsecured Loans?

The following are ways to apply for unsecured loans:

Lender’s website: A great percentage of lenders in the market now provide their services through their websites. You can visit the official website of the bank and apply for a loan with your credentials.

Loan aggregators: These are third-party loan aggregators that can help you find the best deals available in the market. With them, you can compare the different loan products and choose the best product that suits your specific needs.

Branch office: Lastly, you may also visit the lender’s branch office and apply for a loan in person. With the Internet, this choice of application is gradually going extinct. However, if you are not Internet savvy, you may use this option to apply for a loan.

Top banks in Kenya that offer instant unsecured loans

Knowing the fact that a great percentage of the risk involved in granting instant unsecured loan rests on the shoulders of the lender.

Not every credit provider out there welcomes the idea of granting unsecured loans. The following banks offer instant unsecured loans in Kenya:

National Bank of Kenya

NBA is a commercial bank and licensed by the central bank of kenya. You can get an unsecured loan of kes. 6,000,000 without collateral

Benefits

  • Short processing period
  • Easy payment
  • No collateral required
  • Top up your loan
  • Easily accessible

Rates and fees

  • Minimum of KSh 50,000 and maximum of KSh 6,000,000
  • Interest Rate is made up of  CBR + Bank Margin % p.a on a  reducing balance.
  • Has a minimum of 6 months and a maximum  of 84 months
  • Negotiation fees  of 2% for first loans and buy offs. Then 1.5% for top-ups.

Internal costs

  • Appraisal fees charged per individual

External costs

  • Excise duty
  • Insurance fee charged against retrenchment and death.

HDFC Bank

HDFC is one of the biggest private lenders in the country. The transparent process in offering loans helps customers with easy access to instant unsecured and other forms of loans.

Benefits

  • Loan disbursal within just 10 seconds for pre-approved customers
  • Loan disbursal within 4 hours for other customers
  • Optional insurance coverage for customers
  • Hassle-free application process

Stanbic Bank Kenya

Stanbic Bank Kenya is also one of the top-notch loan providers with a top-notch collection of loan products in its line-up. The personal loan offered by the bank comes with flexible terms for the benefit of applicants. They include:

Benefits

  • Flexible payment and loan-top after 6 months or repayment
  • Fast and hassle-free application process and fund disbursed within 48hours

What you need to provide

  • Kenyan National ID
  • Proof of Residence. You can come along with your utility bill or lease agreement.
  • 3 months bank statement or your current payslip
  • Kenya Revenue Authority PIN

HF Group

H.F Group is an integrated property and financial solutions regulated by Central bank of kenya. They are major financial institutions that offer SME loans and Asset financing in Kenya. The personal loan offered by the company comes with the following terms:

Features & benefits

  • Maximum period of 36 months and Maximum amount of Kes. 500,000
  • No early repayment penalties
  • Attractive interest rate on reducing balance

How can I ensure my instant unsecured loan application is approved?

Applicants can follow the steps mentioned below to ensure that their instant unsecured loan applications do not get rejected:

  • We should pay bills and existing loans on time to maintain a high credit score.
  • In case a customer has a low credit score or has never applied for any credit before, he or she can build his/her credit score or enhance it over time.
  • Ensure your earnings match or exceed the minimum income criteria of the concerned lender before applying for an unsecured loan.
  • Having a stable and regular source of income also increases the chances of an unsecured loan application getting approved.

Pros and Cons of instant unsecured Loans

From the borrower’s perspective, the main advantage of an instant unsecured loan is the fact that it is risk free and gotten within a short while. If you receive an instant unsecured loan and can’t make payments, you don’t risk losing your assets.

You just put your credit score at risk. For people and businesses with instant unsecured loans, there is a high chance that your debt will be discharged if you file for bankruptcy.

Additionally, since instant unsecured loans don’t require any collateral and are paid within a few minutes after application, the lender takes on more risk. This generally translates to higher interest rates and less favorable terms.

While instant unsecured loans may be less risky for the borrower, it is important to know how much more it could cost you over its duration. You may find that putting an asset down as collateral is more beneficial than the extra money you will pay as interest.

Conclusion

An instant unsecured loan can be one of the best loan options for blacklisted people. The fact that you don’t have to provide any form of collateral and still get your loan within a few minutes is definitely an advantage to the borrower.

Especially in a situation the borrower has little or nothing to offer at all. You can enjoy instant unsecured loans from any place you are in Kenya. All you need is to login to the lender’s website or visit their physical office. 

Instant unsecured loans in Kenya – What you should know

by

Instant Unsecured loans are loans that are granted with no collateral and within a few minutes. If a borrower defaults on the loan, it leaves the lender with few options to get paid outside of filing a lawsuit. In the course of this article, we will be looking more into instant unsecured loans and if they’re right for you.

instant-unsecured-loans-in-kenya

What is an instant unsecured Loan?

As stated above, instant unsecured loan is a form of loan that doesn’t need collateral or a security deposit to receive and is disbursed immediately. With instant unsecured loan, instead of pledging assets, borrowers qualify based on their credit history and income. Lenders do not receive the right to take physical assets if borrowers stop making payments on unsecured loans. You promise to repay, but you don’t back up that promise by pledging collateral. 

An unsecured loan generally comes in three forms:

· Personal loans

· Student loans

· · Unsecured loans

How instant unsecured loans work

When applying for an instant unsecured loan, most lenders check the applicant’s history to see if you have successfully paid off loans in the past. Based on the information in your credit report, your credit score is created, which is a shortcut for evaluating your creditworthiness.

Lenders will also want to be sure that you have the financial capacity to repay any new loans. When you apply for a loan, whether secured or unsecured, lenders will ask for proof of income. Then, evaluation is done to ascertain how much of a burden your new loan payment will be relative to your monthly income. They typically do this by calculating a debt-to-income ratio.

Documents required for obtaining instant unsecured loan

The following document requirements are obtainable with most unsecured loan providers:

· Office address proof for self-employed individuals

· Proof of continuity of business

·         Processing fee cheque·         Duly filled loan application form

Proof of residence – utility bill, passport, etc.

Pay slips for last 3 or last 6 months

How to Apply for instant unsecured Loans?

The following are ways to apply for unsecured loans:

Lender’s website: A great percentage of lenders in the market now provide their services through their websites. You can visit the official website of the bank and apply for a loan with your credentials.

Loan aggregators: These are third-party loan aggregators that can help you find the best deals available in the market. With them, you can compare the different loan products and choose the best product that suits your specific needs.

Branch office: Lastly, you may also visit the lender’s branch office and apply for a loan in person. With the Internet, this choice of application is gradually going extinct. However, if you are not Internet savvy, you may use this option to apply for a loan.

Top banks in Kenya that offer instant unsecured loans

Knowing the fact that a great percentage of the risk involved in granting instant unsecured loan rests on the shoulders of the lender. Not every credit provider out there welcomes the idea of granting unsecured loans. The following banks offer instant unsecured loans in Kenya:

National Bank of Kenya

NBA is a commercial bank and licensed by the central bank of Kenya. You can get an unsecured loan of kes. 6,000,000 without collateral

Benefits

  • Short processing period
  • Easy payment
  • No collateral required
  • Top up your loan
  • Easily accessible

Rates and fees

  • Minimum of KSh 50,000 and maximum of KSh 6,000,000
  • Interest Rate is made up of  CBR + Bank Margin % p.a on a  reducing balance.
  • Has a minimum of 6 months and a maximum  of 84 months
  • Negotiation fees  of 2% for first loans and buy offs. Then 1.5% for top-ups.

Internal costs

  • Appraisal fees charged per individual

External costs

  • Excise duty
  • Insurance fee charged against retrenchment and death.

HDFC Bank

HDFC is one of the biggest private lenders in the country. The transparent process in offering loans helps customers with easy access to instant unsecured and other forms of loans.

Benefits

  • Loan disbursal within just 10 seconds for pre-approved customers
  • Loan disbursal within 4 hours for other customers
  • Optional insurance coverage for customers
  • Hassle-free application process

Stanbic Bank Kenya

Stanbic Bank Kenya is also one of the top-notch loan providers with a top-notch collection of loan products in its line-up. The personal loan offered by the bank comes with flexible terms for the benefit of applicants. They include:

Benefits

  • Flexible payment and loan-top after 6 months or repayment
  • Fast and hassle-free application process and fund disbursed within 48hours

What you need to provide

  • Kenyan National ID
  • Proof of Residence. You can come along with your utility bill or lease agreement.
  • 3 months bank statement or your current payslip
  • Kenya Revenue Authority PIN

HF Group

H.F Group is an integrated property and financial solutions regulated by Central bank of kenya. They are major financial institutions that offer SME loans and Asset financing in Kenya. The personal loan offered by the company comes with the following terms:

Features & benefits

  • Maximum period of 36 months and Maximum amount of Kes. 500,000
  • No early repayment penalties
  • Attractive interest rate on reducing balance

How can I ensure my instant unsecured loan application is approved?

Applicants can follow the steps mentioned below to ensure that their instant unsecured loan applications do not get rejected:

·         Bills and existing loans should be paid on time to maintain a high credit score.

·         In case a customer has a low credit score or has never applied for any credit before, he or she can build his/her credit score or enhance it over time.

·         Ensure your earnings match or exceed the minimum income criteria of the concerned lender before applying for an unsecured loan.

·         Having a stable and regular source of income also increases the chances of an unsecured loan application getting approved.

Pros and Cons of instant unsecured Loans

·         From the borrower’s perspective, the main advantage of an instant unsecured loan is the fact that it is risk free and gotten within a short while. If you receive an instant unsecured loan and can’t make payments, you don’t risk losing your assets. You just put your credit score at risk. For people and businesses with instant unsecured loans, there is a high chance that your debt will be discharged if you file for bankruptcy.

·         Additionally, since instant unsecured loans don’t require any collateral and are paid within a few minutes after application, the lender takes on more risk. This generally translates to higher interest rates and less favorable terms. While instant unsecured loans may be less risky for the borrower, it is important to know how much more it could cost you over its duration. You may find that putting an asset down as collateral is more beneficial than the extra money you will pay as interest.

Conclusion

An instant unsecured loan can be one of the best loan options for blacklisted people. The fact that you don’t have to provide any form of collateral and still get your loan within a few minutes is definitely an advantage to the borrower. Especially in a situation the borrower has little or nothing to offer at all. You can enjoy instant unsecured loans from any place you are in Kenya. All you need is to login to the lender’s website or visit their physical office. 

How To Apply for Subsequent HELB Loan

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Getting financial support for your ongoing higher education in Kenya can be streamlined by applying for subsequent Higher Education Loans Board (HELB) loans. 

These guidelines in our article outline the steps for students looking to reapply for this loan and everything they need to know.

Eligibility for Subsequent HELB Loans

Subsequent HELB loans are available to students who have previously received HELB loans within the last three years, and are in good academic standing or have good academic records.

Application Methods

There are two main ways to apply: through the HELB mobile app and the HELB student portal.

Applying Through the HELB Mobile App

To apply for a HELB loan through the mobile app, you have to first register your details. Follow the steps below to do the registration:

  • Download or upgrade the HELB App from the Google Play Store if you already have it.
  • Register with a registered Safaricom number to generate a PIN
  • Use the PIN generated to log in.
  • Read, understand, and check the license agreement box to accept it.
  • Enter your first name as it appears on your national ID card.
  • Input your ID number
  • Type in a valid email address to complete your registration.
  • Locate and click on the “loans” tab and choose Degree. 
  • Click “apply” on the Undergraduate subsequent loan.
  • Read and understand the process tutorial
  • Also, read and understand the financial literacy guide.

Then to start off with the application process:

  • Click on ‘Get Started’ to start the application process 
  • Input a valid phone number registered in your name
  • Then type in your national ID number to verify
  • Read and understand the HELB loan terms and conditions and click the agree button to proceed.
  • Answer all the financial literacy questions, and click “proceed”.
  • Choose your preferred loan payment option.
  • Click on the requested loan to view and verify your loan details. Ensure they are correct. 
  • Click the “submit” button to complete the loan application. A pop-up message will appear on the screen to show that you have successfully applied for the HELB loan. The loan serial number will be displayed as well.
  • Later on, you will start receiving notifications on tuition loans, awards, and disbursements of upkeep and bursary payments too.

Applying Through the HELB Student Portal

  1. Visit www.universitiesfund.go.ke or www.helb.co.ke websites, and click on “Student Portal”
  2. Enter your national ID
  3. If you don’t have a national ID, type in your KCSE Index number.
  4. Input a valid email address and password and click register.
  5. If the registration was successful, check your email (Inbox or Spam/ Junk) for a message to activate your account.
  6. Login after the email activation on your device
  7. Fill your profile with the correct information & Update your Biodata correctly 
  8. Give consent to the collection of your personal data by ticking the box. But first, read through the consent form to understand why they are collecting your personal data.
  9. Fill in your residence address details and save to continue.
  10. Add your correct Secondary and Primary school’ details in the next field
  11. Also, input your University/College’s correct details.
  12. Fill in your parents’ details. Ensure they are correct
  13. Preview Information before submitting 
  14. Click save/submit your scholarship/loan request.

For students with a National ID:

  • After inputting the ID, consent to the processing of your personal data.
  • Tick the box to accept the loan terms and conditions
  • Update your guarantor information 
  • Provide loan payment information whether bank or mobile payment.
  • Preview information and click submit. 

Important Documents and Information

Be prepared to submit the following documents:

  • A valid national ID
  • KCSE Index number for those who don’t have a national ID 
  • Passport photograph 
  • Birth certificate 
  • University admission letter
  • Secondary school sponsorship letter if you were sponsored 
  • They request other information like your email address
  • Your residential address
  • Your parent’s or guardian’s details
  • Parents death certificate if they are dead
  • Secondary school details 
  • University details
  • Guarantor details
  • And any other documents or information specified on the HELB platform.

Application Deadlines and Processing Time

Application deadlines for each subsequent application is always stated on their website. So adhere to the application deadlines provided on the HELB website. 

The processing time can vary from student to student, but students should allow for several weeks to start getting notifications on tuition loans, awards and disbursements of upkeep and bursary payments.

Conclusion

Applying for a subsequent HELB loan involves understanding the current eligibility criteria, choosing a suitable application method(whether a mobile app or on the student portal), and preparing the necessary documents. The loan is only available for students who have previously received HELB loans within the last three years.

For detailed information and support, visit the HELB website or contact them on ContactCentre@helb.co.ke or call them on 0711052000. We recommend that you share this article with your peers to help them navigate their educational financing. Also, explore other Loanspot.io resources on managing student loans in Kenya.

Peer to Peer Lending in Kenya Explained

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The system of investment is changing and the way we borrow money is coming to live on our palms. We can get money from other individuals other than banks and financial institutions.

However, when you do not want to borrow money from the bank, peer-to-peer lending Kenya is an option worth seeking.

Can you picture yourself in Kenya and see the emerging market filled with individuals who are ready to offer financial help. So the emergence of peer-to-peer lending opened a new opportunity for investors willing to offer more financial help. Individuals make a profit by coming together and joining a fund, then lending it out.

Let us discuss everything you need to know about peer-to-peer lending in Kenya.

peer-to-peer-lending-kenya

What Is Peer-to-Peer Lending?

Peer-to-peer lending is a platform that enables individuals to get loans directly from lenders other than formal financial institutions. It is a social or crowd funding that connects lenders and borrowers. Most of the loans on this platform are unsecured personal loans. With its unique characteristics with other formal financial institutions, they consider it as an alternative to financing.

Understanding Peer-to-Peer Lending

Peer-to-peer lending binds borrowers and investors who will lend out some part of their money. First the investors open an account and fund it and then disperse it as loans. It is usually done in cash with little formal documentation. 

However, it is limited to a close network of people in the lender’s group. They also give loans to outsiders. A third party can handle the loan application and disbursement and shares a portion of the profit with the lender. Lenders or investors on this platform include people who are ready and willing to assure a portion of the loan.

How Peer-to-Peer lending evolved

Traditionally, lending in Kenya has been informal. Peer-to-peer lending started with no documentation and in cash and with a close number of people in the same group. Earlier on, the peer-to-peer lending system started by offering loans to people who were spurned by formal financial institutions in Kenya.

Often lending on this platform is a way to generate interest in cash at a rate that exceeds those offered by the banks. Lenders then are allowed to start with a little money and as time goes on, they can decide to contribute more and loan out more. 

How Does Peer-to-Peer Lending Work?

Peer-to-peer lending involves processes and steps which include:

1. You fill and submit an online application. This entails you fill in a credit inquiry which can either be soft or hard.

2. The lender may assign you a risk category. Here, your score or rating will affect the principal amount, terms and interest rate. If you settle for the loan limit, you can move forward with the application. 

3. Investors review your loan request and requirements. State why you need the loan and how you can pay back. Your reasons have full chances of convincing the lender. Depending on the structure of that peer-to-peer lender, they might reject your loan application.

4. Loan acceptance. If the investor states other criteria that you are suitable with, you can accept the terms and the loan amount. Some lenders would transfer the loan amount to your bank account within days.

5. You make monthly repayments. Peer-to-peer lenders report all individuals who cannot pay back their loans. CRBs keep the record and you retrieve it any time. Late payments may also come with late fees that increase the total amount of repayment. 

Advantages

Peer-to-peer lending provides some significant advantages to both borrowers and lenders. Both have various ways they benefit from the platform. Advantages of peer-to-peer lending includes:

  1. Higher returns to the investors or higher profit maximization: Peer-to-peer lending provides returns or profit to investors through charging of interest rates. Late fees and other fees paid by the borrower are also part of the returns. g
  2. More alternative and accessible source of funding: For some borrowers, peer-to-peer lending is a better option. They are not ready to go through the stress of the formal banking system. Some borrowers also with low credit scores see it as an alternative.
  3. Lower interest rates: Peer-to-peer lending interest rate is often low and affordable because of the greater competition of financial institutions in Kenya.

Disadvantages  

Peer-to-peer lending comes with a few disadvantages and which includes:

  • Credit risk: Peer-to-peer loans have much default probability because of the risk taken by lenders to give loans to borrowers with low credit scores.
  • Lack of insurance/government protection and policy: The government does not provide any form of policy to govern the platform. No form of insurance or protection to the lenders in case of the borrower’s default.
  • Legislation: Some jurisdictions are limited and do not allow some borrowers to borrow and some lenders to give out loans. It is required you conform to the regulations and when you do not; it affects the platform and the borrowers.

Some Peer-to-Peer Lenders in Kenya

Some of the peer-to-peer lenders in Kenya are:

  • Kiva
  • Zidisha
  • Pezesha 
  • UbaPesa 

The P2P lending platform in Kenya is still new with their continuous zeal in  connecting borrowers to lenders. 

They all use different models to give customers access to loans and have different interest rates and repayment terms. Before applying, ensure you compare different P2P lenders and read their terms.

Types of Loans Available Through Peer-to-Peer Lending

Peer-to-peer lending serves as an unsecured personal loan. It can be used for the same purposes as personal loans. Few loan types you may find on peer-to-peer lending websites are:

The investing side of Peer-to-Peer lending

Becoming a Peer-to-peer is a gigantic business for investors and the investing side to this platform are:

  1. Peer-to-peer lending helps investors earn extra income.
  2. Through the platform, you can learn how to track your earnings from principal to interest and as your borrowers make their payments. You will also learn how to cash out or reinvest.
  3. There is risk involved in the platform
  4. There’s also a tendency of the lending platform itself shutting down. When borrowers don’t turn as suppose, you might lose a portion of the profit or investment.

Is Peer-to-Peer lending the right fit?

Peer-to-peer lending may be a better option for those who cannot qualify with banks and other lenders. Despite the sophisticated Fintech setup, people with fair credit can also apply and have it help them. 

For those who would wish to explore alternative financing sources, peer-to-peer lending might be right for them.

Special Considerations

People who are considering joining a peer-to-peer lending platform should:

  1. Need to note about default rates, as do banks and other financial institutions. 
  2. Any consumer or investor considering using a peer-to-peer lending platform should check the fees on transactions. Fees like origination, transaction and processing fees.
  3. Know that each platform works differently but as unique features which includes credit score rating and interest rates.

Conclusion

Peer-to-peer lending platforms connect borrowers directly to investors or lenders. The platform decides the rates, terms and conditions and also approves all transactions. The lenders are individual investors or consumers who want to get a return on their cash savings. Finally, borrowers who seek alternatives to banks can patronize peer-to-peer lenders and still smile home.

Higher Education Loan Board Kenya

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Due to COVID-19 and other uncertainties regarding college and tuition, planning for expenses is not as easy as you think. Regardless of whether you attend college or study online, one thing is for sure: you will have to pay all dues. That is where the Higher Education Loan Board (HELB) Kenya comes in.

Now you can pursue your dream of studying in Kenya with less hassle. They offer student loans which provide a convenient and intelligent means of financing your education.

HELB, a state-owned and regulated institution, provides flexible and affordable student loan plans. HELB offers quite a number of different products that can benefit you. 

Let us discuss higher education loan board Kenya and all you need to know.

About higher education loan board Kenya

The Higher Education Loans Board (HELB) was legally established in July 1995. It was approved according to the Higher Education Loans Board Act (Cap 213A) of the parliament.

They are the foremost financing institution of higher education in Kenya. HELB is a state institution present in the Ministry of Education, Kenya.

How HELB loans work 

  1. HELB provides financial help to postgraduate and undergraduate students. 
  2. The aid can take the form of loans, bursaries or scholarships.

Who is eligible for helb loans?

All Kenyan students pursuing certificate in Diploma and higher national Diploma are eligible for HELB loans.

The students must be in public universities, selected university colleges in Kenya, public national polytechnics, and approved TVET Colleges under the Ministry of Education.

HELB online sidebars

Different sections on the higher education loan board page are:

  1. Student portal: it provides loan information for students
  2. Loan portals: individuals or beneficiaries who need to pay up or check their payment status
  3. Employer portals: employers seeking to deduct HELB loans from their workers’ salaries
  4. Institution portal: for institutions to see disbursement status of student tuition fees.

The major functions of HELB

  1. Offer affordable loans and bursaries to Kenyan students.
  2. To provide scholarship to Kenyan students from recognized higher education institutions in Kenya.
  3. Get funds and distribute them to students judiciously.
  4. Establish, manage, and recover funds loaned out to students.

4 major Higher Education Loans Board products 

We will explain the products and services offered by HELB below:

Higher Education Loans Board (HELB) Loan

Kenya higher education students receive an offer from HELB that is reimbursable. It is affordable and highly flexible.

The government provides A low interest rate through HELB to Kenyans who are pursuing higher education.

The Higher Education Loans Board Scholarship

HELB offers the following scholarships that are non repayable. They are:

Visa Oshwal Scholarship Program: Through the program, twenty (20) students are government sponsored every year to study in higher institutions.

The duration of the scholarship is throughout the course of study with a net value of Ksh. 100, 000 yearly. This scholarship is possible because of the partnership between HELB and Visa Oshhwal Community.

ABSA program: they designed this program to empower young bright Kenyan students who cannot afford to pay their tuition fees. The financial aid is made possible because of the partnership between HELB and Barclays Bank of Kenya. The beneficiaries  are given accommodation, upkeep and tuition fees equivalent to Ksh. 150,000.

Postgraduate scholarship: A two years and three years partial scholarship programs provided by HELB for Kenyan postgraduate programmes. It is for those pursuing Masters or PHD programs from any university commissioned by University Education (CUE) in the country.

The worth of the scholarship for Masters and PhD programmes are ksh. 200,000 and ksh. 450,000 and for a duration of 2 years and 3 years, respectively. 

The (HELB) Partner Funds.

In Kenya, HELB receives a lot of funding to assist young Kenyans who would love to continue their education but lack the financial ability to do so.

The HELB partnered with local and international organizations to source the needed funds. HELB considers the applications for the program and ensures that they select beneficiaries based on the criteria set by the partners.

The HELB platform charges Ksh. 500 for every loan approved, and a yearly fee of ksh. 1000. It is used to maintain the account of the borrower until the loan is due at interest rate agreed on with the partners.

In addition, HELB gives loans to applicants whose application was successful and also recovers the loan from those whose loan is due. 

Higher Education Loans Board (HELB) Devolved Funds.

The devolving fund is established by the partnership of HELB and county governments. County governments and constituencies help to manage the bursary schemes through:

  1. Both parties sign a service contract.
  2. Both parties work together to draft the legislation for the program.
  3. Among its duties are to source, manage, disburse and recover funds.
  4. The funding of the revolving fund begins, and applicants are invited to apply.

4 Benefits of the Partnership

HELB partnerships have a lot, especially for Kenyans willing to pursue their higher education dreams in Kenya. They are: 

  1. There is efficient data sharing, which prevents multiple payments for a particular student.
  2. The process of application and selection is transparent via an online application platform.
  3. The selection and payment mode has less error and human interference since they automate the process.
  4. There are effective recovery procedures which enable the funds to revolve for sustainability.

How much money can I borrow from HELB?

The amount depends on the product you applying for. Each product has a unique amount and features attached to it.

Why should I take HELB loans?

There are several reasons HELB loans are of benefit to the students. The reasons are:

  1. It is owned by the state and also regulated 
  2. Longer repayment terms with a lot of benefits 
  3. Offer enough funds to take you through your education 
  4. Lots of products are available which you can choose from. 
  5. They give equal opportunity to everyone who meets up with the requirements
  6. Some products require that you don’t pay back immediately. 

What to consider when taking out loans with HELB?

In the same way, as you take out a loan, it is important you know everything concerning the loan. The things to consider are:

  1. Know how much you are borrowing 
  2. Understand the terms of the HELB loans
  3. Be sure of stable sources to pay back the loan of need be
  4. Check whether the amount you qualify for can cover all your school’s essential needs.

How To Update Your HELB details?

Follow the steps below to update your HELB details.

  1. Visit to the Higher Education Loans Board (HELB) website www.helb.co.ke. or use their application.
  2. Navigate to my account on the HELB App or website.
  3. Select Institution.
  4. Select edit and update.

How to apply for HELB Undergraduate Loan online 2020/2021?

The following steps are to be followed when applying for a HELB loan online. 

  1. Go to the HELB student portal website.
  2. Choose “Create account” to have your HELB account.
  3. Make sure you study and fill the HELB financial literacy literature correctly.
  4. After account creation, click on the link first time undergraduate loan application.
  5. To apply, fill the 2020-2021 first time undergraduate loan application form (LAF) provided with accurate information.

Causes of delays in HELB loan processing

  1. The application will be rejected if it lacks any required documents and signatures. 
  2. If the applicant provides untrue information 

How do I check my HELB balance?

You can check for information on the HELB loan balance. This can be done online (using the internet) and Using SMS Service. We explain the steps to check this information below:

  1. Go to the Higher Education Loans Board (HELB) website www.helb.co.ke.
  2. To check your loan status, click “loan status”.
  3. Your loan disbursement status appears in a form once you click on “disbursement”.

How to check your HELB loan balance through SMS?

You can check your loan balance via SMS through the following steps:

  1. Write the name used to create the account. For instance, John Doe.
  2. Put the hash sign (#).
  3. Input your ID number.
  4. Send the message to the 5122 and wait for your balance 

How to contact HELB

The higher education loan board headquarters is currently on the 19th Floor, Anniversary Towers, Nairobi- Kenya. The post office address is P.O. Box 69489-00400.

Conclusion 

Education can be quite expensive but with HELB, there is a good way to finance studies. They empower students with loans to make it easier for them to pursue their studies.

HELB has come to stay and has served Kenya to a large extent. A lot of students have gained and people are still benefiting.

However, before applying for a student loan through HELB, be sure to know all it takes. It is smart to check out all their products and know the one you qualify for.

Importance of loan and financial literacy- Explanations

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Need to know about the importance of loans and financial literacy? You have never been taking loans seriously? Don’t care when banks would call you up and try to sell you on a credit card, or personal loan?

You weren’t looking to buy a car or a house, so what is the point? Having knowledge about loans and finance matters. Don’t wait until you decide to open up a small business loan to start taking a serious look at money, loans, and finances.

Read along with me to find out the importance of loans and financial literacy.

Importance of loan and financial literacy

What are loan and financial literacy?

Loan and financial literacy are important for everyone. It encompasses a general awareness of money matters and financial decision-making that affects you, your family, and your community.

Everything you need to know about the importance of loans and financial literacy

Loan and financial literacy are the keys to financial empowerment. Yet many people are not financially literate. Financial literacy is important not just for individuals, but for our country as a whole.

We should make this a requirement instead of an elective subject in high school. People need to focus on financial literacy courses as much or even more than they focus on driver’s education courses when they are young.

Also, in an age where most people have to pay for their own education, debt is almost always a factor. Some students graduate with exorbitant amounts of debt or loans that they might not even be able to repay until after they are finished with college and have started working.

I guess equipping yourself with the knowledge of how the loan and finance system work, will be of great benefit.

Importance of loan and financial literacy

Good loan and financial literacy are vital to any person’s protection, security, and well-being. But with building positive loan repayment and financial habits, and understanding the numbers and not just the theory, matters a lot. The following are the importance:

  1. Loan and financial literacy will help you develop important money skills for life, understand your credit score, day-to-day cash flow, and how to save and invest money.
  2. When faced with financial problems or choosing the right debt products, you will be equipped with the savvy, knowledge, and self-confidence needed to deal with them effectively and positively.
  3. No matter your occupation, one thing is true, you need to manage your money at some point. Therefore, it helps in money management.
  4. Whether you are a college student looking to pay down student loans, knowledge of loans and finance is needed.
  5. Looking to save for a home or even further in the future, I guess once in a while, take loans, so you need to know how it works
  6. If you have a retirement account, having some level of loan and financial literacy under your belt is important. This is especially true now that you can literally conduct your life and finances with a cell phone.
  7. It is easy for people to make mistakes with their money, loans, and finances, where even simple actions like misreading an invoice can cost you thousands. So watch out and learn all it takes to avoid making mistakes a second time.
  8. With the knowledge of loans and finance, you will find out that inflation has not been as positive as it appears at first sight. Most times inflation and other factors might affect your finances and force you to take loans.

How to get be loan and financial literate

Where can you start from? With regards to understanding loans and personal finance, to start gaining the knowledge, start from:

  1. Knowing the basics of loans and finance.
  2. This can be followed by understanding the basics of credit scores, debts products, and investment strategies.
  3. This can also be followed by gaining insight into how to manage credit scores, knowing about debt consolidation, and managing loans and money.
  4. Get links from reliable sources online and offline, which can help you in getting started with understanding personal loans and finances.

What loan and financial literacy is not?

Loan and financial literacy does not just mean knowing how to sign a cheque or filling in the right paperwork for getting a loan. It is about knowing the basics of money.

How banks work, how financial markets function, and so on. Our ability to make sound economic decisions depends significantly on the level of our education and knowledge.

Tips on knowing that you are loan and financially literate

Loan and financial literacy can include but are not limited to:

  1. Understanding and knowing the importance of how to budget one’s finances to avoid taking loans.
  2. Having deep knowledge of savings and investments.
  3. Knowing the basics of the credit system, debt products, and debt repayment
  4. Understanding the basics of laws that govern finance
  5. Have a basic understanding of your income, expenses, and savings, ready for emergencies and retirement.
  6. Understanding what outstanding debts, assets, and other basic financial health indicators mean
  7. Knowing the basics of taxes and their elements
  8. The basic understanding of inflation, profit, loss, growth, de-growth, appreciation, and depreciation.

Conclusion

This article exposes everything you need to know about the importance of loans and financial literacy. Since money and its need is indispensable, it is recommended you reflect upon the importance of loan and financial literacy. 

Unfortunately, most of the formal education systems across the world skip this essential part of education. It is hence easy to say that you need to focus on working towards being loan and financially literate.

Commercial Loan Process – Application And Documentation 

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The commercial loan documentation process in Kenya is established by, and tailored to suit the needs of all borrowers, their requirements, and target markets.

The commercial loan processes are developed by diverse parties such as banks, financial institutions, and private funding agencies, who have come together to create a lending platform that best meets the needs of borrowers within the country. These kind are usually secured loans.

Understanding a Commercial Loan Process 

Commercial loan in Kenya can be availed from financial institutions like banks and microfinance institutions (MFIs). Banks on their part lend small businesses education facilities loans like student loans, micro credit services and any commercial money that is less than Ksh 10 million.

Going further with the process, even where a financial institution or bank is operating in compliance with the law, there are still times when an application for a loan will be turned down.

While this can be disappointing, it is important to note that many of these institutions adhere to strict criteria when it comes to reviewing loan applications. This is for the protection of both the bank and the client, as well as to ensure that funds are used responsibly and loans repaid.

 In the loan application process, the business must specify what the commercial loan will be used for. Then go further to supply other necessary information and adhere to all instructions. 

What is Commercial Loan Process

Typically, commercial loan process is the agreement and other legal closure between a bank and a business to fund both operating costs and capital expenditures of the business. They usually require collateral and financial statements to prove the company’s ability to pay.

What is a Commercial Loan?

The term “commercial loan” refers to any loan provided by a financial institution such as a bank to businesses. A commercial loan is a type of loan made to a company or an entrepreneur for funding their business or commercial projects. These loans help widen the reach of business enterprises by providing them with capital to fund their activities. 

Moreso, commercial loans help entrepreneurs grow and expand their businesses, by providing them with the required funds that they may lack through current assets. It is typically used to purchase long-term assets or to fund day-to-day expenses in a business.

Process for Securing a Commercial Loan

Commercial lending process steps is as follows:

  1. Qualifying stage and presentation of pre-approval documents 
  2. Loan application stage
  3. Review of loan application document stage
  4. Loan underwriter approval stage
  5. Presentation of the term sheet by the underwriter to the company stating everything about the loan for reconfirmation 
  6. Completing the loan packages, presenting the closing documents and signing.

What are the four loan documentation requirements banks need when granting a commercial loan request?

There is a lot of documentation required by banks when giving commercial loans. We are quite used to these requirements and they are usually provided while taking a business loan or home loan. When disbursing a commercial loan, one is required to produce certain documentation like:

  1. Documents for existing businesses
  2. Income statements and business balance sheets for the past three years.
  3. Projected balance sheets and income statements for two years.
  4. Cash flow forecast or Projected cash flow statements for at least the next 12 months.
  5. Personal and business tax returns for the last three years.

What other financials are needed for a commercial loan?

Before you can even think of getting a business loan, you have to know what financial documentation your bank requires. We have put together a comprehensive list of the most common financial banks require processing an application of commercial loan:

  1. Business Credit Score
  2. Basic Personal Information 
  3. Basic Business Information and Permits
  4. Two Years of Tax Returns, Both Personal and Business
  5. Recent Business Bank Statements

How long does it take to process a commercial loan?

Two to six weeks is an acceptable time for many commercial banks and microfinance banks. There are still banks that process it faster. 

3 Factors influencing the time to process a commercial loan

There are various factors that will influence the time to process a commercial loan. If a business has:

  1. Good financial standing
  2. Bankable and investable projects and
  3. Capacity to service the loan

Here, the process is supposed to be faster.

3 Limits to the processing time of commercial loans in Kenya 

Getting a commercial loan in Kenya is not an easy feat. Among the factors that affect the processing time for a commercial loan in Kenya are:

  1. The length of the borrower’s credit history
  2. The financial institution where the borrower chooses to apply for a loan and 
  3. Constant reminder by the borrower.

How much is a down payment on a commercial loan?

Most commercial lenders require a down payment of 30% before they consider or approve a loan.

Conclusion

Commercial loans are designed to promote business development in the country. However, with so many similar programs available and the ever-increasing demand for these loans by various organizations, banks and financial institutions have put in place conditions that have made it a little challenging for those looking forward to starting up a business.

Just like any other form of lending, getting a commercial loan requires an extensive application process. Just go through these processes keenly and you will get your money within a short while.