People generally take loans when they fall short of money to fund their immediate expenses. On the other hand, for a lender, not that simple. The lender actually considers several factors while evaluating the eligibility of a personal loan applicant before sanctioning a loan.

Rejection and disqualification occur when applicants fall short of certain criteria or requirements. This article contains brief enlightenment on a few steps to avoid loan rejection 

Here are the 5 reasons the financial credit provider of your choice may reject your loan :

Mistakes in the loan application

Banks do not consider loan applications with mistakes or errors. In fact, some banks will get the application verified through third-party agencies.

This to ensure that there is no misrepresentation or deliberate hiding of facts. How to apply for a loan might vary depending on the company. So be sure to do research before getting on with it. 

Taking multiple loans

People have a habit of looking for multiple loans when they don’t get the desired loan amount from one lender. They also do this when they have already taken a loan and want more money to meet certain expenses. 

Now, if you take multiple loans, it could mean over-leverage and risk of falling into a debt trap. This can be disastrous for your future financial security as well as it may affect your credit score.

Not enquiring directly about the loan with lenders

Loan applicants should avoid direct loan and credit card enquiries with lenders as credit bureaus consider such enquiries as hard enquiries. Instead, loan applicants should visit the online financial marketplace to compare various personal loans offerings and select the best one.

Making too many Job switches

Having a steady means of income can go a long way in boosting your chances in getting a loan. Lenders love to work with financially stable individuals. This way they are sure of your repayment capability. 

For sanctioning a bigger amount of loan, lenders also consider the time period of your present employment. Thus, you should avoid frequent job switches during your career, as it may have a negative impression on the lenders.

Not comparing and choosing the product that best suits your needs and means.

This is an important key-point to note. Banks and other financial bodies will decline your loan application if they feel you’ll not be able to make repayments.Instead, personal loan applicants should visit the online financial marketplace to compare various personal loans offerings and select the best one. 

Conclusion

If they deny your application, don’t despair. Remember, most loans are met with a hard no. Take positives from the experience by learning from your errors and submitting an even stronger application the next time around.

This approach ensures progress. Keep it up and you’ll eventually get the finance you or your business requires.

A loan application being rejected can be frustrating. Therefore, it is important to understand the criteria before applying. Successes of loans are not just that easy without meeting a few requirements.

Standing on a friendly note, you need to know that things have tightened up in the financial market since the percentage of loan defaulters continues to grow. And lenders are looking at loan applications more closely. Financial institutions consider many factors before deciding whether to approve your loan. Once you know what they look out for, you can boost your chances of getting approved. 

Be aware that every lender is different. That’s why you should know what different lenders are looking for, so you can put your best foot forward. Ultimately, you will need to be honest with your lender if you want to get approved for a loan. Misleading your lender or hiding relevant information won’t make your situation any better.

5 Common Reasons Your Loan Application May be Rejected

There are a lot of mistakes loan applicants make that can lead to the rejection of their loan applications. Some of them are:

1. Amount of debts and poor credit history:

Besides checking how much a loan applicant makes per year, most lenders also check the total amount of debt as well. They do so in order to decide if the applicant can repay the loan. For salary loan, there could be minimum salary requirements or maximum total debt requirements. Poor credit history can cause your loan to be rejected. Not having an excellent record with CRBs because of accumulation of debt may make a lender reject your loan application. 

2. Error in loan application:

There are plenty of eligible applications that will get rejected simply because there is an error in their application. Some important details are missing or are incomplete. When the required information and documents required are not complete, then the application is rejected.

3. Job Instability and income to repay the loan: 

Employment status and stability is another key player in why some applications boasting excellent credit scores are rejected. Having a stable job means you have stable income, which gives lenders a greater level of comfort that you have the ability to pay back the loan.

4. When your business has no evidence of cash flow:

Many Lenders feel less comfortable giving loans to young businesses without a track record, such as evidence of cash flow.

5. Inadequate form of Collateral: 

Many small business loans are secured by offering something of value to reduce the risk of the loan. Such valued items include cars, houses, etc. Inability of the loan applicant to provide a collateral might cause his/her loan application to be rejected.

Basic things Lenders Look at Before Approving Your Loan

There are basic things lenders look at before approving your loan, and they are:

1. First, they look at your credit history
2. Source of income for repayment and employment history 
3. Type of loan you want and your requirements and eligibility

Factors to Look at to Avoid Loan Rejection

Factors to look at to avoid loan rejections are:

1. Your credit history 
2. Check whether you are eligible first
3. Consider also if you meet up with requirements of such loan
4. Know and decide the type of loan you want. Some would want a personal loan and while filing the application form, they fill a business loan.
5. Know the repayment duration
6. Have a steady source of income so you will be able to pay back the loan.

Frequently Asked Questions

Why am I getting denied for every loan?

The main factor making your personal loan applications get denied are bad credit history, high debt income ratios and unstable income.

What happens if you get rejected for loan?

If your loan application is denied, the lender will tell you the reasons but it won’t appear on your credit score. A declined loan won’t impact your scores also.

Conclusion

Prior to applying for a loan, the lender should be considered. It is important you carry out a proper research on the loan platform. If you are having issues applying, halt your application for the time being. Take actions and be ready to improve your finances before you apply again. 

Technically, some loan applications require not much effort and stress. The basic thing is knowing all it takes to apply. As one of them is clearing up a negative figure on your credit report. Others, like building an excellent credit report, will require  much time and need patience.

But ultimately, you must succeed and these approaches will make you a better loan candidate. And this increases your chances of getting approved in the future. 

Logbook loans in Kenya are a type of secured loan where the borrower’s vehicle logbook (vehicle registration document) is used as collateral to obtain a loan. 

This type of loan is popular in Kenya, where individuals can leverage their personal vehicles to access quick financing. Sometimes people call them emergency logbook loans because they are the easiest way to access credit for emergencies.

5 Best Logbook Loans in Kenya 

We know that the concept of “best” can vary depending on individual needs and preferences. However, we can provide you with the best logbook loans based on our personal experiences with some of these loan lenders in Kenya.

1. KCB Logbook Loans: They are one of the best banks in Kenya that gives logbook loans to eligible borrowers who meet the requirements. Some of their requirements include having an active KCB account that is a minimum of three months, original payslips, Kenyan ID and other documents. You can check out their sites for more details on this type of loan.

2. Family bank logbook loans: The family bank is one of the best great Asset financiers in Kenya with good reviews online. They offer asset loans to business account holders and are intended to assist in the acquisition of assets. You are required to present the original copies of your logbook to access the credit. They also have their unique requirements which you can check out via their website.

3. NCBA logbook loan: The bank launched their logbook loan in 2021 and since then they have been giving out credit to borrowers who meet the requirements. This loan type enables borrowers to access up to 50% financing against an owned vehicle. Visit their office near you or log into their website to learn more about this loan type.

4. Equity bank logbook loan: They are a reliable and accessible bank for easy logbook loans. Equity bank is known for giving reliable asset financing to borrowers. You can get your logbook loans within a few hours of submitting all required documents.

5. Ngao Logbook Credit: They give you up to 50% of the value of your car or up to KES 3 million in less than 24 hours to repay within a period of up to 15 – 20 months. Their requirements are easy to meet and they can be a good fit for solving emergencies by using your car as collateral.

Reasons Why These Logbook Loan Providers Are the Best

1. Credibility and Reputation: These lenders have a good reputation and positive customer reviews. They are licensed by the relevant regulatory authorities in Kenya, such as the Central Bank of Kenya, to ensure they operate within the legal framework.

2. Interest Rates and Fees: We compared the interest rates and fees among different lenders and we found out that the lenders listed above are the best. They all offer competitive rates and transparent fee structures. Also, they don’t charge excessive interest rates that could lead to financial strain.

3. Loan Amount and Repayment Terms: Their maximum loan amount and the flexibility of repayment terms are great. Look for lenders that provide loans that meet your specific financial requirements and offer manageable repayment schedules.

4. Customer Service: These lenders have a responsive customer service team that can address your inquiries and concerns promptly. Good customer service indicates a commitment to assisting borrowers throughout the loan process.

5. Loan Approval and Disbursement Process: When you evaluate the efficiency and speed of their loan approval and disbursement process, you will choose them. They all have a streamlined application process and can disburse funds quickly once the loan is approved.

Requirements For Logbook Loans

It is essential to know the requirements for logbook loans and get them ready for the loan. We all know that different logbook loan lenders have unique requirements but we will be listing the general requirements we know of.

1. Filled application form
2. Bank statements for a period of 6 months
3. Two copies of your passport photograph
4. Original three-month payslips
5. Copy of your national ID or passport
6. Your  KRA PIN
7. Proof of your place of residence 
8. Copies of logbooks of your vehicle or for other motor vehicles (Used vehicles).
9. The year of manufacturing of the vehicle should not be more than 10 to 12 years as a loan expiry

Some Other Lender’s Requirements Like Family Bank And Other Banks

1. Pro-forma invoice from the dealer/ seller.
2. Present the recent AA/regent automobile valuers and assessors valuation (for used vehicles).
3. Proof of your source of income.
4. Introduction/Confirmation/Appointment letter from your present employer
5. Carefully signed authorization forms. 
6. Present the car for evaluation and installation of the car tracker.

Pros and Cons of Taking Logbook Loans

Pros

• The loan comes in handy during an emergency.
• Logbook loans offer longer repayment periods between 12 – 36 months.
• Logbook loan provides more time to get your finances in order.
• Comes with a lower interest rate when compared to payday loan
• People without a high credit score can secure the loan. Most lenders don’t look out for high credit scores but on the logbook documents. 
• Once you meet the requirements, the process can be completed within 24 hours.

Cons

• In all cases, one of the stringent requirements would be first to transfer the car ownership to the lender. 
• If you do not keep up with repayments, most times, the car will belong to the lender, depending on the agreement. Or they will sell off your car to recoup the loan interest and the principal amount.
• The amount you will get as the main credit will depend on the car’s age, the mileage on the vehicle, and the general condition of the car.
• The loan comes with a high-interest rate when compared to mainstream finance.

Conclusion 

There are different best logbook loan lenders in Kenya and we have listed five of them in this article. If you have any reason why you won’t be using any of these lenders in this article, conduct proper research and compare lenders.

Remember, logbook loans come with risks, including high-interest rates and the potential loss of your vehicle if you default on the loan. It’s essential to carefully consider your financial situation and evaluate the terms and conditions before taking a logbook loan.

Shelter is a basic necessity and one of the three most important basic needs of man. In fact, people who can afford this basic necessity in Kenya are few. Financing being the hindrance.  In search of ways to assist in finance of home and property,  financial institutions have designed mortgages to enhance adequate housing delivery. Thus, owning a property through mortgage arrangement.

In addition, a mortgage loan in Kenya is the best form of loan to owning a property or a home. If you are looking to purchase a property or a home through mortgage, this article is for you. Follow through and learn all you need to know about mortgage in Kenya. 

What is a mortgage?

A mortgage is a loan gotten from financial institutions for purchase of a property or a home. Once the loan has been approved and the property owner settled,  the borrower takes the ownership of the property. The bank takes the title of the property until the borrower fully makes the mortgage repayments. See it in the actual sense that the borrower uses the property as a collateral. 

Types of mortgages in Kenya

In Kenya there are two types of mortgages, they are:

1. Fixed-rate mortgage and
2. Adjustable rate mortgage

Fixed-rate mortgages 

In this type of mortgage, the interest rate is fixed till the whole repayments are done. It is more expensive because the amount remains the same during the lifetime of the loan

Adjustable rate mortgage

The interest rate in this type of mortgage keeps changing depending on the market structure. The loan repayment keeps reducing. It is the most common type of mortgage operated in Kenya.  The reason for the changes in the interest rate is because they transfer the part of the risk of the loan to the borrower.

Processes of getting a mortgage loan

The processes for getting mortgage loans includes:

1. Appraisal and approval. Knowing if you qualify for the mortgage loan.
2. Property search and viewing. 
3. Loan processing and provision of required documents needed.
4. Offer/issuance of offer letter. 
5. Perfection of instruction and acquisition of property used as collateral 
6. Making payments to the seller of the property by the lender.

Also check out how to apply for mortgage loans in Kenya

General Documents required for mortgage loans in Kenya

There are general documents required for mortgage loans in Kenya and they include:

1. Copy of the title, which has a minimum free lease duration of 45years.
2. Offer letter from the seller for outright purchases
3. Standing order proving direct debit or employer’s irrevocable check-out letter
4. For spouse applying together, provision of a copy of marriage certificate 
5. Valuation reports which often attract a valuation fee
6. Evidence of rents and rates. That is receipts showing latest payment to the city council
7. Life insurance quotation and medical checkup for application above 20m
8. Rental assessment report for landlords using rental income for mortgage.

Parameters used in scoring approval of mortgage loans in Kenya

There are certain factors that would be checked thoroughly before they can approve your mortgage loan application. They include:

1. Total income 
2. Sum amount of your personal expenses
3. Credit score
4. Whether you possess a solid source of income
5. The duration of the contract
6. Details of the property
7. Age of the borrower 

Some mortgage providers in Kenya and their interest rates 

Lists of mortgage providers in Kenya range from:

1. Housing finance group: They have a mortgage interest rate of 13%
2. Standard Chartered Bank Kenya with an interest rate of 12.2%
3. Consolidated bank has 15.1% as their mortgage interest rate
4. Barclays bank Kenya- 14.4%
5. Kenya commercial bank – 13.3%
6. Citibank Kenya – 12.5%
7. Co-operative bank – 14.9%

Check out other related articles to help you in your loan search

• Home Loans in Kenya Explained
• Type of loans in Kenya you can apply for in 2021
• How to write a loan application letter in 2021
• Loan apps in Kenya: Reviews and Explanations

Charges associated with mortgage loans

Before you get the full acquisition of the property, there are other charges within mortgage loans that you need to pay. They are:

1. The main mortgage interest rate
2. Negotiation fee, which is often 2.5%
3. Stamp duty
4. Commitment fees
5. Legal fees
6. Valuation fees
7. Ledger fee which is charged on a monthly basis.

Conclusion 

Mortgage loans have advantages ranging from living in your dream house to rendering a full potential for profit making when house prices rise. Financial institutions have made it easy for all who qualify to gain homes through mortgage. We believe you have learnt all it takes. Qualify and get your papers ready. That dream house would be yours.

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.

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:

• Personal Loans
• Mortgage Loans
• Car Loans
• Student Loans
• Medical Loans
• Business Loans

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.

One of the major things to understand before taking a loan is the loan’s repayment schedule, which basically defines when & how much you will pay back within the loan’s tenure. Every loan, be it personal loan, car loan, study loan, mortgage loan gives you access to funds which must be paid back at a certain interest rate over a specified duration.

A repayment plan provides important information regarding how much they will require you to pay monthly, and this includes the accrued interest which is spread within the loan tenure.

Hence, understanding loan repayment schedules helps in making the right decision in taking a loan and planning your repayment strategy.

What is a loan repayment schedule? 

A loan repayment schedule is a list of all the payments they require a borrower to make throughout the lifetime of a loan. It gives you the most basic and intrinsic information and knowledge about your loan and how you’ll repay it. Each payment on the list gets broken down according to the interest and principal. It shows you how much you would pay monthly and the remaining down payments yet to be made. 

How to calculate loan repayments schedule 

There are two ways to calculate your loan repayment schedule. They are:

• When you know your monthly payments 
• When you don’t know your monthly payments 

How to calculate your loan repayment schedule when you know your monthly payment 

When you know your monthly payment,  it is pretty much easy to calculate your monthly loan repayment. From the first month, multiply the interest rate with the total loan. Hence, for a loan with monthly repayments, divide your result by twelve (12) to find out the monthly interest. Also note weekly repayments. Remove the interest gotten from the total monthly payment and the rest of the amount goes to the principal. 

For the second month, apply the same method, but the figure to multiply the interest with is the remaining figure from month one and not the original loan amount. This method goes down till the principal gets to zero (0).

How to calculate your loan repayment schedule when you don’t know your monthly repayment 

Often people only know the loan amount they want to take and the interest rate attached to it. They either forget to know their monthly repayment. To calculate and work out your loan repayment schedule for the said period of your loan duration, you follow two methods. The first method is through:

1. Using a loan calculator or
2. The excel sheet 

Using the loan calculator 

The loan calculator gives you the ability to enter your loan amount, interest rate, and repayment duration. You follow the method to work the next month. Remember to keep using the remaining balance for each month and not the original loan amount. 

Using the Excel sheet 

By using the excel sheet, you input it directly on the software using the PMT function. The PMT function calculates and shows  you the payment based on the interest rate, number of payments, and principal amount. 

Example:

Enter this on the excel sheet as viz:

=PMT(5%/12,360,240000). Showing a result of ksh.1,288

Detailed information on the loan repayment schedule paper

The information that is seen on the loan repayment schedule paper are:

1. The starting balance of the loan repayment amount 
2. The interest paid for each month
3. The principal amount paid for each month
4. The new balance for the next month and the other subsequent months.

Importance of loan repayment schedule 

The basic importance of loan repayments schedule is:

1. It helps you know how much you pay a month and throughout the lifetime of the loan
2. Detects, curtains and save excess or extra payments
3. Saves you much stress on thinking whether or not you are cheated by the lender.
4. Gives you full knowledge on your loan and also your future loans.

Conclusion 

The loan repayment schedule and the information it contains is very crucial to understand the inn and outs of your loan. It shows you how sensible and valuable it could be to pay off your loans. When you learn how to calculate your loan schedule, it gives you full knowledge on the loan.