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Search Results for: mortgage loan

Loans and Advances Explained – Meaning and All You Should Know

March 7, 2023 by hakeem

The need to make a sound financial decision when borrowing funds for your personal or organisational need cannot be over emphasized. Basically, when individuals choose to go for funds to expand a business, personal need and purchase of land, the best option is a loan.

But when institutions seek to raise a short-term find to cover salary, purchase of materials and other office expenses, an advance is the best.

Stay tuned. We will discuss the differences between the two terms and in this article. 

loans-and-advances-in-kenya

What is a Loan?

A loan is a sum of cash or fund that you borrow and expected to pay with an interest on a specific due date. A loan is also an act of lending of money by individuals, financial institutions, and other entities. Some even borrow airtime.

The borrower incurs a debt which 8sbmwant to be repaid. The lender and borrower agree on the interest rate and repayment terms.

Moreso, loans are often secured with a collateral, credit score and other required entries which helps to reduce the risk of the loan.

Objects of Loan Contracts 

Contracts of loans includes objects like:

  1. The principal amount
  2. The repayment amount
  3. Number of repayment duration 
  4. The repayment terms and
  5. Collateral, if there is any.

Types of Loans

Types of loans include:

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

What is an advance 

An advance is a means of finding rendered by the bank to other institutions or entities to meet up a short-term need (often less than a year). 

Facilitation in advances 

The key facilitation of advances includes:

  1. Primary security: This includes the promissory notes, and here the bank stands as a priority to repay the loan before any other parties involved. 
  2. Collateral loan: This is more like a mortgage of property like land, buildings and other fixed assets.
  3. Guarantees: It is given by the partners, promoters, chief executive officers and so many others.

Types of Bank Advances 

Types of bank advance we have are:

  1. Short-term loans 
  2. Overdraft 
  3. Bill purchase
  4. Cash credit 

Conclusion 

Normally “Loans” and “Advances” are seen as “Loans”. But technically, and for all things balanced, the two terms are distinct.

As it stands, a company or an individual who needs funds for personal use or capital projects shall get a loan.

The agreement is between the borrower and the lender and the latter agreeing to pay the sum with an interest. But a company needs to solve a short-term financial need shall go for an advance. So loans and advances have been explained properly in this article.

Filed Under: Personal Finance

I Need an Easy Cash Advance, Which Loan Would be the Best? 

March 3, 2023 by hakeem Leave a Comment

Have you found yourself in a financial situation where you need a loan to tide you over for a few months? If so, the first thing that comes to mind is how can you get an easy cash advance. But finding one of the best loans in Kenya can prove ‌quite a challenge. In borrowing money, most lenders require that you meet certain requirements and go through several stages before they even give you a chance to borrow their money. These requirements and stages are mostly time-consuming and end up wasting most of your time instead of getting you the loan of your dreams.

I Need an Easy Cash Advance, Which Loan Would be the Best?

The best solution when I Need an Easy Cash Advance, Which Loan Would be the Best? 

When you face a financial emergency and you need cash in a short space of time, what are your options? You can do several things such as:

  1. Borrowing from friends, family, or even taking a loan from a credit union. These loan options may not be that easy to get if you have been suffering from bad credit scores.
  2. The easiest other option for you then is to look for an online loan lender that can approve the easy cash advance that you need in no time.
  3. Try the Saccos and credit unions. Most consumers need cash for different purposes like paying bills, buying food, paying school fees, and many more. The loan industry is a lucrative business in Kenya and there are several investors and unions who are ready to provide financial support to those interested.
  4. You can also try out traditional and other direct lenders.

Applying for the Best, Easy Cash Advance Loan Online

You are in debt and you have Ksh. 35,000 which you need to raise. You need cash. You need it now. Applying for the best and easy cash advance loan online will depend on many factors. These factors need to be put in check as often as possible. They include:

  1. The lender you choose and your preference.
  2. To have good deals, you may have to have a good credit score.
  3. Check out for the best cash advance loans online that offer credit that can be paid back over a few months
  4. See to choose and ride along with accepting lenders who offer borrowers who have bad credit ratings and cannot offer collaterals.
  5. Be sure to provide and have a legit income statement which is a factor that also determines how much you can borrow both online and offline.

Credit Card Advances vs. Payday Loans vs. Installment Loans

Are you looking for a personal loan? It can be very overwhelming when looking for the best personal loan to meet your needs. You may have a number of loan providers asking for your business, but will all these companies provide a good service?

Let’s take a look at credit card advances, payday loans, and Instalment Loans. Check out the differences.

Credit card advances: They are short funds offered by credit card companies in Kenya as cash advances, on your credit card. It is very flexible to use and can be repaid based on the terms and conditions of the lender.

Payday loans: Payday loans are short-term loans or a quick credit that have to be repaid in lump-sum on your next pay date or once you receive your paycheck l, depending on the agreement. Most times it is repaid on the last day of the month and has a minimum of 30days duration.

Installment Loans: direct lenders and traditional lenders offer Installment loans. Traditional credits are repaid in installments in most situations. While the online installment loans from a direct lender render the same benefits as payday loans but are more flexible with the repayment terms.

What to consider when you need an easy cash advance

Loan applications in the country have been experiencing a boom ever since the government made it a duty for all banks to provide small loans to their customers. This has been followed by many loan companies entering the market who also offer loans to Kenyans at relatively cheaper interest rates. What to consider before you choose any lender:

  1. The interest rate
  2. Their 24 hours transfer
  3. 24/7 loan accessibility
  4. Their No credit checks options
  5. No collateral
  6. Online application

What to do if you need your Loan on the Same Day

A loan is a very vital tool in society to establish a business and get the capital needed to start it. What you need to do if you need your loan on the same day is by sourcing through a direct lender. This is not guaranteed but most direct lenders offer it easily. It is achieved with no collateral or mortgage to build confidence for a startup. A person has to be 18 years old and above to apply for a loan. Having a valid bank account is also another key requirement. Bear all these requirements in mind as you proceed with your loan application.

Bank Loans may not be Easy to get, but could Save you Money

Having a hard time making ends meet with your high loan installments? Or thinking of repaying with large interest. Bank loans save a lot of money when compared with payday loans. 

I have met people who don’t enjoy taking high amounts of loans from the bank because of the collateral and other rigid requirements. However, they ‌serve a purpose, but only in a very particular situation, saving you a lot of money as regards if you had applied with payday lenders. Their interest rate is lower.

Other Searches- Payday loan for people with disabilities in Kenya

Conclusion

A loan is a good choice if you want to borrow money but you do not know where to get a loan. The best lender is always the person who gives you money easily and faster than others can usually accumulate. However, it is also pertinent you check the ones that carry a high risk of defaulting on payment. Those also with high-interest rates. The benefits and disadvantages of each category and their characteristics should be of utmost importance.

Filed Under: Personal Loans

Loan Documentation Process in Kenya

February 7, 2023 by hakeem Leave a Comment

The loan documentation process includes the following terms: application, examination, assessment, choice documentation, directions, and collection of loans. The documentation process in Kenya for commercial banks, microfinance banks, Saccos, and private financial institutions is all for their best interest. This article will get you through the loan documentation processes, the steps for a commercial loan, and the process for preparing a loan document.

Loan documentation process in Kenya

Understanding the loan documentation process in Kenya

When you want to secure a business loan in Kenya, you will be required to fill out a lot of forms as attachments and all this works to determine how the lender will approve your loan application. 

There are several standard terms used by lenders in Kenya, which are often incorporated in facility letters, loan agreements, or offer letters, which are produced by banks in-house. Law firms prepare security documents for them too. For higher-value loans, most banks/lenders contractually instruct an external lawyer to prepare the loan documentation. Typically, the loan agreement would be patterned with legal backup.

The loan documentation process is an important one, as it is how the lender evaluates the borrower and decides whether to provide the loan.

What is the loan documentation process?

The loan documentation process includes ways of identifying the borrower, documenting the collateral and other papers, attaching the proper instruments, and perfecting the Security Interest. With all these checklists noted and filed, the lender and borrower can now go ahead with the loan agreement process.

How do I prepare a loan document?

To prepare loan documents, you first need a good deal of planning and other things which include:

  1. Review your personal financial statement.
  2. Properly review and state a tangible way to use the Funds 
  3. For business, you need to prepare your P&L Statement, Personal Tax Returns, and business debt schedule.

How do you document a loan?

The loan documentation agreement should include the following information:

  1. Names and addresses of the lender and the borrower.
  2. Amount of the said loan
  3. Date of loan disbursement
  4. Interest rate
  5. Date of repayment 
  6. Include also the APR and other information about the consignor, if applicable

4 Stages of the loan documentation process in Kenya 

The loan documentation process in Kenya involves several stages. These are: 

  1. Application 
  2. Underwriting
  3. Disbursement and 
  4. Accounting for the loan or repayment 

Interest rate loan documentation process 

In Kenya, there are two main types of interest rates:

  1. Fixed rate and 
  2. Variable rate.

The Central Bank of Kenya (CBK) rate is used as the reference point for setting the interest rate on loans in local currency. Banks usually apply a margin over LIBOR to loans denominated in foreign currencies (e.g., US dollars).

Conclusion

The loan documentation process in Kenya is not as tough as most people think. As a matter of fact, it is quite simple because most financial institutions offering loans, mortgages and other financial services take the same steps to completing the loan or mortgage. Learn all it takes to document a loan in Kenya. 

Filed Under: Personal Finance

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

January 10, 2023 by hakeem

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.

Filed Under: Personal Loans

Home equity loan in Kenya explained

December 13, 2022 by hakeem

Among the three basic necessities, only “Shelter” can be leveraged for cash. Home equity loans in Kenya provide lower-interest cash during a financial crisis. One of the benefits of home ownership is the opportunity to benefit from the housing market’s performance when it is performing well. 

In addition to getting a low interest rate, you also have an appreciating asset that you can leverage. You could complete a number of important projects without impeding your long-term financial goals if you have a solid plan in place to utilize your home equity.

home-equity-loans-in-kenya

What Is a Home Equity Loan?

A home equity loan is a loan taken out against the equity in your home. You get a home equity loan based on how much you owe on your mortgage and how much your house is worth. It is also known as a home equity installment loan and is a form  of consumer debt.

Additionally, a home equity loan can also be called a “second mortgage” which  allows you to keep your existing mortgage while taking out a new one time loan against your home’s equity. You repay the loan with equal monthly payments over a fixed period.

What you should know about home equity loans in Kenya

Take advantage of your home’s equity by taking a loan, but consider how long you plan to stay in your home before applying for a home equity loan. Your loan or credit line must be paid off before your sale date. Depending on how much you owe on your mortgage and how much you pay in closing costs, you could walk away with little or no profit from the sale.

How a Home Equity Loan Works

The concept of a second mortgage is essentially the same as that of a home equity loan. Lenders use the equity in the home as collateral. Borrowing capabilities for homeowners will partly depend on the combined loan-to-value ratio, which will range from 80% to 85% of the assessed value of the home. Of course.

Banks in Kenya that offer home equity loans

  1. Absa bank
  2. Equity bank
  3. Standard chartered 

How to determine home equity loan amount and interest rate

The amount of the loan and the rate of interest charged also depend on:

  1. The borrower’s credit score 
  2. Previous payment history.
  3. Value of the home

Two varieties of home equity loan

Home equity loans come in two varieties, which are:

  1.  Fixed-rate loans: In this case, the borrower receives a lump-sum payment which is repaid over a fixed period, and the payments and loan interest percentage remain the same.
  2. Home equity revolving lines of credit: A home equity line of credit (HELOC) is like a credit card that has a variable or adjustable rate of interest

Advantages and Disadvantages

Home equity loans have several benefits, including their affordability, but they also have drawbacks. The pros and cons include:

Pros

  1. Easy to get and source for
  2. Room for fixed interest rates
  3. Flexible use of funds
  4. Lower interest rates than other debt
  5. Possible tax benefit of interest paid

Cons

  1. Two mortgage payments running at the same time
  2. Higher interest rate and payment of premium
  3. Comes with Closing costs
  4. Possible spiraling debt
  5. Can lead to home foreclosure

Example of a Home Equity Loan

Example 1:

For example, if your home is currently worth ksh. 800,000 and your current mortgage balance is Ksh 500,000, you have Ksh 200,000 of equity in the home and could borrow up to ksh. 80,000 (80% of ksh. 200,000) with a home equity loan.

Example 2:

Let’s say you have a loan with a balance of ksh. 50,000 at an interest rate of 26% with one year left on the term. Paying off that debt to a home equity loan at a rate of 10% with a term of four years would actually cost you more money if you took all four years to pay off the home equity loan. 

Note: Remember that your home is now collateral for the loan.

The Right Way to Use a Home Equity Loan

  1. When you have a stable and reliable source of income.
  2. When you do not have additional loans elsewhere and borrow responsibly.
  3. If you plan to use a fixed-rate home equity loan to cover a large purchase, such as the cost of a new roof on your house or an unexpected personal need.. 

Benefits of home equity loan to borrowers

  1. Home equity loans provide an easily accessible source of available cash. 
  2. Helps in consolidating pressing debts
  3. The interest rate on a home equity loan is way low compared to the rates on credit cards and other consumer loans.

Benefits of home equity loan to Lenders

  1. Gets interest income and fees from the borrower’s initial mortgage and earns even more from the home equity loan.
  2.  For defaulting borrowers, a lender gets both the initial mortgage and the home equity loan; it also gets to retake back the property and sell it again, starting the cycle over with the next person. 

Conclusion 

Note that a home equity financing can be set up as a fixed loan or a line of credit. A home equity loan provides you with the total loan amount upfront.

Look around for loan plans you can get from banks, SACCO, credit unions, and mortgage companies when considering a home equity loan or credit line. Shopping or conducting a careful review of all financial institutions can help you get a better deal.

Keep in mind, however, that the amount you borrow through a home equity loan is secured by your home. The lender may have the authority to forcibly sell your house if you don’t pay your debt. Make sure you understand your home equity loan terms.

Filed Under: Personal Loans

Secured loans in Kenya – Meaning and what you should know

December 29, 2021 by hakeem

As the search for more creative and better ways to facilitate loan application continues to rise, both lenders and borrowers continue to practice secured loans. This means an increased willingness of lenders to give out loans by receiving collateral. 

Though in Kenya lending standards appear to be sophisticated, borrowers still protect their risk exposure by providing an asset. The asset turns to belong to the lender if the borrower cannot repay the loan amount. So it is important that borrowers should be open-minded and probing about what they may pledge as collateral. If the earning power is enhanced and improved on, the lender continues to look more favourable to the borrower.

Let us study secured loans in Kenya and everything you need to know.

secured-loans-in-kenya

What is a secured loan

A secured loan is a loan given to individuals who have deposited or provided any form of security. Examples of such securities are title deeds, logbook, share certificates, etc. They are acquired with specific collateral as requested by the lender considering the loan amount. A logbook loan is one of the highest types of loan applied for in Kenya by the citizens. 

Understanding secured loans

Secured loans can come as a business or personal loan in Kenya. The lender allows you to borrow by providing a collateral or security. Most times the collateral for secured loans are assets for money.

If you default on the loan, the lender sells off the asset or seizes the collateral. So with a mortgage loan for an instance, until you make the full payment, the home is not yours yet. Once you cannot pay, the bank takes possession of the asset.

How a secured loan works

In Kenya secured loans allow you to borrow and then submit collateral. Once you repay the loan, you take back your collateral. But if you cannot pay back the loan, the lender owns the property.

You can find these loans from many lenders like the bank, credit union, and online lenders. Most lenders offer these loans as mortgages and car loans. However, there are still other ways you can secure a loan using your equipment.

Finally, they require a little credit check depending on the lender. The lender determines your interest rates based on the amount you are applying for and the repayment duration. Interest rates for this type of loan are low when compared with unsecured loans. It is so because the risk of the loan is reduced by using an asset to secure the loan.

Rates and fees

The rates and fees associated with secured loans in Kenya are:

  1. Interest rates
  2. Negotiation fee
  3. Annual renewal fee
  4. Documentation and security fee
  5. Valuation fee

Standard requirements

The basic requirements for any secured loan are the same everywhere in Kenya except some little difference. The requirements are:

  1. Kenya national ID card
  2. Passport 
  3. Must have an account with the financial institution. Some lenders might also prefer you have an M-Pesa account
  4. Employment card
  5. The last 3 months’ pay slips
  6. Evidence of income and consistent cash flow for self employed.
  7. Valuation report for motor vehicle loans

Benefits

The benefits are many. To dive deep into the matter, it is one of the easier loans to apply for. You do not need to worry about your credit score and the lender, too, worries less. Alternatively, once you present the collateral, they reduce the risk of the loan. Once the borrower cannot pay back the loan, the lender sells it off to recuperate the fund. The benefits include:

  1. The lender is relaxed and has an alternative way of recovering the money once the borrower cannot pay back the money.
  2. It has a competitive and low-interest rate.
  3. It has a longer repayment duration.
  4. The borrower also enjoys in such a way that many lenders remove other associated fees once they request security.

Examples of secured loans

Secured loans can come in different forms and used for different purposes. So if you are borrowing funds for business or for personal usage, your security option can come in the form:

  1. Bad credit loans
  2. Mortgage loans
  3. Car logbook loans
  4. Vehicle loans
  5. Shylocks loans
  6. Equipment loans

Where to find secured loans

In Kenya, searching for where to get secured loans is just not far-fetched. You can collect secured loans from different financial institutions like:

  1. Banks
  2. Online lenders
  3. Credit unions

What can you use as a collateral for secured loans

Kenya is a country that has a larger financial market. And they offer several types of loans with collateral while some are not. Collateral as an asset is pledged in exchange for a fund. The lender takes possession of the asset till the borrower pays off the loan. Collateral most lenders want are items that can easily be converted into cash. The items include:

  1. Houses
  2. Bonds
  3. Cars
  4. Stock
  5. Jewelry
  6. Antique furniture
  7. machines

These assets represent a revenue stream for the lender once the borrower cannot repay the loan.

What to consider when looking at secured loans

Secured loans are risky in the sense that you lose everything once you cannot pay back the loan. It is also risky to the lender when the collateral cannot be easily liquidated. When comparing and considering secured loans, there are tips to keep in mind. They are:

  1. The type of collateral or security required for the secured loan
  2. The interest rate associated with the secured loan
  3. Check if the secured loan interest rate is fixed or variable
  4. Look out for other fees and hidden charges
  5. Ask for the minimum and maximum loan amount
  6. Consider also the credit score
  7. Be sure to assimilate the whole requirements.

Conclusion 

With a secured business or personal loan, be rest assured that you repay with a low-interest rate. Be sure to check the requirements. While they continue to ask for collateral, be capable of paying back the loan, you do not want to be taken by surprise. And with a secured loan, checking your credit score is not taken too seriously by some lenders. Note that, it is helpful to ask and compare lenders before you take a step.

Filed Under: Personal Loans

Peer to Peer Lending in Kenya Explained

July 4, 2023 by hakeem

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:

  • 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.

Filed Under: Personal Loans

National Bank of Kenya- All You Need To Know

June 15, 2023 by hakeem Leave a Comment

National Bank of Kenya is the latest and only full-service multinational bank in Kenya, combining local and international expertise with a large private-sector presence. They provide a financial cornerstone for the future and opportunities for the present and future generations through various financial loan products and services.

About National Bank of Kenya

National Bank of Kenya (NBK) was established by the National Bank of Kenya Act 1964, as a banking company limited by guarantee, wholly owned by Kenyan citizens and controlled by the Central Bank of Kenya (CBK). The bank is committed to and renowned for making and keeping friends. NBK has grown faster than its peers and grown into a fully subsidiary driven bank with branches in both urban and semi-urban areas in all the provinces driven by well serviced Automated Tellers Machines (ATMs) and customer driven Branch Network. Through their strong relationship driven values we have created thriving businesses at our branch network levels.

National bank of Kenya loan products

NBK has different loan products and they include:

Unsecured Loan

Unsecured loan is an easy loan of up to ksh 6 Million shillings without collateral.  You can get the best loan to fund education for your children, go on a shopping e.t.c.

Features:

  1. Easy accessibility 
  2. Easy payment 
  3. Short processing period
  4. No collateral 
  5. Loan top up

National Bank of Kenya Mortgage loan

Are you in need of a house? You can set you off on the journey to owning your new home. NBK home loan supports you in the buying of an existing and completed house.

Features:

  1. You can increase asset
  2. Opportunity for mortgage relief
  3. Value in appreciation and increase in property over time.

How to get loan from National bank of Kenya 

Do you need a loan from the National Bank of Kenya? Please read on to learn more about this process, and get started today.

  1. Visit the website 
  2. Go to “Get a loan” 
  3. Choose the type of loan Product you want 
  4. Put all necessary personal information and documents 
  5. Wait for loan approval 

National Bank of Kenya app

The national bank of Kenya apps includes:

  1. Natmobile
  2. NBK mobile banking- used in accessing various banking services.
  3. KCB

How do I withdraw money from NBK to M-Pesa?

The steps for withdrawing include:

  1. Locate your phone’s M-PESA menu.
  2. Select Lipa na M-PESA
  3. Choose the PayBill option.
  4. Enter your bank’s business/paybill number
  5. Type in your bank account number (this is the number of the account you want to send the cash to).
  6. Input the amount.
  7. Enter your M-PESA pin.
  8. Get the confirmation message 

National bank of Kenya contacts

You can chat with them via +254 (20) 282 8900, +254 703 088 900, +254 732 118 900.

National Bank Head Office Nairobi

The address for National Bank Kenya Nairobi is at National bank building, Harambee Avenue Nairobi. P.O Box: 72866, Nairobi, 00200

Conclusion 

National Bank of Kenya wants you to get the loan that suits your needs! Become a loan customer today and get your money in minutes.

Tip: Crypto loans are fast becoming a thing.

Filed Under: Financial institutions

Five C’s Of Credit- All You Need Know

May 22, 2023 by hakeem

Loan application and it’s underwriting processes are a practice of analysing, structuring, documenting, and approving credits. Therefore, to achieve all these, lenders need tools to guide them through the process. Also, while considering the risk in credit and following the fact, it is relevant to emphasize on the need to protect financial institutions and individual lenders, hence the five Cs of credit. The 5Cs are fundamental tenets of lending loans.

With the result of the recent CGAP in Kenya, it was noticed that 50% of digital borrowers repay their loan late and default, respectively. To investigate and describe the creditworthiness analysis methods, strategies and procedures, they form requirements within the analysing process.

Thus, let us discuss the 5Cs of credit and all you need to know.

Five C's of credit

What are Five C’s of credit?

The five Cs of credit are a gauge or a system used in weighing creditworthiness of borrowers. It gauges five features of the borrowers, which are capacity, character, capital, collateral, and conditions. Moreso, it analyzes the probability of loan default and capacity for repayment.

No five Cs are more important than the other, but most lenders gauge using capacity. The goal is your ability and willingness to repay your loan. 

Understanding the five C’s of credit in Kenya 

The 5Cs of credit in Kenya have to do with a series of credit analysis by a lender to find out the risk associated with a loan. Regardless of the type of loan you need, the lender is interested in how you will pay back the loan.

In Kenya, credit analysis is governed and controlled by the “five Cs”. The borrower’s character, capacity, condition, capital, and collateral. These 5 components make up the credit analysis. It also helps the lender understand you as a borrower and   your creditworthiness. 

Finally, it is pertinent as a Kenya citizen that you understand these five Cs . It would prepare you for a loan application process and give you the edge you need.

Five C’s of credit in Kenya

In gauging creditworthiness of potential borrowers, 5 features of five Cs are considered. They are:

  1. Character/credit history
  2. Capacity
  3. Collateral
  4. Capital
  5. Conditions

Character/credit history

This refers to the borrower’s repayment track records. Reputation appears in your credit history. It is generated by the CRB in Kenya and contains how much you borrowed and your loan defaults and repayments. Often, if you are looking for jobs, you might be asked to get your credit certificate.

Many lenders also gave a minimum credit score and requirements before a borrower is eligible. Also note that a low interest rate is offered to borrowers with an excellent credit score.

Capacity

This is the ability of the borrower to repay the loan. It is often assessed based on the borrower’s debt-income ratio. They obtained it by adding the potential borrower’s monthly debts payment and dividing it by the gross salary or income.

The lower the DTI, the higher the chance. The length of hon and the job stability are also considered as part of the capacity of the borrower. 

Collateral 

Collateral prices, the risk of loan. They presented it in exchange for loans. It assures the lender that he can get something back in case of default. It is the object of the loan application.

They also referred to as secured loans. Loans secured with collateral often have low interest rates and longer loan duration such as with mortgage loans providers.

Capital

This includes the down payment of loans to show more seriousness and willingness to repay loans. This down payment can make lenders comfortable in extending the loan. A large capital by the borrower reduces the risk of default.  

Conditions

This includes the conditions for the loan, the principal amount, and the interest rate the loan would attract. This also explains what the borrower is using the loan for.

These are the things the lenders find out. The reason behind every loan influences lenders’ decisions for approval. 

Basics of five C’s of credit

The five-Cs-of-credit methods and evaluation are rooted on;

  1.  Qualitative and
  2.  Quantitative measures.

Lenders approve and grant loan applications based on borrower’s credit reports, credit scores, income statements, and other documents. Documents relevant to the borrower’s financial situation are the only one considered. Take note that the information about the loan itself is also considered. 

How lenders analyse the five C’s of credit

Different lenders analyse it differently based on how they want it. They can use any of the 5Cs as a basic gauge for analysis. Let us quickly look at the 5Cs and see how lenders analyse it. 

Character: Lenders look at:

  1. Credit score/history 
  2. Financial reputation 
  3. Other financial credit utilisation 

Capacity: Lenders analyse it by looking at:

  1. Cash flow
  2. Debt-to-income ratio
  3. Debt service ratio

Capital Lenders will want to see:

  1. How much you have invested in your business
  2. Your business net worth 
  3. The real estate you possess 
  4. Ratio of your debt to equity 
  5. The equipment and assets you have

Collateral: Financial institution can perceive it in the form of: 

  1. Your Valuable assets 
  2. Depreciation rates of your assets 
  3. Account receivables

Conditions: conditions include other factors that will influence your loan repayments. They are:

  1. Economic trends 
  2. Issues that are predominant in your business or your workplace
  3. Tangible reasons for the loan application. 

Why are Five C’s of credit important 

The importance of five C’s of credit are:

  1. important?It helps lenders determine the borrower’s credit limit and the interest rate.
  2. It influences, to a large extent, the borrower’s loan approval.
  3. The 5Cs, when properly analysed, give the lender conditions that the borrower would pay back.

How to improve on the five C’s of credit by a borrower

Improving on the 5Cs of credit by the lender involves distinct steps. They include:

  1. Make your payments early
  2. Create a mutual relationship with lenders
  3. Reduce your debts by clearing outstanding debts
  4. Increase your cash flow
  5. Record all your personal investments and knowing off hand
  6. Gain and purchase assets
  7. Control the way you sound. Prepare yourself and use all your loans prudently. 

Frequently asked questions

Of importance, let us recap. The 5 C’s of credit are Character, Capacity, Collateral, Capital, and Conditions.

Why are they all important?

Lenders use these criteria to know if you are qualified for a loan. Eligibility is first considered before a loan application process.

These criteria determine your interest rates and credit limits. They also help determine loan risk and the likelihood of the borrower repaying at the agreed date. 

Is there a sixth ‘C’ of credit?

Often people refer to the credit report/history as the 6th C of credit. It is not yet verified.

Conclusion 

Each financial institution has its own method for analyzing a borrower’s creditworthiness. Using the five Cs of credit is common for both individual and business loan applications.

Of hierarchy, capacity basically, the borrower’s ability to generate consistent income to pay off the interest and principal ranks as the most important. 

But applicants who have high marks in each category are more apt to receive bigger loans, a lower interest rate, and more favorable repayment terms.

These factors are what lenders used to gauge your creditworthiness, but make no mistake. It’s also important for the financial health and stability of your business to check the 5 Cs of credit analysis on your own from time to time. Whether for lenders or for yourself, use this guide to help you strengthen your business’s 5 Cs of credit!

Filed Under: Personal Finance

Prime Bank Kenya- Everything You Need To Know

May 3, 2023 by hakeem Leave a Comment

Prime bank Kenya is a leading commercial bank, providing a wide range of loans, commercial and retail banking services through a network of over 20 branches spread across counties in Kenya and other countries.  

Prime-Bank-Kenya

About prime bank Kenya 

They founded prime Bank on 3rd September 1992 as a privately held commercial bank, serving small and medium sized enterprises. It is licensed by the Central Bank of Kenya, the national banking regulator. 

Prime bank is Kenya’s market leader in the banking industry, with a range of products and services unmatched by other banking institutions.

While these products and services are innovative and attractive, they recognize that they also reflect the rigorous and well thought out mechanisms put in place to manage and protect the interests of their valued customers.

How many branches do Prime bank have

It has a total of 146 branches across the country and 20 interconnected branches in Kenya’s urban cities.

Prime bank Kenya loan products 

Prime bank is among the leading banks in Kenya offering retail and corporate banking solutions. They provide their customers with a wide array of financial products and services that include:

  1. Consumer/individual loan
  2. Mortgage loans
  3. Small business loans and
  4. Large scale business lending 

How to apply for Prime Bank Kenya loan

To apply for a Prime bank Kenya loan, visit any branch close to you and get the loan application form and follow the due process.

20 Prime bank branches in Kenya

Prime bank offers a wide range of loans and banking services in different locations in Kenya and they include:

  1. Aside plaza, Ring Road Kilimani, Nairobi city, Kenya
  2. PRQC+JMP, Nairobi, Kenya 
  3. Mombasa Rd, Nairobi City, Kenya 
  4. No 10, Nairobi, Kenya 
  5. First flow  Diamond plaza, Masari Rd, Parklands, Westlands, Kenya
  6. Yaya Center, Argwings kodhek Rd, Nairobi, Kenya
  7. Ukwala Rd, Nairobi, Kenya 
  8. Kenyatta Hwy, Thika, Kenya
  9. Makasembo Rd, Eldoret, Kenya
  10. Malaba Rd, Eldoret Kenya
  11. Opposite Mombasa Law Courts, Kizingo, Dedan Kimathi Ave, Mombasa, Kenya
  12. 2MW3+MJR, Meru, Kenya
  13. Krishna Center, Woodvale Grove, Kenya
  14. Nyali Plaza, Opposite Nyali Cinemax, Nyali Rd, Mombasa, Kenya
  15. Westside Mall, Kenyatta Ave, Nakuru, Kenya
  16. Next To Mukeshi R. Lakhani, Oginga Odinga Rd, Kisumu, Kenya
  17. Links Rd, Mombasa, Kenya
  18. Krishna Centre, Woodvale Grove, Nairobi, Kenya
  19. Two Rivers mall, QQQV+GRF, Nairobi, Kenya
  20. Nairobi tow, Kenya (+254 20 4203000)

Subsidiaries of Prime Bank

The following are the bank investments:

  1. Prime Capital and Credit Limited 
  2. Tausi Assurance Company Limited 
  3. FMBCapital Holdings Plc in Mauritius.

Conclusion

Prime bank Kenya is located in Nairobi’s Central Business District. The bank provides the required banking services and loans to the public so that they can achieve their financial independence. They also strive to provide quality banking and loan products made for its clients.

Filed Under: Financial institutions

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