Loans: A quick guide on personal loans in Kenya

Before we get on loans you borrow for personal use in Kenya, did you notice I’d been away? So, it’s an amazing comeback for your writer. Its been a brief hiatus thanks to some personal duties mainly Exams. That word alone I bet has made you nervous, but don’t worry. Its a once in a while ‘thing’. So today I am going to guide you in an aspect of personal finance. You can check on this previous post. But hey, here is a guide on important information on Personal loans in Kenya.

Personal loans definition

In short, can we now narrow it down to the specific part? Let’s do it, guys! It’s all about personal loans. You might be asking yourself what personal loans are. So, a personal loan is money borrowed from a Credit union, bank, and online lender. A loan basically for your own personal use.

You pay it back in fixed installments that are either monthly or even years. In addition, personal loans are general purpose loans that is; you can use the loan at your own discretion. In other words, personal loans are an option for expenses or other purchases that are too much and can’t be accommodated in a credit card.

Notes of money after getting a loan

Types of Personal Loans

1. Secured loans

A secured personal loan is a loan backed by collateral, such as an asset, car, or a savings account. Therefore, if the borrower defaults on the loan, the lender is able to seize the assets to cover the amount not paid.

2. Unsecured loans

This loan is paid in installments and is not backed up by assets or any collateral. It is easier to acquire this loan if you have a good credit score.

3. Consigned loans

This is a secured or unsecured loan that has more than one party guaranteeing payment. Therefore if you have no credit, a lender can involve a consignee so that in case of default, he/she will pay the loan.

4. Debt consolidation loans

This one combines multiple debts into a single loan with a single monthly payment. It subsequently helps you reduce your overall monthly costs into one affordable payment by avoiding multiple interest rates and late fees.

5. Personal line of credit

This is a revolving form of credit similar to a credit card. However, unlike an installment loan that involve lump sum monthly payments, borrowers are given access to a line of credit up to a certain amount that can be borrowed as needed.

A mobile phone which is used to get personal loans

Cheapest and quick personal loans

Most of us are quite more familiar with these personal loans in Kenya. These are the easiest ones to access. Some of them include ;

A. Safaricom Fuliza

This one is offered based on your M-Pesa usage. You can sign up via USSD code *243#. There a 1% charge on the access fee and maintenance fee on the outstanding balance. So, the faster you pay the cheaper. Get to know of Fuliza.

B. Eazzy loan

Equitel provides this loan. Equity is the owner of Equitel. Equity launched its as a mobile banking platform. In order to get an Equitel line, you need to open an Equity bank account. As a result, it has an interest rate of 2%-10% per month of the loan amount on a flat rate.

C. M-Shwari

This is a collaboration between CBA Bank and Safaricom. Therefore, you have to be over 18 years and have registered a Safaricom line. As a result, you have to activate the Mpesa account for 6 months. The repayment period is 30 days and has a 7.5% interest.

Credit card used when accessing personal loans

D. KCB Mpesa

KCB Mpesa is a savings and loans account which consequently is a partnership between Safaricom and Kenya Commercial Bank. It, therefore, allows customers to borrow micro loans between Ksh. 50 and Ksh. 1M. KCP Mpesa also has a savings option of Ksh 1 and a maximum of Ksh. 1M with an interest rate of 6%. Also, read on making money and getting paid via Mpesa here.

E. Branch

It’s an app used to access loan services. In order to access it, you just install the app and register your details for a quick review. Loan amounts range from Ksh. 250 to ksh. 50,000 and payment is between 2 weeks to one month with interest rates of between 6%to 16%.

F. Timiza

Barclays bank which recently changed its name to Absa launched the digital banking platform. And you can register by dialing *848# on your Safaricom line or installing the app. As a result, it offers loans of up to 150,000 depending on your transaction history in M-pesa. Other apps loans are Tala, Okash, MCo-op cash loans e.t.c

Qualification for getting personal loans

So now what do you need in order to get a personal loan? As stated above you can see most of these loans have eligibilities that don’t vary that much. That is because all of them need you to be 18 years and above(with an ID card). In addition, mobile banking apps need a good transaction record of your Mpesa. And for some banks, they require someone who has been in continuous employment for more than 6 months. Most importantly, what these financial institutions mainly consider is your ability to pay back the loan.
They also need a clean Credit Reference Bureau report.

A few notes being held

Fastest places to borrow personal loans and their consequences

Going by what I have mentioned above, the fastest places are Mobile banking services and mobile phone apps. These places offer the fastest place to get a personal loan. The likes of Tala, Branch, M-Shari, Okash, and other mobile banking services are the quickest means to personal loans. Unfortunately, they have disadvantages mainly because these loans people take for consumption. Borrowers use money for ordinary household needs, airtime, and personal goods. Only a few people use it for business and in that case, the loans pile up since there is nothing done to multiply the money borrowed.

The speed and ease of access to credit through mobile applications leads to many borrowers being indebted. And despite their small size, they are very expensive. The interest rates are high and borrowers are charged for late payment.

Someone in an ATM

The best places to get personal loans

Now that there are several places to get loans, there are specific places that offer the best loans. And these are financial institutions like commercial banks. Note that commercial banks offer loans at a cheaper interest rate and payment can span for along time. So you have no pressure to pay up within a short time. Not to forget is that short term loans are expensive. This is a short review of interest rates of personal loans in Kenya.

Cooperative bank 13.5%

Equity Bank 13%

KCB 13.5%

Barclays Bank 14%

Other banks considered to be the best lenders include Standard Chattered Bank, NIC Bank, CFC Stanbic, and I&M bank.

Inline the above information,

I believe you can get out and find a personal loan that suits your interest. Make sure you have background checks and piece up information for the loan offering bank or app. That will be of great help. Types of online passive incomes for Kenyans

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