[Update:05.01.2021]

A loan is a sum of money you borrow from a lender, after which you pay back over a set period of time. There are various types of loans in Kenya, and each one serves a different purpose.

Lately, Kenyans have taken advantage of the possibility of getting a loan, as the process is pretty easy, and helps them deal with everyday financial setbacks. Here are the most common loans you can find on the market today.
Read also: https://kashy.co.ke/financial-guide/the-essential-things-to-be-considered-when-you-think-of-applying-for-a-loan/

Secured Loans

This type of loan represents an amazing option for people who are in need of some money and looking to build their credit. Secured loans are safer especially when you are late with payments. Because the loan is backed by collateral such as an asset or something of equal value, the lender is more likely to approve your loan as it’s less risky.

Unsecured Loans

Unsecured loans come with certain risks. Basically, they don’t have much security, which means that they are not as protected as other loans. In the case of default, you might end up being sued by the lender in order to recover the money. Usually, these loans include student loans, credit cards, and signature loans.  Not to mention the heavy interest and fines that accrue as a result of default over long periods.

Mobile Loans

Mobile loans have overtaken the financial industry in Kenya and have given banks a run for their money. Such loans are attractive because they come in handy in times of emergencies and have no red tape and long application procedures. When in need of money on the fly, these apps sort you in less than 30 minutes.

Nonetheless, because of their growing popularity, predatory lenders are also lurking and one can easily be duped. If there is a need to borrow from mobile apps, default to trusted lenders such as Zenka, Tala or Branch.

Auto/Car/Motor Loans

When in need to buy a car in Kenya, most people tend to seek the help of auto loan companies or banks. These loans have been created for this exact purpose – so, if you need a car now and you don’t have the funds, this is the way to go.  It will cost you a lot more than buying upfront though.

Nevertheless, the possibility of using your income to cover the cost and deductions of the car is one of the decisive factors that lenders consider. At the same time, interest rates will be applied depending on the model and make of the vehicle.

Mortgages

If there is a product that you can’t miss from any banking institution it’s mortgage loans. They are very popular among Kenyans because of the convenience to afford construction costs of putting up a house or building. Building a home is not cheap, that’s where mortgages come in handy.

It’s interesting to note that medium and high-income families are the banks’ target audience with these loans nowadays.  Times have changed and new families are building their dream homes sooner rather than later. Let alone single adults taking on this venture before settling down.

Small Business Loans

The title speaks for itself but it’s still worth addressing. Small business loans are mostly taken up by MSmes’or startup companies to finance their operations. Regular ‘biasharas’ also benefit from such loans as they have shorter repayment periods and affordable flexible interest rates.

Unsecured Loans

Guarantor Loans

Guarantor loans are an option to take should you have a negative credit score or your paying power and affordability cannot match what you need. A  family member or a trusted friend guarantees they will act as collateral on your behalf in the unlikely case you’re unable to make the repayments.

Though effective, this line of action is usually shied upon as guarantors are in short supply. Saccos are one of the few institutions known to still use this option when giving out loans.

Cash Advances

Think of this method as purchasing money. Basically, cash advances allow you to take out an amount of money from a bank or ATM, for a short time, after which you pay it back. They go hand in hand with salary advances or on the extreme end, shylocks.

With cash advances, the money is deducted upfront for cases of salaries. Or an item is held in place of the advance and returned when the full debt is paid.

Installment Loans

When you settle for personal loans, it pretty much means you’re going to get money from an online lender or bank and repay it in monthly installments. This usually happens over the course of five years, making them long term loans. These loans can be used for anything you need (an unexpected bill, a vacation, home renovation, etc.).

Whether you want to settle for online instalment loans or any other type of loan, it’s important to check various options at your disposal, depending on your needs.

Settle with the right one that will cost you less and you can get the most out of it. Loans can be overwhelming and enticing. Kashy advises taking only what you need.

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