This archive report was first published on 19 August 2021.
As the pandemic continues to wreak havoc on the economy, many Kenyans are finding themselves in a precarious financial situation. With sales dwindling, jobs lost, and expenses mounting, it's no wonder that 14 million Kenyans have been listed with the credit reference bureau for defaulting on loans.
However, before resorting to loans, it's essential to consider the potential risks and rewards. A loan can be a lifeline, but it can also lead to a vicious cycle of debt if not managed properly.
According to recent reports, approximately 14 million Kenyans have been listed with the credit reference bureau for defaulting on loans. This has left many with limited access to credit facilities, pushing them into the open arms of loan sharks and other unscrupulous lenders.
So, what should you consider before applying for a loan? Firstly, think about the type of loan you want and what you intend to use it for. Ask yourself if the purpose is worthy of taking a loan. You also need to know that there are different types of loans in the market, and you should only go for the one that best suits your situation.
Furthermore, the kind of place you decide to take your loan also matters. A loan comes with an interest, so do not go for a small loan at a big place where you will end up being ripped off by paying more money than you bargained for. Always consult financial experts first before taking a loan.
Another crucial factor to consider is your current financial situation. Can you manage to sustain your living expenses and still pay the loan? When you understand your monthly and yearly budgets, it becomes easy for you to know how much you can manage to spare in loan repayments every month and how much you can actually borrow.
When you blindly take a loan without considering your financial status, you are likely to drive yourself into a deeper financial pit. This is especially true for those who are not good at clearing their debts and loans. If you have a bad credit history, you are likely not to get a loan from any bank or get the exact amount you want.
Banks tend to be very cautious with the people they lend money to. In order to cover interest rates, most banks are anxious about lending for risk of default. Before anything else, check your credit score in order to know the likely prospects of getting the loan approved. If you have a bad reputation, consider clearing your name first.
It's also essential to ask your lender about the interest rates and any hidden charges before committing to a loan. Some lenders will allow you to take a shorter time to pay your loan if they think you can handle it, but this is not always openly discussed. Always ensure to ask your lender whether they allow people to pay back loans earlier or later, and how this is likely to affect the interests as well as monthly instalments.
Lastly, be wary of loans that have no written agreements. Steer clear of such loans to avoid any potential pitfalls.
