People take loans from banks and other non-banking financial institutions for a number of reasons. The choice of which bank to borrow from varies from person to person, with banks offering varying loan arrangements and differing in strengths and incentives. While people may have different reasons and motivations for choosing one bank over the other, the key determinants that dictate people’s choice of which bank to borrow from include the interest rates charged, loan fees, and other charges, which then determine how much one is supposed to pay back to the bank once s/he has been issued with a loan or credit facility. Another factor to consider before taking a loan is the type of loan offered by a bank. There are three main forms of loans one can secure from a bank, namely: secured loans, unsecured loans, and salary advance, all with different qualification requirements.
Generally, the Central Bank of Kenya (CBK) continues to retain the benchmark lending rate at 9 percent while the 2015 Banking Act caps lending rates at 4 percentage points above the CBK benchmark rate. This means that Kenyan banks can only charge maximum interests rates of between 13 to 14 percent besides other internal and external costs. Considering all these, the following are the Kenyan banks that offer the cheapest loans.
1. Victoria Bank
Victoria Bank is one of the banks that offers loans at subsidized rates. The bank levies no extra fees on the loans they provide apart from the interest rates they charge. Victoria Bank is also known to abide by its loan agreements.
KCB charges a 13 percent interest on its loans. The Bank offers a wide variety of loans, including Masomo Loan, personal unsecured check off loans, personal unsecured non-check off loans, personal secured loans, salary advance and various business loans. While KCB charges an extra 2.5 percent negation fee and a 20% of charge on the negotiation fee on its loans, its loans are still some of the cheapest in the Kenyan market.
3. Bank of Baroda
Yet another bank that offers cheap personal secured and unsecured loans, business loans, and mortgage loans is the Bank of Baroda. Bank of Baroda charges a 13% interest rate. Its loans attract no processing, prepayment, or documentation charges, making them some of the most affordable in the Kenyan market.
4. National Bank of Kenya
Another Kenyan bank that offers cheap loans to its customers is the National Bank of Kenya. With a minimum loan amount of Ksh 50,000 and maximum of Ksh 6,000,000, the bank offers competitive interest rate on a reducing balance. Other charges include 2% negotiation fees – 2% for new loans and buy offs and 1.5% negotiation fees for top-ups, appraisal fees, and risk margins.
5. Bank of India
Bank of India also provides cheap loans at a 13% interest rate. Borrowers also incur a one-time 1% per annum processing charge and other external costs like cost of valuation, legal cost, insurance, and stamping but these do not raise the cost of the loan significantly.
With many borrowers defaulting on their loans and facing consequences such as repossession of property, CRB listing, and auctions among other undesirable outcomes, it is prudent to do you’re your research to establish which banks offer the cheapest loans but also with flexible repayment plans to ensure that you do not become victim to a good loan gone bad. Luckily, we have done the hard job for you and given you a list of banks that can help unlock your financial prosperity.