@Tito44....

U're assuming straight line basis for charging interest which is rarely used by banks or Saccos.... In reality u pay interest on the OUTSTANDING balance.....

I like working with actual numbers so here goes...

Assuming that U and I earn about the same and can only afford to pay about the same in installments..

I borrow 200K from a bank for 2 years... monthly installments = 9,984.82.... total interest = 39,635.69

U borrow 300K from your Sacco for 3 years.... Monthly installments = 9,964.29.... When 200k PRINCIPAL is repaid (after 25 months),you tell them to write off the balance with your contributions.... Ur total interest paid will be 58,714.55 MINUS 6,301.15 = 52,413.40

Know this... Financial institutions collect the largest portion of total interest AT THE BEGINNING and more of the Principal AS THE END OF THE TERM OF THE LOAN nears...

I could send you a reducing balance loan schedule calculator,you do the math yourself....

To your second example:::::-

I agree that when you borrow 300K from the Sacco,you effectively have 400K (300K loan and 100K in savings)... HOWEVER,after two years,I will have completed paying my loan and the money that was going towards paying the bank accumulates as savings to 100K.. You on the other hand will still be paying your loan in the third year.... so at the end of the third year,you and I will effectively have 400K!!!

ACTUALLY... U'll have less since you'll have paid nearly 18K more in interest... Hope you're dividends will be able to cover that....

PS: This is the first time I'm doing this calculations and I'm shocked!!! I'm really beginning to wonder about this Sacco's phenomenon......

@ Niando

What is the opportunity cost of having a payslip(a piece of worthless paper) in your bank managers office?


WOULD RATHER DIE FIGHTING 4 MY RIGHTS THAN LIVE FOREVER WITHOUT ANY RIGHTS

young*...

we feel your pain.....

however....

before you put pen to paper......

read the fine print....

or get a lawyer to interpret the contents of the letter of offer......

it is called ....

preventive lawyering..... from the adage... Prevention is better than cure......

I'm the real Massey F.....shut your mouth

@Mozenrat

Why is it so hard for you to give similar comparisons? You conveniently use a repayment of 9,984 for the bank and 9,964 for the sacco. You then go ahead and give an inflated figure for the sacco interest. As if that is not enough,you clearly say that the sacco loan will be written off after two years with the 100k. This essentially means the sacco loan is also cleared after 2 years. So u are the bright one to continue saving after clearing your bank loan while the foolish me will not save any single cent and yet we've both cleared our loans?

It's good you've said it is the first time you are calculating this. So,i will pardon you for the mistake you've made but pliz don't go on fooling guys on how better a bank loan is compared to saccos. You even conveniently forgot to include the loan facilitation fee charged by banks.

The problem is that you are relying on those loan calculators. Those work in the USA my friend. Get a spreadsheet and see the difference for yourself. I will soon be posting the entire breakdown side by side.

@Tito44...

Wacha kuenda personal.....

Who told you these loan calculators are used in the States... Enter any Stanchart ATM area today and pick the loan schedules they give you for their personal loans... I assure you,you will get the same amount.

I have used the figures that are nearest to each other for the Bank and Sacco. This is supposed to be one individuals choice so I'm assuming that the same individual can only afford roughly 10k per month installments.... If you shorten the Sacco period to 2 years for the 300k,the fellow has to pay installments of Kshs. 14,122.14 with interest totalling to Kshs. 38,929. If he chooses a bank,the guy and pays even less at 13,556.29 he'll be finished in 17months with an interest of Kshs.27,761.85..... If he paid slightly more at 14,474.44,he finishes in 16 months with an interest of Kshs. 25,827.14

When I said I've never done this computations,I meant that I've never compared the two. Otherwise I once worked for a bank IN KENYA and a significant portion of my work involved providing revenue assurance by recomputing interest income and expense for the bank.... I also have my schedule of repayments for the last loan I took from my Sacco and rest assured my calculator is accurate...

NIC Bank is not in the STATES... Go to their website and see how interest is computed ama unadhani kuna reducing balance ya Kenya na ingine ya States....