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Faulu Kenya Loans 12%PA
Rank: Elder Joined: 4/30/2008 Posts: 6,029
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jerry wrote:mawinder wrote:Faulu is now the cheapest lender in Kenya at 9.5% interest per annum!!!!!!!!!!!!!!!!!!!!!!!!! Give an example! Amount, repayment period, payment per month, insurance, t&c... Just saw the advert in the papers,as for example I dont have any.
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Rank: Elder Joined: 10/3/2008 Posts: 4,058 Location: Gwitu
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Flat rate is very costly especially for long periods. It means that you will be interest on the original amount even when the balance is 10/- Truth forever on the scaffold
Wrong forever on the throne
(James Russell Rowell)
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Rank: Elder Joined: 9/29/2006 Posts: 2,570
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kaka2za wrote:Flat rate is very costly especially for long periods. It means that you will be interest on the original amount even when the balance is 10/- I thought if it's flat rate eg 400k @9.5% pa interest will be 400,000*9.5% for 1st yr, 300,000*9.5% for 2nd yr, 200,000*9.5% for 3rd yr and 100,000*9.5% for 4th yr? This works out to (400,000+300,000+200,000+100,000)*9.5% equal to 1,000,000/=*9.5% i.e. 95,000/=. The opposite of courage is not cowardice, it's conformity.
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Rank: Veteran Joined: 11/2/2006 Posts: 1,206 Location: Nairobi
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jerry wrote:kaka2za wrote:Flat rate is very costly especially for long periods. It means that you will be interest on the original amount even when the balance is 10/- I thought if it's flat rate eg 400k @9.5% pa interest will be 400,000*9.5% for 1st yr, 300,000*9.5% for 2nd yr, 200,000*9.5% for 3rd yr and 100,000*9.5% for 4th yr? This works out to (400,000+300,000+200,000+100,000)*9.5% equal to 1,000,000/=*9.5% i.e. 95,000/=. Flat Rate(Simple Interest) will be: 1st Yr 400K*9.5%=38,000sh 2nd Yr 400K*9.5%=38,000sh 3rd Yr 400K*9.5%=38,000sh 4th Yr 400K*9.5%=38,000sh Total Interest=152K/48months=3,166sh interest/month Reducing Balance: 1st Yr 400K*9.5%=38,000sh 2nd Yr 313K*9.5%=29,700sh 3rd Yr 218K*9.5%=20,700sh 4th Yr 114K*9.5%=10,800sh Total Interest=99.2K/48months=2,066sh interest/month Compound Interest: 1st Yr 400K*9.5%=38,000sh 2nd Yr 438K*9.5%=42,000sh 3rd Yr 480K*9.5%=46,000sh 4th Yr 526K*9.5%=50,000sh Total Interest=176K/48months=3,666sh interest/month We have just used an example of 400K & a term of 4yrs & a rate of 9.5%.If you do the same math for a 4Million loan with a term of 6yrs & a rate of 12%....you will be shocked!But,most customers never do this math...some don't care as long as they look at the "interest %age figure".The devil is in the detail (formula). Formally employed people often live their employers' dream & forget about their own.
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Rank: Elder Joined: 3/29/2011 Posts: 2,242
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kaka2za wrote:Flat rate is very costly especially for long periods. It means that you will be interest on the original amount even when the balance is 10/- Whenever you see flat rate, RUN. Its the most expensive interest rate ever and is used to play on peoples psychology that its cheap but expensive. Even the term is fixed e.g 5 yrs and you will pay the interest for 5 yrs even if you repay the loan in one month! "Things that matter most must never be at the mercy of things that matter least." Goethe
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Rank: Veteran Joined: 11/2/2006 Posts: 1,206 Location: Nairobi
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Gathige wrote:kaka2za wrote:Flat rate is very costly especially for long periods. It means that you will be interest on the original amount even when the balance is 10/- Whenever you see flat rate, RUN. Its the most expensive interest rate ever and is used to play on peoples psychology that its cheap but expensive. Even the term is fixed e.g 5 yrs and you will pay the interest for 5 yrs even if you repay the loan in one month! @Gathige....true!Compound is even worse!Allows you to quote a very low interest rate e.g 12% only for the interest to be equivalent to 23-24% compared to a reducing balance loan. Formally employed people often live their employers' dream & forget about their own.
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Rank: Elder Joined: 9/29/2006 Posts: 2,570
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bird_man wrote:Gathige wrote:kaka2za wrote:Flat rate is very costly especially for long periods. It means that you will be interest on the original amount even when the balance is 10/- Whenever you see flat rate, RUN. Its the most expensive interest rate ever and is used to play on peoples psychology that its cheap but expensive. Even the term is fixed e.g 5 yrs and you will pay the interest for 5 yrs even if you repay the loan in one month! @Gathige....true!Compound is even worse!Allows you to quote a very low interest rate e.g 12% only for the interest to be equivalent to 23-24% compared to a reducing balance loan. Does it mean there are/is no monthly reducing balance interest rates? The opposite of courage is not cowardice, it's conformity.
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Rank: New-farer Joined: 3/2/2011 Posts: 33 Location: Nbi
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So flat rate is akin to an interest only bond with a bullet paymemt, reducing balance is equivalent to a standard loan, and compound interest is akin to a zero coupon bond, correct? Would you know if Faulu engages in either Interest Only or Zero Coupon loans? Thx! bird_man wrote:jerry wrote:kaka2za wrote:Flat rate is very costly especially for long periods. It means that you will be interest on the original amount even when the balance is 10/- I thought if it's flat rate eg 400k @9.5% pa interest will be 400,000*9.5% for 1st yr, 300,000*9.5% for 2nd yr, 200,000*9.5% for 3rd yr and 100,000*9.5% for 4th yr? This works out to (400,000+300,000+200,000+100,000)*9.5% equal to 1,000,000/=*9.5% i.e. 95,000/=. Flat Rate(Simple Interest) will be: 1st Yr 400K*9.5%=38,000sh 2nd Yr 400K*9.5%=38,000sh 3rd Yr 400K*9.5%=38,000sh 4th Yr 400K*9.5%=38,000sh Total Interest=152K/48months=3,166sh interest/month Reducing Balance: 1st Yr 400K*9.5%=38,000sh 2nd Yr 313K*9.5%=29,700sh 3rd Yr 218K*9.5%=20,700sh 4th Yr 114K*9.5%=10,800sh Total Interest=99.2K/48months=2,066sh interest/month Compound Interest: 1st Yr 400K*9.5%=38,000sh 2nd Yr 438K*9.5%=42,000sh 3rd Yr 480K*9.5%=46,000sh 4th Yr 526K*9.5%=50,000sh Total Interest=176K/48months=3,666sh interest/month We have just used an example of 400K & a term of 4yrs & a rate of 9.5%.If you do the same math for a 4Million loan with a term of 6yrs & a rate of 12%....you will be shocked!But,most customers never do this math...some don't care as long as they look at the "interest %age figure".The devil is in the detail (formula).
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Rank: Veteran Joined: 11/17/2012 Posts: 1,461 Location: Ngong Forest
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They use flat rate,that is total interest divided by period.
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Rank: Veteran Joined: 11/2/2006 Posts: 1,206 Location: Nairobi
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Ngong wrote:They use flat rate,that is total interest divided by period. I highly highly doubt that.If it was flat rate it would still need to be higher than 9.5% otherwise you cannot give 12% on deposits. This can only be compound interest!But anyway,the surest way to test is by someone giving their loan amount & the amount they are paying.From that we can get the real thing instead of relying on marketers. Formally employed people often live their employers' dream & forget about their own.
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