Last time Interest rates were increased in 2012 My personal loan that i had taken when rates were low increased by four (4) installments. I enlightened my colleagues to check their loan balances and they found incresases ranging from 4-6 installments depending on how much the loan was and repayment period. I was curious and took a loan form from the bank(COOP) and several other banks. When i read the terms and conditions, there was a clause " the bank reserves the right to vary interest without prior informing the client." I also took.my loan statement and went through all transactions one by one. I inquired from several people and the banks employees and found out that IF you take a LOAN when rates are low:
a). ALL Banks are quick to vary interest rate up but TOO SLOW to vary it down.
b). If loan is reducing balance, the interest rate is calculate monthly using that months balance and PREVAILING RATE. So for my case when rate went up, inerest charged monthly shot high...when interest rates were lowered, interest charged came down. Even though they took several months to effect downwards.
IF you take a LOAN when rates are HIGH:
a). When market rates come lower, your loan rate remains HIGH unless you top up the loan. ALL Banks.
** Similarly at that time Saccos had had varied rates upto between 1.1% to 1.25% monthly as a result of pressure from banks and gvt to create balance.
The only way to curb this is CBK tell banks to change that clause. That is what i found out.
Everybody STEALS, a THIEF is one who's CAUGHT stealing something of LITTLE VALUE. !!!