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Sacco loans Versus Bank loans
Rank: Member Joined: 9/14/2011 Posts: 834 Location: nairobi
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I have always assumed that using sacco loans for development is not always the cheaper option
This is because to secure say a Kshs 3M loan at 12% pa you need to have a saved kshs 1M in the sacco which earns say interest at about 9% per year
But i think if i get a bank loan at say 18% pa i can then invest the 'potential sacco savings' and generate a higher return say at 15% per year
But with my bank having increased my interest rate to 24% ( they claim their cost of deposits is now higher) am wondering whether my assumptions are still valid
Your comments are welcome
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Rank: New-farer Joined: 4/8/2015 Posts: 42
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heri wrote:I have always assumed that using sacco loans for development is not always the cheaper option
This is because to secure say a Kshs 3M loan at 12% pa you need to have a saved kshs 1M in the sacco which earns say interest at about 9% per year
But i think if i get a bank loan at say 18% pa i can then invest the 'potential sacco savings' and generate a higher return say at 15% per year
But with my bank having increased my interest rate to 24% ( they claim their cost of deposits is now higher) am wondering whether my assumptions are still valid
Your comments are welcome Each has its strength and weakness Sacco strengths 1. Cheaper than most bank loans (99%) 2. Interest rate stays at 12% for the basic loan. There are other packages available at very different rates including one I saw at 10% p.m. depending on the add on feature (fast processing, top up, etc etc) 3. Is not dependent on income/cash flow: since it's based on shares held, given as a multiple of the same: can be triple or quintuple. Good especially for non salaried business people 4. Interest is fixed. 5. Most saccos have common bond (common factor eg profession, employer, etc) so are very friendly and personal 6. Some saccos like mine gives loans at 12% for up to 8 years (above a certain amount) Disadvantages 1. Long processing period: often 30 working days (6 weeks), unless you are taking another (more expensive option - my Sacco gives a 2 week swift loan - at 16% p.a.) 2. Guarantors can be hell to find especially with increasing amounts. And each cent lent out must be guaranteed 3. Interest on your deposits are ridiculously low: 6% pa and below in most. 4. Long queues in some saccos waiting for loans so it "helps" kujuana. But only in some very large and govt affiliated like Afya and Kilimo My experience and observation with sacco loans is much better than bank loans. The 30 day processing 'wait' means no overnight 'bright' harebrained ideas, lazima nipange mikakati. And I have realised that organic growth in sacco deposits is very useful as I take on progressively bigger projects. So a sacco must needs both patience and planning.
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Rank: Veteran Joined: 7/5/2010 Posts: 2,061 Location: Nairobi
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heri wrote:I have always assumed that using sacco loans for development is not always the cheaper option
This is because to secure say a Kshs 3M loan at 12% pa you need to have a saved kshs 1M in the sacco which earns say interest at about 9% per year
But i think if i get a bank loan at say 18% pa i can then invest the 'potential sacco savings' and generate a higher return say at 15% per year
But with my bank having increased my interest rate to 24% ( they claim their cost of deposits is now higher) am wondering whether my assumptions are still valid
Your comments are welcome The flaw in your thinking stems from the assumption that 'potential sacco savings' just miraculously happens to be there. Your starting point is 1 million shillings ahead. In real life, you have to work, live, scratch and claw like a tunnel rat and develop a strong saving habit over some long bit of time before that milli tops out. The 2 situations are not comparable. Its apples to oranges. Its either you need 3 million, or 4 million, now, for something urgent. Then you go to the bank and eat the full market interest rate -or, you are willing to wait and save in the interim, let the money lie idle so as to get cheaper Sacco credit. This 'investing the 1 million' is a figment of the imagination cause either the million is not there, or the million is tied up.
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Rank: Member Joined: 6/14/2010 Posts: 521 Location: Nairobi
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Let’s take a Case of Ksh 1Million Loan To qualify to borrow this amount I need to have raised 1/3 of the same of course with a guarantee of other members to get the remaining 2/3rd covered. I'll be happy to say that I have secured a 1M loan from my Sacco at 12% interest per annum (Or 1% per month as they normally put it). This of course boils down to a repayment of ksh 21,935.69 for five years. For purposes of clarity Loan: Ksh 1Million Interest rate: 12% Pa on reducing Period: 5 years(60 months) monthly repayment: Ksh 21,935.69 Reality is shocking! You have actually borrowed your own money at exorbitant rates! Let's look at the argument again. To qualify for a ksh 1M loan, you need to raise 1/3 that amount ie: Ksh 333,333 to be precise. In that case the real money you have borrowed from your Sweet Sacco is Ksh 1m – 333,333 which is Ksh 666,666.67 with a repayment of Ksh 21,936 per month for five years. Let’s see how much the interest will be for the second scenario(Reality). Loan: Ksh 666,666.67 Interest rate:35.664% on reducing Period:5 years(60 months) Monthly repayments:21,935.69 Now we say Banks are expensive at 21% etc. Who is more expensive? Your Sacco or your Bank?
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Rank: Elder Joined: 3/18/2011 Posts: 12,069 Location: Kianjokoma
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optimist, The Sacco money is just a security like a plot of land. An interesting security because it will still earn you a dividend annually(some in another thread claim they're paid up to 20% If you needed 1M today, you will not start saving in a SACCO. You will go to them and borrow based on the deposits with them. You do not just walk there give them 333 and then expect them to give you 1M. You will have saved that 333 over some time In your bank example, you needed 1M, you've borrowed 667. Where will you get 333 from???
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Rank: Elder Joined: 3/2/2009 Posts: 26,328 Location: Masada
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The optimist wrote:Let’s take a Case of Ksh 1Million Loan
To qualify to borrow this amount I need to have raised 1/3 of the same of course with a guarantee of other members to get the remaining 2/3rd covered.
I'll be happy to say that I have secured a 1M loan from my Sacco at 12% interest per annum (Or 1% per month as they normally put it).
This of course boils down to a repayment of ksh 21,935.69 for five years.
For purposes of clarity
Loan: Ksh 1Million
Interest rate: 12% Pa on reducing
Period: 5 years(60 months)
monthly repayment: Ksh 21,935.69
Reality is shocking!
You have actually borrowed your own money at exorbitant rates!
Let's look at the argument again.
To qualify for a ksh 1M loan, you need to raise 1/3 that amount ie: Ksh 333,333 to be precise.
In that case the real money you have borrowed from your Sweet Sacco is Ksh 1m – 333,333 which is Ksh 666,666.67 with a repayment of Ksh 21,936 per month for five years.
Let’s see how much the interest will be for the second scenario(Reality).
Loan: Ksh 666,666.67
Interest rate:35.664% on reducing
Period:5 years(60 months)
Monthly repayments:21,935.69
Now we say Banks are expensive at 21% etc.
Who is more expensive?
Your Sacco or your Bank?
Sasa kishwa yangu yaniuma.  Portfolio: Sold
You know you've made it when you get a parking space for your yatcht.
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Rank: Elder Joined: 3/2/2009 Posts: 26,328 Location: Masada
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Now if you borrow Kes.1M from sacco if your share/saving is Kes.333,333 do you lose the 333,333 savings? Portfolio: Sold
You know you've made it when you get a parking space for your yatcht.
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Rank: Elder Joined: 3/18/2011 Posts: 12,069 Location: Kianjokoma
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Impunity wrote:Now if you borrow Kes.1M from sacco if your share/saving is Kes.333,333 do you lose the 333,333 savings? No. You only lose the chums if you don't repay. These chums continue earning you dividends. Optimist's argument is too simplistic
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Rank: Elder Joined: 12/7/2012 Posts: 11,908
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Lolest! wrote:Impunity wrote:Now if you borrow Kes.1M from sacco if your share/saving is Kes.333,333 do you lose the 333,333 savings? No. You only lose the chums if you don't repay. These chums continue earning you dividends. Optimist's argument is too simplistic That calculation is tafash   In the business world, everyone is paid in two coins - cash and experience. Take the experience first; the cash will come later - H Geneen
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Rank: Veteran Joined: 11/2/2006 Posts: 1,206 Location: Nairobi
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The optimist wrote:Let’s take a Case of Ksh 1Million Loan
To qualify to borrow this amount I need to have raised 1/3 of the same of course with a guarantee of other members to get the remaining 2/3rd covered.
I'll be happy to say that I have secured a 1M loan from my Sacco at 12% interest per annum (Or 1% per month as they normally put it).
This of course boils down to a repayment of ksh 21,935.69 for five years.
For purposes of clarity
Loan: Ksh 1Million
Interest rate: 12% Pa on reducing
Period: 5 years(60 months)
monthly repayment: Ksh 21,935.69
Reality is shocking!
You have actually borrowed your own money at exorbitant rates!
Let's look at the argument again.
To qualify for a ksh 1M loan, you need to raise 1/3 that amount ie: Ksh 333,333 to be precise.
In that case the real money you have borrowed from your Sweet Sacco is Ksh 1m – 333,333 which is Ksh 666,666.67 with a repayment of Ksh 21,936 per month for five years.
Let’s see how much the interest will be for the second scenario(Reality).
Loan: Ksh 666,666.67
Interest rate:35.664% on reducing
Period:5 years(60 months)
Monthly repayments:21,935.69
Now we say Banks are expensive at 21% etc.
Who is more expensive?
Your Sacco or your Bank?
If you went to your bank with a payslip that can pay 22k per month...assuming your net after major expenses is 30k.What loan amount do you think they would give you?1M unsecured?I highly doubt. Also note that the 333,333sh will earn you close to 100k in dividends over the 5yrs if rate is 6%. Formally employed people often live their employers' dream & forget about their own.
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Rank: Hello Joined: 2/17/2016 Posts: 2
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I believe that both have their advantages. For Saccos, however, there is the added advantage of being able to plan years ahead given that interest rates on the loans do not change. Also, most Saccos allow earlier payments without hefty penalties and the same cannot be said of banks (although, admittedly, some banks are now allowing prepayments without penalties).
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Rank: Member Joined: 2/20/2007 Posts: 767
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The optimist wrote:Let’s take a Case of Ksh 1Million Loan
To qualify to borrow this amount I need to have raised 1/3 of the same of course with a guarantee of other members to get the remaining 2/3rd covered.
I'll be happy to say that I have secured a 1M loan from my Sacco at 12% interest per annum (Or 1% per month as they normally put it).
This of course boils down to a repayment of ksh 21,935.69 for five years.
For purposes of clarity
Loan: Ksh 1Million
Interest rate: 12% Pa on reducing
Period: 5 years(60 months)
monthly repayment: Ksh 21,935.69
Reality is shocking!
You have actually borrowed your own money at exorbitant rates!
Let's look at the argument again.
To qualify for a ksh 1M loan, you need to raise 1/3 that amount ie: Ksh 333,333 to be precise.
In that case the real money you have borrowed from your Sweet Sacco is Ksh 1m – 333,333 which is Ksh 666,666.67 with a repayment of Ksh 21,936 per month for five years.
Let’s see how much the interest will be for the second scenario(Reality).
Loan: Ksh 666,666.67
Interest rate:35.664% on reducing
Period:5 years(60 months)
Monthly repayments:21,935.69
Now we say Banks are expensive at 21% etc.
Who is more expensive?
Your Sacco or your Bank?
Good point. The advantages of sacco are more psychological than real. Of course no body talks about the fact that when you ask for guarantors, you are also forced to be a guarantor yourself. Your hard earned deposits are therefore at risk from people you guarantee. Many have lost these deposits when their 'trusted friend' suddenly disappears a few months after taking the sacco loan. They must find it difficult....... those who have taken authority as the truth, rather than truth as the authority. -G. Massey.
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Rank: Elder Joined: 4/22/2010 Posts: 11,522 Location: Nairobi
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bird_man wrote:The optimist wrote:Let’s take a Case of Ksh 1Million Loan
To qualify to borrow this amount I need to have raised 1/3 of the same of course with a guarantee of other members to get the remaining 2/3rd covered.
I'll be happy to say that I have secured a 1M loan from my Sacco at 12% interest per annum (Or 1% per month as they normally put it).
This of course boils down to a repayment of ksh 21,935.69 for five years.
For purposes of clarity
Loan: Ksh 1Million
Interest rate: 12% Pa on reducing
Period: 5 years(60 months)
monthly repayment: Ksh 21,935.69
Reality is shocking!
You have actually borrowed your own money at exorbitant rates!
Let's look at the argument again.
To qualify for a ksh 1M loan, you need to raise 1/3 that amount ie: Ksh 333,333 to be precise.
In that case the real money you have borrowed from your Sweet Sacco is Ksh 1m – 333,333 which is Ksh 666,666.67 with a repayment of Ksh 21,936 per month for five years.
Let’s see how much the interest will be for the second scenario(Reality).
Loan: Ksh 666,666.67
Interest rate:35.664% on reducing
Period:5 years(60 months)
Monthly repayments:21,935.69
Now we say Banks are expensive at 21% etc.
Who is more expensive?
Your Sacco or your Bank?
If you went to your bank with a payslip that can pay 22k per month...assuming your net after major expenses is 30k.What loan amount do you think they would give you?1M unsecured?I highly doubt. Also note that the 333,333sh will earn you close to 100k in dividends over the 5yrs if rate is 6%. This is the most important point possunt quia posse videntur
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Rank: Elder Joined: 3/18/2011 Posts: 12,069 Location: Kianjokoma
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tom_boy wrote:
Good point. The advantages of sacco are more psychological than real. Of course no body talks about the fact that when you ask for guarantors, you are also forced to be a guarantor yourself. Your hard earned deposits are therefore at risk from people you guarantee. Many have lost these deposits when their 'trusted friend' suddenly disappears a few months after taking the sacco loan.
You have a point when you tell us there will be an issue when you guarantee others but optimist's argument is flawed!
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Rank: User Joined: 8/15/2013 Posts: 13,237 Location: Vacuum
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bird_man wrote:The optimist wrote:Let’s take a Case of Ksh 1Million Loan
To qualify to borrow this amount I need to have raised 1/3 of the same of course with a guarantee of other members to get the remaining 2/3rd covered.
I'll be happy to say that I have secured a 1M loan from my Sacco at 12% interest per annum (Or 1% per month as they normally put it).
This of course boils down to a repayment of ksh 21,935.69 for five years.
For purposes of clarity
Loan: Ksh 1Million
Interest rate: 12% Pa on reducing
Period: 5 years(60 months)
monthly repayment: Ksh 21,935.69
Reality is shocking!
You have actually borrowed your own money at exorbitant rates!
Let's look at the argument again.
To qualify for a ksh 1M loan, you need to raise 1/3 that amount ie: Ksh 333,333 to be precise.
In that case the real money you have borrowed from your Sweet Sacco is Ksh 1m – 333,333 which is Ksh 666,666.67 with a repayment of Ksh 21,936 per month for five years.
Let’s see how much the interest will be for the second scenario(Reality).
Loan: Ksh 666,666.67
Interest rate:35.664% on reducing
Period:5 years(60 months)
Monthly repayments:21,935.69
Now we say Banks are expensive at 21% etc.
Who is more expensive?
Your Sacco or your Bank?
If you went to your bank with a payslip that can pay 22k per month...assuming your net after major expenses is 30k.What loan amount do you think they would give you?1M unsecured?I highly doubt_ Why not, a loan of Kshs 1M translates to a monthly repayment of 25K at a rate of 18% over 5 years
Also note that the 333,333sh will earn you close to 100k in dividends over the 5yrs if rate is 6%.-- Please note that you would also end up paying kshs 111,507 over 5 years in interest on your money of Kshs 333,3333 to the sacco! If Obiero did it, Who Am I?
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Rank: Member Joined: 2/7/2014 Posts: 155
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Swenani wrote:bird_man wrote:The optimist wrote:Let’s take a Case of Ksh 1Million Loan
To qualify to borrow this amount I need to have raised 1/3 of the same of course with a guarantee of other members to get the remaining 2/3rd covered.
I'll be happy to say that I have secured a 1M loan from my Sacco at 12% interest per annum (Or 1% per month as they normally put it).
This of course boils down to a repayment of ksh 21,935.69 for five years.
For purposes of clarity
Loan: Ksh 1Million
Interest rate: 12% Pa on reducing
Period: 5 years(60 months)
monthly repayment: Ksh 21,935.69
Reality is shocking!
You have actually borrowed your own money at exorbitant rates!
Let's look at the argument again.
To qualify for a ksh 1M loan, you need to raise 1/3 that amount ie: Ksh 333,333 to be precise.
In that case the real money you have borrowed from your Sweet Sacco is Ksh 1m – 333,333 which is Ksh 666,666.67 with a repayment of Ksh 21,936 per month for five years.
Let’s see how much the interest will be for the second scenario(Reality).
Loan: Ksh 666,666.67
Interest rate:35.664% on reducing
Period:5 years(60 months)
Monthly repayments:21,935.69
Now we say Banks are expensive at 21% etc.
Who is more expensive?
Your Sacco or your Bank?
If you went to your bank with a payslip that can pay 22k per month...assuming your net after major expenses is 30k.What loan amount do you think they would give you?1M unsecured?I highly doubt_ Why not, a loan of Kshs 1M translates to a monthly repayment of 25K at a rate of 18% over 5 years
Also note that the 333,333sh will earn you close to 100k in dividends over the 5yrs if rate is 6%.-- Please note that you would also end up paying kshs 111,507 over 5 years in interest on your money of Kshs 333,3333 to the sacco! and your inevestment(whatever you borrow the money) will also have grown and at end of day, you still have a saving.
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Rank: User Joined: 8/15/2013 Posts: 13,237 Location: Vacuum
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kasibitta wrote:Swenani wrote:bird_man wrote:The optimist wrote:Let’s take a Case of Ksh 1Million Loan
To qualify to borrow this amount I need to have raised 1/3 of the same of course with a guarantee of other members to get the remaining 2/3rd covered.
I'll be happy to say that I have secured a 1M loan from my Sacco at 12% interest per annum (Or 1% per month as they normally put it).
This of course boils down to a repayment of ksh 21,935.69 for five years.
For purposes of clarity
Loan: Ksh 1Million
Interest rate: 12% Pa on reducing
Period: 5 years(60 months)
monthly repayment: Ksh 21,935.69
Reality is shocking!
You have actually borrowed your own money at exorbitant rates!
Let's look at the argument again.
To qualify for a ksh 1M loan, you need to raise 1/3 that amount ie: Ksh 333,333 to be precise.
In that case the real money you have borrowed from your Sweet Sacco is Ksh 1m – 333,333 which is Ksh 666,666.67 with a repayment of Ksh 21,936 per month for five years.
Let’s see how much the interest will be for the second scenario(Reality).
Loan: Ksh 666,666.67
Interest rate:35.664% on reducing
Period:5 years(60 months)
Monthly repayments:21,935.69
Now we say Banks are expensive at 21% etc.
Who is more expensive?
Your Sacco or your Bank?
If you went to your bank with a payslip that can pay 22k per month...assuming your net after major expenses is 30k.What loan amount do you think they would give you?1M unsecured?I highly doubt_ Why not, a loan of Kshs 1M translates to a monthly repayment of 25K at a rate of 18% over 5 years
Also note that the 333,333sh will earn you close to 100k in dividends over the 5yrs if rate is 6%.-- Please note that you would also end up paying kshs 111,507 over 5 years in interest on your money of Kshs 333,3333 to the sacco! and your inevestment(whatever you borrow the money) will also have grown and at end of day, you still have a saving. Lets see who is better off after 5 years, assuming 10% ROI If you borrow 666,667 from the bank and top up with your savings of Kshs 333,333, you will end up paying kshs 349,013 in interest assuming 18% interest In 5 years, your total net worth will be(assuming 10% ROI annual compounding) 1,610,510-666,667-349,013=Kshs 594,830 If you go the sacco way and borrow kshs 666,667 you will end up paying kshs 334,667 in interest at 12%(interest is charged to Kshs 666,667 you borrowed+kshs 333,333your savings). At the end of 5 years , your total net worth will be ((assuming 10% ROI annual compounding on loan and 6% on your shares compounding) 1. Loan= 1,610,510-1,000,000-334,667=kshs 275,843 2. Growth of your shares due to dividends paid at 6% compounding 333,333*1.06^5=446,074 Total net worth=446074+275843=721,917 The Sacco guy is better off than the bank guy with kshs 127,087 after 5 years If Obiero did it, Who Am I?
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Rank: Veteran Joined: 11/2/2006 Posts: 1,206 Location: Nairobi
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Swenani wrote:bird_man wrote:The optimist wrote:Let’s take a Case of Ksh 1Million Loan
To qualify to borrow this amount I need to have raised 1/3 of the same of course with a guarantee of other members to get the remaining 2/3rd covered.
I'll be happy to say that I have secured a 1M loan from my Sacco at 12% interest per annum (Or 1% per month as they normally put it).
This of course boils down to a repayment of ksh 21,935.69 for five years.
For purposes of clarity
Loan: Ksh 1Million
Interest rate: 12% Pa on reducing
Period: 5 years(60 months)
monthly repayment: Ksh 21,935.69
Reality is shocking!
You have actually borrowed your own money at exorbitant rates!
Let's look at the argument again.
To qualify for a ksh 1M loan, you need to raise 1/3 that amount ie: Ksh 333,333 to be precise.
In that case the real money you have borrowed from your Sweet Sacco is Ksh 1m – 333,333 which is Ksh 666,666.67 with a repayment of Ksh 21,936 per month for five years.
Let’s see how much the interest will be for the second scenario(Reality).
Loan: Ksh 666,666.67
Interest rate:35.664% on reducing
Period:5 years(60 months)
Monthly repayments:21,935.69
Now we say Banks are expensive at 21% etc.
Who is more expensive?
Your Sacco or your Bank?
If you went to your bank with a payslip that can pay 22k per month...assuming your net after major expenses is 30k.What loan amount do you think they would give you?1M unsecured?I highly doubt_ Why not, a loan of Kshs 1M translates to a monthly repayment of 25K at a rate of 18% over 5 years
Also note that the 333,333sh will earn you close to 100k in dividends over the 5yrs if rate is 6%.-- Please note that you would also end up paying kshs 111,507 over 5 years in interest on your money of Kshs 333,3333 to the sacco! @Swenani...forget about 18% on unsecured. Those are rates for guys with collateral such as title (you have to value and charge it at about 100K, plus takes more than 30days). You will also be required to channel your salary etc via the bank as well as produce bank statements for 1yr or so. Try it practically and let us know, perhaps guys who've taken bank loans can tell us. Formally employed people often live their employers' dream & forget about their own.
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Rank: Member Joined: 2/20/2007 Posts: 767
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The optimist wrote:Let’s take a Case of Ksh 1Million Loan
To qualify to borrow this amount I need to have raised 1/3 of the same of course with a guarantee of other members to get the remaining 2/3rd covered.
I'll be happy to say that I have secured a 1M loan from my Sacco at 12% interest per annum (Or 1% per month as they normally put it).
This of course boils down to a repayment of ksh 21,935.69 for five years.
For purposes of clarity
Loan: Ksh 1Million
Interest rate: 12% Pa on reducing
Period: 5 years(60 months)
monthly repayment: Ksh 21,935.69
Reality is shocking!
You have actually borrowed your own money at exorbitant rates!
Let's look at the argument again.
To qualify for a ksh 1M loan, you need to raise 1/3 that amount ie: Ksh 333,333 to be precise.
In that case the real money you have borrowed from your Sweet Sacco is Ksh 1m – 333,333 which is Ksh 666,666.67 with a repayment of Ksh 21,936 per month for five years.
Let’s see how much the interest will be for the second scenario(Reality).
Loan: Ksh 666,666.67
Interest rate:35.664% on reducing
Period:5 years(60 months)
Monthly repayments:21,935.69
Now we say Banks are expensive at 21% etc.
Who is more expensive?
Your Sacco or your Bank?
Good point. The advantages of sacco are more psychological than real. Of course no body talks about the fact that when you ask for guarantors, you are also forced to be a guarantor yourself. Your hard earned deposits are therefore at risk from people you guarantee. Many have lost these deposits when their 'trusted friend' suddenly disappears a few months after taking the sacco loan. They must find it difficult....... those who have taken authority as the truth, rather than truth as the authority. -G. Massey.
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Rank: Member Joined: 6/22/2011 Posts: 561 Location: House
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Swenani wrote:bird_man wrote:The optimist wrote:Let’s take a Case of Ksh 1Million Loan
To qualify to borrow this amount I need to have raised 1/3 of the same of course with a guarantee of other members to get the remaining 2/3rd covered.
I'll be happy to say that I have secured a 1M loan from my Sacco at 12% interest per annum (Or 1% per month as they normally put it).
This of course boils down to a repayment of ksh 21,935.69 for five years.
For purposes of clarity
Loan: Ksh 1Million
Interest rate: 12% Pa on reducing
Period: 5 years(60 months)
monthly repayment: Ksh 21,935.69
Reality is shocking!
You have actually borrowed your own money at exorbitant rates!
Let's look at the argument again.
To qualify for a ksh 1M loan, you need to raise 1/3 that amount ie: Ksh 333,333 to be precise.
In that case the real money you have borrowed from your Sweet Sacco is Ksh 1m – 333,333 which is Ksh 666,666.67 with a repayment of Ksh 21,936 per month for five years.
Let’s see how much the interest will be for the second scenario(Reality).
Loan: Ksh 666,666.67
Interest rate:35.664% on reducing
Period:5 years(60 months)
Monthly repayments:21,935.69
Now we say Banks are expensive at 21% etc.
Who is more expensive?
Your Sacco or your Bank?
If you went to your bank with a payslip that can pay 22k per month...assuming your net after major expenses is 30k.What loan amount do you think they would give you?1M unsecured?I highly doubt_ Why not, a loan of Kshs 1M translates to a monthly repayment of 25K at a rate of 18% over 5 years
Also note that the 333,333sh will earn you close to 100k in dividends over the 5yrs if rate is 6%.-- Please note that you would also end up paying kshs 111,507 over 5 years in interest on your money of Kshs 333,3333 to the sacco! which bank at 18% unsecured based on your payslip? Its ranging 19-21 for scheme and 21-25 for non-scheme
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