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Sacco loans Versus Bank loans
Rank: User Joined: 8/15/2013 Posts: 13,237 Location: Vacuum
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Lolest! wrote:Swenani wrote:Lolest! wrote:Swenani wrote:
All that has been considered in the revised calculation above.
The thing is, if you have savings of 333K in a sacco and you have a project of Kshs 1 million, you will have to borrow 1 million from the sacco ad pay interest on it(1M) unlike a guy who has savings of 333k in a bank will only need a loan of Kshs 667K
That's fine. But in your co,mparative analysis, you subtract the savings amount which is wrong IMO Quote: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 1. I subtracted since you have to repay the loan in full. 2. I added back the savings and factored in growth in dividends Quote:2. Growth of your shares due to dividends paid at 6% compounding
333,333*1.06^5=446,074
Total net worth=446074+275843=721,91 At the end of it all, you assume that the SACCO guy's deposits have gone down to 113K. After he has paid the loan? Subtracting the savings and then adding them back gives us a net value of zero- Wewe ulisomea kwa dirisha? If you take a loan of 1M(667K+333k) and pay an interest of 12% while your savings(333k) is earning 6% in dividends, you do not end up with a net value of zero The sacco guys 333K savings have grown to 446K assuming a return of 6% The 275K is the return on the loan of 1M over a period of 5 years. So where has the the sacco guys deposit gone down by 113K? If Obiero did it, Who Am I?
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Rank: Veteran Joined: 5/18/2008 Posts: 796
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I remember this discussion from way back when...http://m.wazua.co.ke/forum.aspx?g=posts&t=1109 Here is what I got. Have I left out any relevant factors  Edited slightly
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Rank: Member Joined: 2/20/2007 Posts: 767
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mozenrat wrote:I remember this discussion from way back when...http://m.wazua.co.ke/forum.aspx?g=posts&t=1109 Here is what I got. Have I left out any relevant factors Edited slightly Good one. One small omission, the bank guy is paying shs 16,027 LESS per month. If you invest this cash at 9%, you will have shs 961,620 as cash savings and interest of shs 244,579. Total 1,206,199. Practically, the bank guy can choose to use the excess cash each month to pay off the loan faster thus pay much less interest, pay it off earlier by 18 months and save the intended loan repayments at interest. 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: Veteran Joined: 5/18/2008 Posts: 796
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tom_boy wrote:mozenrat wrote:I remember this discussion from way back when...http://m.wazua.co.ke/forum.aspx?g=posts&t=1109 Here is what I got. Have I left out any relevant factors Edited slightly Good one. One small omission, the bank guy is paying shs 16,027 LESS per month. If you invest this cash at 9%, you will have shs 961,620 as cash savings and interest of shs 244,579. Total 1,206,199. Practically, the bank guy can choose to use the excess cash each month to pay off the loan faster thus pay much less interest, pay it off earlier by 18 months and save the intended loan repayments at interest. I didn't ignore the interest on the 16,027. It is included as 245,960.85. However, if I have to consider the 961K like you have, I would also have to consider the 1m initial deposit that the Sacco guy put into the Sacco. so I ignored both and considered only the incremental amounts i.e. the interest earned by the bank guy on the difference between the installments and the interest earned by the Sacco guy on the initial deposit only.
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Rank: Member Joined: 2/20/2007 Posts: 767
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mozenrat wrote:tom_boy wrote:mozenrat wrote:I remember this discussion from way back when...http://m.wazua.co.ke/forum.aspx?g=posts&t=1109 Here is what I got. Have I left out any relevant factors Edited slightly Good one. One small omission, the bank guy is paying shs 16,027 LESS per month. If you invest this cash at 9%, you will have shs 961,620 as cash savings and interest of shs 244,579. Total 1,206,199. Practically, the bank guy can choose to use the excess cash each month to pay off the loan faster thus pay much less interest, pay it off earlier by 18 months and save the intended loan repayments at interest. I didn't ignore the interest on the 16,027. It is included as 245,960.85. However, if I have to consider the 961K like you have, I would also have to consider the 1m initial deposit that the Sacco guy put into the Sacco. so I ignored both and considered only the incremental amounts i.e. the interest earned by the bank guy on the difference between the installments and the interest earned by the Sacco guy on the initial deposit only. Point taken. However , a more rational way of looking at it is that the bank guy will use all funds available to clear the loan first. Do the same calculation but assume each of them is paying the same amount each month. Let us know your findings. 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: Hello Joined: 2/22/2013 Posts: 5
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Very confusing...in summary, which is "better"? Those who are unwilling to take risks do not change the world.
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Rank: New-farer Joined: 10/3/2014 Posts: 20
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tonieneri wrote:Very confusing...in summary, which is "better"? Assuming that the Bank might increase or decrease lending rates depending on the market dynamics, Sacco is better but the difference is not very significant.
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Rank: User Joined: 8/15/2013 Posts: 13,237 Location: Vacuum
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tonieneri wrote:Very confusing...in summary, which is "better"? For interest below 23% bank is better If Obiero did it, Who Am I?
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Rank: Hello Joined: 8/15/2019 Posts: 5
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For a couple of years, I was an unofficial employee and I couldn't apply for a bank loan. The bank loans are way better than the credit unions ones. They have lower interest rates. So I had to loan money from credit companies and pay for a year the same that I could pay for 3 if loaning from the bank. After becoming an official employee, I couldn't miss the chance to loan money from banks so I applied a few times on Lånemegleren. As soon as I return one loan, I take another. Most of all I applied for consumers loan as they allow you to spend the money however you want. And having a good credit history allowed me to get better offers.
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