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Sacco loans Versus Bank loans
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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