@dijkstra

You are an insult to your name.... How can you use the name of one who was so logical yet resort to emotions in a mathematical discourse.....I once worked for a bank (back office)... but no more.... You maybe surprised to learn that I'm now an official in two Saccos and you may require my signature for your loan... ; -)

I concede on the insurance,commitment fee etc etc..... Lakini if you had bothered to read my earlier posts,you'd have noticed that I'd already stated that by requiring only two signatures,Saccos are a lifeline.... Further,I stated that I agree that Banks 'fine print' is used to fleece people... U can assume fine print includes all those charges....

Seeing as all those who are now posting have moved out of the scope of the argument - which was limited to interest rates... I rest my case.....

If you can use numbers AND THE CORRECT COMPUTATIONS PROCESS to show that saving 100k in a sacco then borrowing 300K (@12%) will result in lower INTEREST charges than storing the same 100K under my bed then borrowing 200K (@18%) from a bank... BRING IT ON....

@Tito44

You've just used two posts to say... I WILL,I WILL.... Then Do it...

I suspect once you realise that you're wrong you never will....

Msema Kweli ndiye huyu hapa...

http://www.nic-bank.com/...al-Link/Loan-Calculator

Kumbe hii mambo ya interest ni moto hivi

@dijkistra

I don't know why you're inventing your own case study...

Further,u've not stated how you got your interest figures.... I'm using what I know the Banks use and YES I used to do the interest recomputations for them...

U asked for similar comparison but they also have to be realistic....

So same guy,requires same amount,can only afford same amount in installments...

Here are the terms....

1. The case study is...Mr [dijkstra] needs 300K...Mr [dijkstra] can only afford to pay 10k a month in loan installments... Two SKerians are advising on how he can get that money via a loan...

Sacco option

Save 100,000... for a year....

earn 8,000 in interest....

Borrow 300,000k from the Sacco at 12% interest....

Remembering that he can only afford to pay 10k a month,the loan will take exactly 36 months (3 years) to pay off at a rate of 10k a month...

Total interest = Kshs. 58,461.83...

Net cost = Kshs. 58,461.83 - 8,000 = Kshs. 50,461.83

At the end of 3 years,Mr [dijkstra] has had 400K in capital i.e. 300K borrowed + 100k saved in contributions...

Bank option

Save 100,000 under your mattress...

Interest earned = 0

Borrow 200,000 from the bank at 18% interest....

Remembering that he can only afford to pay 10k a month,the loan will take exactly 24 months (2 years) to pay off at a rate of 10k a month...

Total interest = Kshs. 39,565.35...

loan arrangement and insurance fees (per your own figures) = Kshs. 16,000...

Therefore net cost = Kshs. 55,565.35

At the end of 2 years,Mr [dijkstra] has 300K in capital (100k mattress money and 200k loan).... but while in the sacco he would still be paying 10k in loan installments in the third year,he can now save 10k monthly under his mattress such that at the end of the 3rd year,he will have 420k in capital....

Summary

Sacco 400,000 (Capital) - 50,461.83 (total cost) = Kshs. 349,538.17 (net)

Bank 420,000 (Capital) - 55,565.35 (total cost) = Kshs. 364,434.65 (net)

Bank option still beats Sacco option by 14,896.48

When you post your rebuttal,please state how you came up with your interest figures so that we can show you the error of your ways....

Anyone checked out the Stanchart or Cooperative Bank loan schedules or the NIC bank calculator ???.... Prove my calculations wrong. They are available in the streets of Nairobi...

Those of you interested in doing the above calculations for yourself,Just use MS Excel and the PMT(a/12,b,c) function where a = interest rate per year,b = number of months,c = loan amount.... This gives you the monthly installment... Multiply that by number of months (b) to get total figure repaid.... subtract initial loan... Whallah,you have your interest......

.... and by the way... that nugget about 'Little knowledge' is very true....

.... for instance the arrangement fee for Stanchart is 3%.... while insurance is 0.3% per annum...

.... Therefore the 200,000 loan would have charges amounting to 7,800 and not 16,000..

... angalia hapa.. http://www.standardchart...ees%20and%20Charges.pdf

@ Mozenrat

Yes,yes i have seen. BTW,because of that myth of SACCO loans being cheap borrowing,i know of some sacco officials who con some naive and unsuspecting members that the 12% interest p.a is only 1%( and conveniently fail to state that the 1% interest is monthly). Most saccos officials when dealing with new members dont like talking of 12% interest.


WOULD RATHER DIE FIGHTING 4 MY RIGHTS THAN LIVE FOREVER WITHOUT ANY RIGHTS