Traditionally, well-to-do individuals were the ones who had access to loans to either expand their big businesses or build a karental on that piece of land bought when Kenya was still learning to sit. Loans were synonymous with portly (retired) civil servants who had nothing better to do. That tradition is dead, and in its place, a more savvy, youngish one has taken over with the violence of a category 3 hurricane. However, the modern generation takes to patience as one would take to particularly bitter and unsavory medicine. They do not want to wait to inherit land to use as collateral, especially for something as mundane, for example, buying a car or starting a business. They want them now or even better, yesterday.
Enter unsecured loans. But what are they?
Unsecured loans are loans that do not require collateral, such as a car or a house, to use as security for the loan. In Kenya, banks and other financial institutions offer several types of unsecured loans to individuals and businesses. These have made life easier, but if you have been somewhat behind on the information cure, which is OK by the way, or just need a lil’ bit of information then read on for this article was written with only you in mind.
Types of Unsecured loans
Personal loans
These are loans that are given to individuals for personal use. These loans can be used for a variety of purposes, such as paying for a vacation, consolidating debt, or making a major purchase. Personal loans in Kenya are typically offered by banks and other financial institutions, and the loan amount and interest rate will depend on the borrower’s creditworthiness and financial history.
Salary Advance loans
These are short-term loans that are designed to help borrowers meet their immediate cash needs. These are short-term loans that are offered to individuals who need quick access to cash to meet urgent expenses and to cover other unexpected expenses, such as car repairs or medical bills, and are typically repaid on the borrower’s next payday. Banks and small, non-bank lenders such as Hela Pesa typically offer payday loans in Kenya, and the loan amount and interest rate will vary depending on the lender.
Microloans
These are small loans that are given to individuals or businesses to help them start or expand a small business. These loans are typically offered by microfinance institutions, and the loan amount and interest rate will depend on the borrower’s creditworthiness and the viability of the business plan.
Credit cards
These are unsecured lines of credit that are offered by banks and other financial institutions. Credit cards allow borrowers to make purchases or withdraw cash up to a certain credit limit, and the loan is repaid through monthly installments.
Overdrafts
They are short-term unsecured loans that banks offer to account holders who have a current or savings account. Overdrafts allow account holders to withdraw more money than they have in their accounts, up to a certain limit. Think Fuliza.
Business loans
These are unsecured loans that small and medium-sized enterprises (SMEs) access to help them finance their business operations either as start-up loans or as cash injections to an existing business. Business loans are typically offered by banks, microfinance institutions, and other financial institutions, and do not require collateral to secure the loan.
Asset finance loans
These are unsecured loans that individuals or businesses are offered to finance the purchase of assets, such as vehicles, machinery, or equipment. Asset finance loans are typically offered by banks, microfinance institutions, and other financial institutions, and do not require collateral to secure the loan.
What to look for when applying for an unsecured loan
When choosing an unsecured loan, you should consider the following factors to ensure that you get the best deal possible. Some of these factors include:
- Interest rate: The interest rate on an unsecured loan will determine how much you will pay in interest over the life of the loan. To get the best deal, look for a loan with the lowest possible interest rate.
- Loan term: The loan term is the length of time over which you will repay the loan. Longer loan terms may have lower monthly payments, but they will also result in higher total interest costs. To get the best deal, look for a loan with a loan term that is appropriate for your needs and that will allow you to repay the loan in a reasonable amount of time.
- Fees and charges: Many unsecured loans have fees and charges that can add to the overall cost of the loan. To get the best deal, look for a loan with low or no fees and charges, such as origination fees, prepayment penalties, or late fees.
- The reputation of the lender: The reputation of the lender is an important factor to consider when choosing an unsecured loan. Look for a lender that has a good reputation and is known for providing good customer service and fair lending practices.
- Flexibility and customization: Some unsecured loans may offer flexible repayment options or the ability to customize the loan to meet your specific needs. To get the best deal, look for a loan that offers the flexibility and customization you need.
Why you should get an unsecured loan
The main advantages of unsecured loans include:
- No collateral required – Unsecured loans do not require collateral, which means that borrowers do not have to put up any assets as security for the loan. This makes them more accessible to those who do not have collateral, such as those with limited assets or those who are starting a business.
- Quick access to funds – Unsecured loans are often approved and disbursed quickly, which means that borrowers can access the funds they need in a short amount of time. This is especially useful in emergency situations or when funds are needed quickly.
- Flexibility in use – Unsecured loans can be used for a wide range of purposes, such as personal expenses, business expenses, or investments. This allows borrowers to use the funds in the way that best meets their needs.
- Credit-building opportunity – Taking out an unsecured loan and making timely payments can help build or improve credit scores, which can be beneficial for future borrowing opportunities.
- No impact on collateral – Since unsecured loans do not require collateral, borrowers do not have to worry about their assets being seized in the event of default. This allows them to retain ownership of their assets and maintain control over their financial situation.
So, it matters not what you’d want to do with the money or the type of unsecured loan you want to access, though we would highly recommend our Hela Pesa Salary Advance loan, unsecured loans if used correctly can pay for that emergency that would have overwhelmed you or buy you that pick-up to boost your business. But like all good things, their sparing use is what makes them worthwhile. Take care of your loan e.g., by paying on time and your unsecured loan will take care of you. Good luck.