Easy Way to Get a Personal Loan in Kenya (Full Guide)

Loans and Finances.

Carson O.
8 Min Read

Typically, when you need money for an emergency, an unplanned situation or an investment opportunity that you’ve been targeting, you are usually limited to three categories of loan options. These options include; Payday loans, credit cards and personal loans. This article will take you through personal loans, and how to apply and get approved by traditional banks or modern fintech companies in Kenya.

Before diving into personal loans, let’s understand a few terminologies;

#1. Payday Loans

These are a type of short-term loans that are lent to people faced with unavoidable circumstances that don’t require a considerable amount of money, say over Ksh.100,000. These lenders are usually classified as predatory as their interest rates are pretty high (400%+).

Quite often, loanees find themselves in a cycle of debt, that leads them to borrow from different lenders to pay back outstanding debt. For this reason, we advise you to stay away from payday loans.

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#2. Credit Cards

Credit cards, on the other hand, are payment cards that allow you to borrow money from financial institutions when you need to make purchases in retail shops, supermarkets, etc. These credit cards are usually charged after a certain period, with interest fees reaching up to 16%. Of course, there is a spending limit that is determined by your financial strength and creditworthiness.

#3. What are personal loans?

A personal loan is usually given by a lender, i.e., a traditional bank, to a loanee at an interest rate of up to 9%. These loans are usually given after the banks assess the loanees credit worthiness. In Kenya, all citizens’ credit information is stored in the credit reference bureau (CRB). Poor credit scores are never granted any loan as it will be a risky business for the banks.  

With those out of the way, let’s dive in;

Steps you should take when seeking a personal loan

1. Run the numbers

Before applying for a loan, run the numbers. By this, I mean that you should know the exact amount that you wish to be loaned. If it’s buying a piece of land or paying for an emergency, take your time to ascertain what you will need.

Secondly, ask your lender to provide details of the origination fee. This fee is some sort of processing fee that is usually deducted from your loan after receiving it. Different lenders have different origination fees and therefore, you should consider talking to multiple lenders.

After knowing the origination fee, get to know what your monthly payment amount will look like. This will require you to do simple arithmetic. However, with the advancing technology, you could simply use a loan calculator that will give you results in seconds.

2. Check your credit

A credit score is the single most important factor when you want to apply for a personal loan in any traditional bank.

A good credit score in Kenya ranges from around 600. Anything less than that will mean that you will struggle to get approved for a personal loan. Further, if your credit score falls below 300, you are not going to get a loan from any traditional financial institution in Kenya. in such a case, you will need to contact your friends and relatives for help.

Here is how to check and improve your credit score in Kenya. A good credit score and the report will enable you to apply for competitive interest rates from your bank of choice.

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3. Consider your options

Depending on your credit score as discussed in this article, could determine whether or not you will need a co-signer or guarantor for your loan. This is important as the guarantor will pay for the loan if in any case, you default on payment.

If you fail to convince anyone to be your guarantor, you will then need to provide collateral for the loan. If you default on payment, the bank will seize the items that you listed as collateral. Be wise and avoid using collateral as much as possible. This is an example of a secured loan.

In addition, you should consider who you want to borrow from, whether it’s a traditional lender, a credit union or an online lender, e.g., Tala, Okash, Zenka Digital etc.

Here are the top loan apps [Online Lenders] in Kenya.

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4. Have a good reason for borrowing the money

Some lenders may require you to explain why you are borrowing the money. The lender always has the right to deny your loan request based on your reason.

It is therefore important for both you and the bank, to have a good use for the money that you are about to be loaned. About this concept, loans are therefore subclassified as below;

  1. Debt consolidation loans – Used to pay off all your other smaller loans, leaving you with only one monthly payment to worry about. Typically, the interest rates on such loans would be lower than the cumulative interest of all the smaller loans.
  2. Home Improvement Loans
  3. Medical expense loans – These help you lessen the medical burden that you or your family/friend may have.
  4. Wedding loans etc.

5. Shop around for different lenders

Before settling on your first lender, consider doing some more research that will enable you to get the best interest rates and payment periods. As much as traditional lenders are recommended, you shouldn’t shy away from online lenders as they too have attractive packages. Below are the three main types of lenders in Kenya.

  • Traditional banks
  • Credit unions
  • Online banks

Apply for your loan and provide the required documentation

To successfully apply for a loan after conducting your due diligence, you will need several important documents and details as listed below;

  • Your full names
  • Your national ID or passport
  • Your KRA PIN certificate
  • Your address
  • How much do you want to borrow?
  • Income and employment information

Here are the top 50 business ideas for you.

7. Approve the loan and get ready to pay for it

Once you have submitted your loan application, your bank attendant will get back to you with details of your approval.

Consequently, it is important that you accept the loan and start making necessary adjustments to your income so that you can accommodate payment that will be deducted monthly.

It is therefore advisable for you to signup for an automatic deduction system so that you don’t have trouble logging into your account and making payments by yourself every month.

If possible, pay up a little more than the minimum required monthly payment, so that you can get out of debt faster and improve your credit score.

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I am a multi-faceted professional with a strong foundation in Business and Finance, honed since 2020. Additionally, I possess a deep passion for automobiles, serving as an avid car enthusiast. In parallel to my diverse interests, I am also a dedicated student pursuing a career in the medical field.
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