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Sacco loans Versus Bank loans
Rank: User Joined: 8/15/2013 Posts: 13,236 Location: Vacuum
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Ngogoyo 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! which bank at 18% unsecured based on your payslip? Its ranging 19-21 for scheme and 21-25 for non-scheme So many banks-see attached average rates for unsecured loan ranging from 14.8% to 26%If Obiero did it, Who Am I?
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Rank: Member Joined: 6/22/2011 Posts: 561 Location: House
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Swenani wrote:Ngogoyo 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! which bank at 18% unsecured based on your payslip? Its ranging 19-21 for scheme and 21-25 for non-scheme So many banks-see attached average rates for unsecured loan ranging from 14.8% to 26% Of all people you are last person i would have expected not to have fully understood that article.  “Therefore the effective rates charged by individual banks may be higher than these published interest rates depending on the other fees and charges levied on loan products by the specific bank,” says the regulator.actually go to KCB today and if you can get evidence that they can give you an unsecured loan based on your payslip at 16.6% for 4yrs and you are not in a scheme i will buy full mbuzi for wazua in upcoming mbuzi season sijui 
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Rank: Veteran Joined: 11/2/2006 Posts: 1,206 Location: Nairobi
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Ngogoyo 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! which bank at 18% unsecured based on your payslip? Its ranging 19-21 for scheme and 21-25 for non-scheme Thanks Nyogoyo.Simply put unsecured of 1M for 5yrs is around 24-27% based on payslip.For a first time walkin with net of 30k after expenses you are unlikely to even get the 1M. Other option is secured where you will value and charge your land for 100k or thereabout. Formally employed people often live their employers' dream & forget about their own.
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Rank: User Joined: 8/15/2013 Posts: 13,236 Location: Vacuum
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Ngogoyo wrote:Swenani wrote:Ngogoyo 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! which bank at 18% unsecured based on your payslip? Its ranging 19-21 for scheme and 21-25 for non-scheme So many banks-see attached average rates for unsecured loan ranging from 14.8% to 26% Of all people you are last person i would have expected not to have fully understood that article. “Therefore the effective rates charged by individual banks may be higher than these published interest rates depending on the other fees and charges levied on loan products by the specific bank,” says the regulator.actually go to KCB today and if you can get evidence that they can give you an unsecured loan based on your payslip at 16.6% for 4yrs and you are not in a scheme i will buy full mbuzi for wazua in upcoming mbuzi season sijui Sijui but i do not think the other charges should be significant, in most cases those other charges are usually one off thus in my layman's view, i do not think the rest can constitute more than 2% What is scheme? Sisi what wa ocha tunajua scheme ni shamba bought through cooperatives If Obiero did it, Who Am I?
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Rank: Member Joined: 2/27/2011 Posts: 518
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Rank: Member Joined: 6/22/2011 Posts: 561 Location: House
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Sijui but i do not think the other charges should be significant, in most cases those other charges are usually one off thus in my layman's view, i do not think the rest can constitute more than 2% What is scheme? Sisi what wa ocha tunajua scheme ni shamba bought through cooperatives [/quote] hii scheme siyo kitu ingine, ni hiyo tu. your employer is a common denominator for you and your colleagues. He influences the bank (based on his perceived value and going concern status) for it to give his employees low interest loans (below market rate)
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Rank: Member Joined: 2/20/2007 Posts: 767
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Lolest! wrote: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! His arguement is on point. Look at it this way. Person A and person B both plan to have 1 million shillings for a project in 12 months time. Person A decides to go the sacco route and saves 333,333 shs via sacco for 12 months then hussles to get guarantors for 666,666 shs. He then takes a loan of 1 million at 12% per annum. Assuming 5yr repayment, monthly repayment will be sh 22,244. At the end of 5 yrs, their 333,333 deposit may have gained at 6% to be at sh 446,000 net cash at 5 yrs. Person B saves sh 333,333 over the same 12 months and puts it in money market fund. He then approaches his bank for 666,666 sh at 20%. He pays at the same rate as the sacco guy but he will finish 18 months earlier. He continues to save and invest the 22,244 for 18 months and by the time 5 yrs are up , he will have 400,392 plus interest. Basically, this works for as long as bank rates are 20% and below, you are salaried and can get loan easily. If rates go above 20% the sacco guy wins. Realistically though rates have been below 20% for a long time. 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: New-farer Joined: 1/29/2016 Posts: 47 Location: Nairobi, Kenya
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Swenani wrote: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 @Swenani, thanks for great analogy above. Bottom line the Sacco have bridged the gap of those who don't have collateral in terms of the "real" assets such as Land,Bonds,Shares etc to access the traditional Bank Loans that impoverished many who couldn't leverage them well. While saccos have come to the rescue, it's telling though that many loans from saccos have been God sent to "Small-Mid Level Creditors Bracket" who want to leverage their savings over time. In Investment world ,Time is money.Hence high net individuals still leverage bank loans /overdrafts/"sharks-Platinum Credit & Like" as they look at opportunity cost lost due to time.They leverage quick money by making use of it immediately and make a killing (ROI) that can pay back the high interest rates. On the downside they know if the investment doesn't work out they can live with it,even if the security charged was auctioned/lost. My take, if you can leverage Sacco Loans ,they are very good for increasing your "net worth " slowly but surely. While bank/other loans allows you increase your "net worth" 'overnight' though it works for those who have been there done it and have good fall back. Hence, Make it (Via Sacco), Master it (Via Sacco/Bank) Then It can Matter (Any Credit)! Disclaimer; Know your risk appetite first. Live your life well, don't settle nor conform to people expectations. It's one of the best way to live life full of bliss and contentment.
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Rank: Elder Joined: 3/18/2011 Posts: 12,069 Location: Kianjokoma
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tom_boy wrote:Lolest! wrote: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! His arguement is on point. Look at it this way. Person A and person B both plan to have 1 million shillings for a project in 12 months time. Person A decides to go the sacco route and saves 333,333 shs via sacco for 12 months then hussles to get guarantors for 666,666 shs. He then takes a loan of 1 million at 12% per annum. Assuming 5yr repayment, monthly repayment will be sh 22,244. At the end of 5 yrs, their 333,333 deposit may have gained at 6% to be at sh 446,000 net cash at 5 yrs. Person B saves sh 333,333 over the same 12 months and puts it in money market fund. He then approaches his bank for 666,666 sh at 20%. He pays at the same rate as the sacco guy but he will finish 18 months earlier. He continues to save and invest the 22,244 for 18 months and by the time 5 yrs are up , he will have 400,392 plus interest. Basically, this works for as long as bank rates are 20% and below, you are salaried and can get loan easily. If rates go above 20% the sacco guy wins. Realistically though rates have been below 20% for a long time. You will not start saving to get the loan. And your membership will not end when you pay. You will still be a member, entitled to another loan
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Rank: New-farer Joined: 6/3/2014 Posts: 58 Location: Nairobi
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Lolest! wrote:tom_boy wrote:Lolest! wrote: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! His arguement is on point. Look at it this way. Person A and person B both plan to have 1 million shillings for a project in 12 months time. Person A decides to go the sacco route and saves 333,333 shs via sacco for 12 months then hussles to get guarantors for 666,666 shs. He then takes a loan of 1 million at 12% per annum. Assuming 5yr repayment, monthly repayment will be sh 22,244. At the end of 5 yrs, their 333,333 deposit may have gained at 6% to be at sh 446,000 net cash at 5 yrs. Person B saves sh 333,333 over the same 12 months and puts it in money market fund. He then approaches his bank for 666,666 sh at 20%. He pays at the same rate as the sacco guy but he will finish 18 months earlier. He continues to save and invest the 22,244 for 18 months and by the time 5 yrs are up , he will have 400,392 plus interest. Basically, this works for as long as bank rates are 20% and below, you are salaried and can get loan easily. If rates go above 20% the sacco guy wins. Realistically though rates have been below 20% for a long time. You will not start saving to get the loan. And your membership will not end when you pay. You will still be a member, entitled to another loan A survey on financial access was done by FSD Kenya and released yesterday. It is touching on which groups prefer SACCOs to banks and as expected SACCOs are perceived to be a cheaper source of credit than banks. See the report here Be ignorant and ask a few questions - Peter Drucker
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Rank: Member Joined: 2/20/2007 Posts: 767
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Lolest! wrote:tom_boy wrote:Lolest! wrote: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! His arguement is on point. Look at it this way. Person A and person B both plan to have 1 million shillings for a project in 12 months time. Person A decides to go the sacco route and saves 333,333 shs via sacco for 12 months then hussles to get guarantors for 666,666 shs. He then takes a loan of 1 million at 12% per annum. Assuming 5yr repayment, monthly repayment will be sh 22,244. At the end of 5 yrs, their 333,333 deposit may have gained at 6% to be at sh 446,000 net cash at 5 yrs. Person B saves sh 333,333 over the same 12 months and puts it in money market fund. He then approaches his bank for 666,666 sh at 20%. He pays at the same rate as the sacco guy but he will finish 18 months earlier. He continues to save and invest the 22,244 for 18 months and by the time 5 yrs are up , he will have 400,392 plus interest. Basically, this works for as long as bank rates are 20% and below, you are salaried and can get loan easily. If rates go above 20% the sacco guy wins. Realistically though rates have been below 20% for a long time. You will not start saving to get the loan. And your membership will not end when you pay. You will still be a member, entitled to another loan Everybody joins sacco to access ' cheap' loans. The sacco guy can take another loan after 5 yrs. The bank loan guy will also have saved 400k + by the time sacco guys finishes paying his loan and can also access another loan or continue saving. 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: 3/18/2011 Posts: 12,069 Location: Kianjokoma
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tom_boy wrote:Lolest! wrote:tom_boy wrote:Lolest! wrote: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! His arguement is on point. Look at it this way. Person A and person B both plan to have 1 million shillings for a project in 12 months time. Person A decides to go the sacco route and saves 333,333 shs via sacco for 12 months then hussles to get guarantors for 666,666 shs. He then takes a loan of 1 million at 12% per annum. Assuming 5yr repayment, monthly repayment will be sh 22,244. At the end of 5 yrs, their 333,333 deposit may have gained at 6% to be at sh 446,000 net cash at 5 yrs. Person B saves sh 333,333 over the same 12 months and puts it in money market fund. He then approaches his bank for 666,666 sh at 20%. He pays at the same rate as the sacco guy but he will finish 18 months earlier. He continues to save and invest the 22,244 for 18 months and by the time 5 yrs are up , he will have 400,392 plus interest. Basically, this works for as long as bank rates are 20% and below, you are salaried and can get loan easily. If rates go above 20% the sacco guy wins. Realistically though rates have been below 20% for a long time. You will not start saving to get the loan. And your membership will not end when you pay. You will still be a member, entitled to another loan Everybody joins sacco to access ' cheap' loans. AND TO SAVEThe sacco guy can take another loan after 5 yrs. The bank loan guy will also have saved 400k + by the time sacco guys finishes paying his loan and can also access another loan or continue saving.
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Rank: New-farer Joined: 2/7/2016 Posts: 79 Location: Home
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tom_boy wrote:Lolest! wrote:tom_boy wrote:Lolest! wrote: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! His arguement is on point. Look at it this way. Person A and person B both plan to have 1 million shillings for a project in 12 months time. Person A decides to go the sacco route and saves 333,333 shs via sacco for 12 months then hussles to get guarantors for 666,666 shs. He then takes a loan of 1 million at 12% per annum. Assuming 5yr repayment, monthly repayment will be sh 22,244. At the end of 5 yrs, their 333,333 deposit may have gained at 6% to be at sh 446,000 net cash at 5 yrs. Person B saves sh 333,333 over the same 12 months and puts it in money market fund. He then approaches his bank for 666,666 sh at 20%. He pays at the same rate as the sacco guy but he will finish 18 months earlier. He continues to save and invest the 22,244 for 18 months and by the time 5 yrs are up , he will have 400,392 plus interest. Basically, this works for as long as bank rates are 20% and below, you are salaried and can get loan easily. If rates go above 20% the sacco guy wins. Realistically though rates have been below 20% for a long time. You will not start saving to get the loan. And your membership will not end when you pay. You will still be a member, entitled to another loan Everybody joins sacco to access ' cheap' loans. The sacco guy can take another loan after 5 yrs. The bank loan guy will also have saved 400k + by the time sacco guys finishes paying his loan and can also access another loan or continue saving. If the rates are more or less similar, the sacco guy wins. Sacco loans have a fixed interest rate compared to bank loans which have a floating rate that is very hard to be reduced. If you take a bank loan at 20%, and rates fall to 16%, it will be a nightmare for your loan to be adjusted down. However, they never fail to adjust upwards. The only real advantage of a sacco loan is the certainty in repayments. You know exactly what to pay.
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Rank: Member Joined: 2/20/2007 Posts: 767
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. 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: 2/20/2007 Posts: 767
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hindsight wrote:Swenani wrote: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 @Swenani, thanks for great analogy above. Bottom line the Sacco have bridged the gap of those who don't have collateral in terms of the "real" assets such as Land,Bonds,Shares etc to access the traditional Bank Loans that impoverished many who couldn't leverage them well. While saccos have come to the rescue, it's telling though that many loans from saccos have been God sent to "Small-Mid Level Creditors Bracket" who want to leverage their savings over time. In Investment world ,Time is money.Hence high net individuals still leverage bank loans /overdrafts/"sharks-Platinum Credit & Like" as they look at opportunity cost lost due to time.They leverage quick money by making use of it immediately and make a killing (ROI) that can pay back the high interest rates. On the downside they know if the investment doesn't work out they can live with it,even if the security charged was auctioned/lost. My take, if you can leverage Sacco Loans ,they are very good for increasing your "net worth " slowly but surely. While bank/other loans allows you increase your "net worth" 'overnight' though it works for those who have been there done it and have good fall back. Hence, Make it (Via Sacco), Master it (Via Sacco/Bank) Then It can Matter (Any Credit)! Disclaimer; Know your risk appetite first. @ Swenani, your analogy is flawed, The sacco guy will be paying shs 22,244 per month for a 1 miilion loan at 12% for 5 yrs. The bank loan guy will be paying shs 16,929 per month for a sh 666,667 loan at 18% for 5 yrs. The bank loan guy can invest the difference of sh 5315 at 10% which when added monthly to the 1 million available (333,333 savings + 666667 loan) will amount to 2,020,667 which minus repayed loan of 1,015,680 (666,667 principal + 349,013 interest) , you are left with 1,004,987. Who is smarter now? 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: 2/20/2007 Posts: 767
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tom_boy wrote:hindsight wrote:Swenani wrote: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 @Swenani, thanks for great analogy above. Bottom line the Sacco have bridged the gap of those who don't have collateral in terms of the "real" assets such as Land,Bonds,Shares etc to access the traditional Bank Loans that impoverished many who couldn't leverage them well. While saccos have come to the rescue, it's telling though that many loans from saccos have been God sent to "Small-Mid Level Creditors Bracket" who want to leverage their savings over time. In Investment world ,Time is money.Hence high net individuals still leverage bank loans /overdrafts/"sharks-Platinum Credit & Like" as they look at opportunity cost lost due to time.They leverage quick money by making use of it immediately and make a killing (ROI) that can pay back the high interest rates. On the downside they know if the investment doesn't work out they can live with it,even if the security charged was auctioned/lost. My take, if you can leverage Sacco Loans ,they are very good for increasing your "net worth " slowly but surely. While bank/other loans allows you increase your "net worth" 'overnight' though it works for those who have been there done it and have good fall back. Hence, Make it (Via Sacco), Master it (Via Sacco/Bank) Then It can Matter (Any Credit)! Disclaimer; Know your risk appetite first. @ Swenani, your analogy is flawed, The sacco guy will be paying shs 22,244 per month for a 1 miilion loan at 12% for 5 yrs. The bank loan guy will be paying shs 16,929 per month for a sh 666,667 loan at 18% for 5 yrs. The bank loan guy can invest the difference of sh 5315 at 10% which when added monthly to the 1 million available (333,333 savings + 666667 loan) will amount to 2,020,667 which minus repayed loan of 1,015,680 (666,667 principal + 349,013 interest) , you are left with 1,004,987. Who is smarter now? Infact, using the above modified @swenani analogy, even if you borrow from a bank at 23% you will still be ahead of the sacco guy by some 23,000 sh at the end of 5 yrs. 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: 2/20/2007 Posts: 767
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When it comes to the matter of risk, sacco saving is very risky business. God himself warns us about standing guarantor to a stranger. Most people in saccos allow their deposits to act as security for people they hardly know other than the fact that they work together. So, in addition to paying more in a sacco, you are putting your life savings at risk. A risk that you cannot control. 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: User Joined: 8/15/2013 Posts: 13,236 Location: Vacuum
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tom_boy wrote:hindsight wrote:Swenani wrote: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 @Swenani, thanks for great analogy above. Bottom line the Sacco have bridged the gap of those who don't have collateral in terms of the "real" assets such as Land,Bonds,Shares etc to access the traditional Bank Loans that impoverished many who couldn't leverage them well. While saccos have come to the rescue, it's telling though that many loans from saccos have been God sent to "Small-Mid Level Creditors Bracket" who want to leverage their savings over time. In Investment world ,Time is money.Hence high net individuals still leverage bank loans /overdrafts/"sharks-Platinum Credit & Like" as they look at opportunity cost lost due to time.They leverage quick money by making use of it immediately and make a killing (ROI) that can pay back the high interest rates. On the downside they know if the investment doesn't work out they can live with it,even if the security charged was auctioned/lost. My take, if you can leverage Sacco Loans ,they are very good for increasing your "net worth " slowly but surely. While bank/other loans allows you increase your "net worth" 'overnight' though it works for those who have been there done it and have good fall back. Hence, Make it (Via Sacco), Master it (Via Sacco/Bank) Then It can Matter (Any Credit)! Disclaimer; Know your risk appetite first. @ Swenani, your analogy is flawed, The sacco guy will be paying shs 22,244 per month for a 1 miilion loan at 12% for 5 yrs. The bank loan guy will be paying shs 16,929 per month for a sh 666,667 loan at 18% for 5 yrs. The bank loan guy can invest the difference of sh 5315 at 10% which when added monthly to the 1 million available (333,333 savings + 666667 loan) will amount to 2,020,667 which minus repayed loan of 1,015,680 (666,667 principal + 349,013 interest) , you are left with 1,004,987. Who is smarter now? Yeah, I have noted If you factor in the savings of 5,315 invested at 10%, this will yield kshs 411,578 at the end of 5 years Hence the bank guy's Net worth will be (411,578+594,830)=1,006,408 while the Sacco guy's net worth will be 721,917. The bank guy is better off after 5 years than the sacco guy with Kshs 284,491. If Obiero did it, Who Am I?
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Rank: Hello Joined: 2/17/2016 Posts: 2
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Swenani wrote: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 @ tom_boy - good point. Banks will make you jump through gazillion hoops before the money actually hits your account. I have practical experience with both Sacco and Banks loans. Lets say you have a great deal that just came up and you need 1M pronto or the deal is gone. It is very likely that if you are in a Sacco, you can ask for emergency funding and get it within 2-3 days or worst case 1 week (I am in Sacco where that happens in practice). Try the bank and the issue of documentation (payslips, collateral, lawyers review and fees, etc) will drag a cool 2-3 weeks if you are lucky to have expedited processing. Now, to the numbers. I am not sure what the average Sacco dividend rate in Kenya is but my Sacco has paid over 10% in the last 14 years. So,your deposit of 333k should be at around 537k in 5 years (if untouched). Also, there are Saccos out there now that allow members to self-guarantee. Use your idle land as collateral and you get cash to build up other assets. You will have to pay valuation fees and lawyers fees but the advantage is that you do not need anyone to guarantee you for a loan. Finally, your borrowing rate in a Sacco is 12% and is known. Come back to me with your KNOWN bank rate for the next 2-3 years!
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Rank: Member Joined: 2/20/2007 Posts: 767
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@johniewalker, even with deposit growth of 10%, the sacco guy is still behind the loan guy if loan is at 20% or below. Why take a guaranteed expensive loan now ( sacco), than a cheaper non guaranteed option (bank). With the bank, it can get cheaper or more expensive over time. Why do we all assume interest rates will be higher in the next 2 yrs. With self guarantee process, I believe you will require lawyers, land office, collateral just like getting a collateralised bank loan. This is similar beuracracies as the bank therefore no advantage there. 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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