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People take loans for different reasons, it can be to facilitate education or build a business. However, it is important to note that there are good and bad loans. As a result, it is crucial to garner enough knowledge on institutions from which you want to take a loan from. In this article, we explore different banks examining the ones that have cheapest and the ones that have expensive loans.
Key Highlights:
Loan Cost Comparison for Sh1 Million (1-Year Personal
Secured Loan):
Let's compare interest charged by different banks if you decide to take a personal secured loan of one million shillings for a period of 1 year.
Cheapest Personal Secured Loan Provider:
Affordable Options:
Detailed Insights:
Absa Bank Kenya is identified as the one that has the most expensive loans among major
lenders in Kenya. When you take a loan of sh 1 million from Absa for a period of year, you will be charged an interest of Sh143,007. In contrast, smaller institutions like Bank of
Baroda and Credit Bank offer significantly lower costs due to fewer
non-interest charges.
Cost Breakdown for Absa:
Trends and Updates:
The rankings derive from the Kenya Bankers Association (KBA)
and Central Bank of Kenya (CBK) data, showcasing interest rates between 11% and
13.63%. Notably, KCB is the only major bank among the more affordable options,
with a total cost of Sh71,807, including a 2.5% negotiation fee and taxes.
KBA CEO Habil Olaka confirms that the cost portal
updates in real-time, reflecting banks' latest charges, ensuring accuracy and
transparency for prospective borrowers.
Market Dynamics:
Larger banks, despite having access to cheaper deposits and
multiple revenue streams, still impose higher loan costs compared to smaller
competitors. The current market shows a shift where small lenders now offer the
cheapest credit options, a reversal from previous years when they had the
highest costs due to expensive wholesale deposits.
Interest Rate Trends: The average lending rate fell to 11.75% in September last year, the lowest since the early 1980s, influenced by CBK's benchmark rate cut from 9% to 7%. Although banks attempted to increase rates for riskier customers, CBK has not approved these changes.
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