Most Kenyans sign loan agreements without reading them. This is one of the most expensive mistakes you can make. Before you sign anything, get clear answers to these five questions.
1. What is the total amount I will repay? Not the monthly instalment — the total. If you borrow KES 50,000 and repay KES 72,000 over 12 months, the loan cost you KES 22,000. That is what matters.
2. What is the interest type — flat rate or reducing balance? Flat rate charges interest on the full original amount every month, even as you pay it down. Reducing balance only charges interest on what you still owe. A 10% flat rate costs nearly the same as an 18–20% reducing balance rate. Always clarify.
3. Are there any fees beyond the interest? Processing fees, insurance fees, appraisal fees, CRB check fees — these add up and are often not mentioned upfront. Ask for the full list before signing.
4. What happens if I miss a payment? Penalty charges, CRB listing, collateral seizure — know the consequences before you are in that situation, not after.
5. Can I repay early, and is there a penalty? Some lenders charge early repayment fees. If you might clear the loan ahead of schedule, confirm you will not be penalised for doing so.