Mobile lenders advertise interest rates that sound manageable — "only 7.5% per month" or "just 1% per day." These numbers are carefully chosen to appear small. Here is what they actually mean.
1% per day
- Per month (30 days): 30%
- Per year: 365%
- On KES 10,000 borrowed for 30 days: you repay KES 13,000
7.5% per month (flat rate)
- Per year (flat): 90%
- Equivalent reducing balance rate: approximately 160–180%
- On KES 50,000 for 3 months: you repay roughly KES 61,250
Why lenders quote monthly rates A 90% annual rate sounds alarming. A 7.5% monthly rate sounds manageable. They are the same loan.
The danger of rollovers Mobile loans are typically 7–30 days. If you cannot repay and roll the loan over, interest compounds quickly. A KES 5,000 loan rolled over four times can become KES 9,000–12,000 in a few months.
When mobile loans make sense Only when you are certain the money will return within the loan period — for example, bridging a payment you know is arriving in 7 days. Never use a mobile loan to cover a recurring shortfall.