Transcript
Joy: Welcome to Your Phone, Your SACCO — using your society from the phone in your hand. I'm Joy, and with me is James. Today: the loan products your SACCO offers, and how the numbers are worked out.
James: Thanks Joy. The aim here is that a member can look at two loan offers and tell which one is actually cheaper.
Joy: Let's start with the products. What kinds are there?
James: Broadly three shapes. The instant one, the ordinary one, and the special-purpose one.
Joy: Take the instant one.
James: That's the QuickLoan sort of product. Small, decided in minutes, disbursed to your phone, repaid over a short period. No committee, no guarantors, because your own savings record is the security.
Joy: What's it good for?
James: Working capital and small gaps. Stock for the week. A repair. Something you'll clear quickly out of income you can already see.
Joy: And what is it bad for?
James: Anything large or slow. The short term makes the instalments heavy. Using an instant product for something that pays back over a year is how members get squeezed.
Joy: The ordinary loan?
James: The development or normal loan. Bigger, longer, usually needs guarantors or collateral, and it's assessed against your savings and your ability to repay. This is the one for land, a building, a business expansion.
Joy: And special-purpose?
James: School fees, emergency, agriculture, asset finance. They exist because the timing is different. A school-fees loan is built around terms. An agriculture loan can wait for harvest before the first repayment.
Joy: That timing point matters.
James: It's the most underused feature in lending. If your income arrives seasonally, ask for a product and a schedule that match. It is not a favour — it's how the product is designed.
Joy: Now the calculations. Where should a member start?
James: With one question: is the interest flat, or reducing balance?
Joy: Remind us of the difference.
James: Flat is charged on the original amount for the whole term, no matter how much you've repaid. Reducing balance is charged only on what you still owe, so it falls as you repay.
Joy: So the same number means two prices.
James: Roughly, a flat rate costs about what a reducing-balance rate close to double it would cost. How close depends on the term — nearer one and a half times on a short loan, nearer double on a long one. So ask the lender to show you both figures. A good one will.
Joy: That's a big difference to be hidden in one word.
James: It is. And neither is dishonest — they're just two conventions. What's expensive is not knowing which you were quoted.
Joy: What else goes into the price?
James: The processing or appraisal fee, insurance, and sometimes a savings or share requirement you must hold. Ask what is deducted from the disbursement and what is added to the balance.
Joy: Why does deducted-versus-added matter?
James: Because it changes what reaches you. If the fees come off the top, you receive less than you asked for. Apply for the amount you need to receive, not the amount you need to owe.
Joy: How does a member compare two offers properly?
James: Ignore the rate and ignore the instalment. Ask each lender for two figures: what will actually reach my hand, and what will I have paid in total by the end. Those two numbers can be compared honestly. Nothing else can.
Joy: Can a member work this out themselves on the phone?
James: They can get very close. Multiply the instalment by the number of instalments — that's roughly your total. Subtract what you actually received. The difference is what the loan cost you. Do it for both offers.
Joy: Simple enough to do standing in a queue.
James: That's the point. It needs no formula and it can't be dressed up.
Joy: Where does the app come in?
James: You can see the products your society offers, and once a loan is running, what you still owe in total. For the instalment-by-instalment schedule, ask your SACCO to print or send you a copy — they can produce it from their system, and that's the document that answers everything we've talked about today.
Joy: The takeaway: match the product to the purpose and to when your money actually arrives, always ask whether the rate is flat or reducing balance, and compare offers on two numbers only — what reaches your hand, and what you'll have paid by the end. Thanks James, and thank you for listening to Your Phone, Your SACCO.