Loan financing is a common need for almost everyone. At some time in your life, you may find yourself needing access to fast cash that can be wired to you quickly and efficiently with minimal hassle. The problem most people face when trying to get a loan is that banks and other financial institutions have strict regulations about loan eligibility criteria and application processes. It’s not always easy getting approved for a loan at the bank – even if you have great credit and ample income. Fortunately, there are other ways to get approved for a loan fast so that you don’t have to wait weeks or months before you can access the money you need.
What Are Instant Loans?
Instant loans, also known as “fast loans,” allow easy access to funds. These loans are frequently utilised to cover unexpected costs or situations, such as medical bills, car or home repairs, or other household or personal requirements. After completing the generally quick and straightforward application process, you can receive your loan in minutes or up to 24 hours. Generally, instant loans are those that can be disbursed almost instantly, within a few hours but less than a day. Many financial institutions recognise this real need that most people will have at some point in their lives and have designed various products that can be termed as “instant loans”.
Below, we discuss some of the main options available for instant loans in Kenya.
1. Digital loans
As the name implies, a digital loan is one that can be applied online either via a computer, smartphone, or even USSD on a feature phone. This means you can complete the full loan application process online and receive your funds without physically visiting the lender’s branch.
Most digital loans in Kenya provide loans directly to your M-Pesa account and have a one-month or shorter repayment period once you borrow the money. Comparing rates and terms from various lenders is the simplest way to locate the best loans for you. Most digital loans have apps on the Google Play store.
The amount you qualify for will depend on your creditworthiness as determined by the lender’s internal processes which may include a history of your M-Pesa activity. Typically, you will begin with a low limit of about Ksh500 and work your way upwards. Some digital lenders will even offer the first digital loan you take with them interest-free.
To prevent getting into a debt trap, only borrow what you can afford to repay. Also, examine the terms and conditions before applying for any loan.
2. Emergency loans
An emergency loan is an unsecured loan that can assist you to pay for unforeseen costs if you don’t have a financial safety net or are unable to instantly come up with the necessary funds on your own.
Compared to various other types of emergency loans, an unsecured personal loan for emergencies is typically the quick funding route, although the amounts may be a little lower as compared to secured options – which typically take fairly longer but some lenders could expedite the process e.g. of an emergency logbook loan, to be disbursed in under 24 hours if everything checks out.
To qualify for unsecured emergency loans, you will typically need to have an existing relationship with the financing institution and the amounts will be determined by internal process which may include amounts you have saved with them, if you are already servicing an existing and your credit history generally
The most common types of emergency loans are discussed below. Note that we are excluding secured emergency loans since they do not exactly fit into the “instant loans” category.
Bank loan – Commercial banks have been offering emergency loans for decades. You will need to have an active account with the lender of interest for a minimum period, typically three months or thereabouts.
Bank emergency loans are unsecured and are specially designed for customers going through a “rough patch” or emergency as opposed to regular personal loans, although in reality they could simply be expedited personal loans.
Interest rates and fees will vary from lender to lender depending on their internal processes which may include your credit score, income level, and frequency, existing debt, etc. that, according to the lender, determine your ability to repay.
Compare personal loan rates from commercial banks in the Kenyan market here.
Sacco loan – Saccos in Kenya also give emergency loans. To be eligible for a loan from the Sacco, you must meet the following requirements: Be making monthly savings, have fulfilled (or are fulfilling) the minimum share capital requirement of the Sacco and you must have been a Sacco member for at least three months. Speed of disbursements is comparable to commercial banks. The amount you can qualify for, however, is typically determined by how much you have saved with the Sacco and can sometimes be capped to a certain amount for this loan category.
MFB Loans – A Microfinance Bank (MFB) is a lender that is eligible to provide financial services to microfinance clients such as savings and deposits, loans, domestic funds transfers, and non-financial services. They operate in a similar manner to commercial banks but at a smaller scale and are regulated by the CBK. It is possible that eligibility requirements may be a tad lower than with higher-tier commercial banks.
MFI Loans – Microfinance Institutions (MFIs) are lenders that provide financing to typically low-income clients but are not deposit-taking like MFBs. They will typically offer smaller amounts on average than commercial banks but possibly have the laxest eligibility requirements including overlooking CRB checks in the case of secured loans. You can get instant personal or business emergency loans from the tens of MFIs registered in Kenya without a prior history with the institution at fairly fast speeds. Note that MFI interest rates may be typically higher than bank loans. Rates will depend on the institution and your risk profile as determined by the institution.
Chama Loans – Also known as micro-savings or investment groups, chamas are more popular than ever before as being one of the cheapest, safest and fastest ways of getting an instant cash injection. A Chama is typically structured as a merry-go-round, with each member contributing a specific sum on a monthly, weekly, or even daily basis. The money is subsequently allocated to each member in turn. However, with the need to cater to recurring needs for financial pick-me-ups by members and the opportunity for all members to enjoy interest on savings, emergency loans are a typical feature in most formalised chamas.
Due to the personal nature of chamas, and the fact that they are formed to improve the financial well-being of members, they offer probably the lowest interest rates and most favourable repayment terms including extended tenures.
3. Shylock loans
While the term “shylock” is immediately associated with terms such as “loan shark” and notions of heartless, demanding creditors who lend at excessively high-interest rates, the truth is that sometimes shylocks will be the lenders that will save the day.
Shylock, ‘loan on items’ or ‘payday loans’ lenders give secured loans with instant disbursements to borrowers who present collateral items of value such as phones, laptops, woofers, TVs, gas cookers, etc. with repayment periods of typically 30 days or the next payday.
One of the biggest risks and reasons why shylocks have such a bad rap is the significantly high rate of loss of collateral when you default with very low possibilities of renegotiations or extensions.
The interest rates are also quite high averaging between 20% to 30% for a two-week loan even when the percentage of collateral value you can qualify for as a loan is very low. For example, you may only qualify for a Ksh10,000 loan against a laptop worth Ksh 50,000.
It is very important that you understand the terms and conditions of a shylock loan before taking one as the potential for remorse is very high.
4. Salary advance loans
Also referred to as a payroll advance, a salary advance loan is a short-term typically 30-day loan borrowed against your next paycheque to fund a pressing need. Once your next salary is deposited into your account, the amount is deducted instantly.
The first option, which is the cheapest one, is getting a salary advance from your employer at zero interest. Your employer may agree to allow you to borrow money against your future paycheck to cover a one-time emergency.
Some employers do not offer salary advancements, and for those who do, there are often conditions attached. Before asking for a salary advance, an employee should become acquainted with the company’s policies, since there may be limitations on the amount that can be borrowed as well as the basis for the request.
Additionally, there can be criteria for qualifying, such as a minimum length of service, a history free of disciplinary measures, and a lack of prior requests for pay advances.
Salary advances are also available through a variety of financial institutions, including banks and Saccos that will charge an interest rate but unlike other loans, it is possible that typical fees charged for personal loans may not apply – this is strictly dependent on the institution.
An overdraft occurs when a bank or Sacco authorises a transaction despite the fact that there is insufficient money in the account to fund it. In essence, it is a credit line granted by a financial institution when an account balance reaches zero.
The overdraft feature allows the account user to make withdrawals even if there is no money in the account or not enough to meet the cost of the withdrawal.
In addition to the fees for each overdraft that is dependent on the lender and amount including limits and over-limit fees, interest is charged on the loan.
It is very important to understand the overdraft policy of the accounts you operate since associated fees could quickly add up if, say, you overdraw by mistake and fail to settle the balance promptly.
6. Friends and family
Borrowing from family and friends is one of the easiest ways to get money fast during an emergency. If you need money, you should consider asking your close friends and relatives for help. Simply ensure that everyone understands what is expected of them in terms of borrowing and returning money.
7. Business Instant Loans
When it comes to expanding your business, maintaining a steady cash flow while waiting for clients to pay, or even paying your employees through tough times, instant business loans can be a lifesaver.
You can get instant business loans from institutions that specifically lend to businesses with a short turnaround time like Microfinance Institutions (MFIs).
Another option for getting instant loans is getting a business credit card. A business credit card can be obtained in the same way that a personal credit card can. Both cards work in the same way, giving you access to a revolving line of credit that you may use to borrow money and return it up to a certain credit limit. A business credit card, however, can only be used for business expenses.
Using business credit cards to pay for client purchases, office supplies and utilities, business travel costs, material purchases, and other continuing costs is a simple approach for businesses to cover both short-term and long-term demands.
Mwananchi Credit is a company that offers instant loans to people who need money immediately. They can be used for a variety of purposes, including paying bills and covering unexpected expenses.
Mwananchi Credit gives customers access to fast, convenient and flexible loan options. The application process takes less than an hour and the funds are deposited directly into your bank account in minutes. It’s ideal for those looking to solve financial challenges on their terms by getting instant loans.