Mobile loan apps can provide quick access to credit when emergencies arise. However, borrowers should check several things before accepting a loan.
1. Confirm the Lender Is Licensed
First, check whether the digital lender appears on the Central Bank of Kenya’s licensed Digital Credit Providers directory.
CBK regulates and supervises Digital Credit Providers under the Digital Credit Providers Regulations, 2022. Therefore, do not submit your personal information to an unverified lender.
The CBK directory provides the safest starting point for checking a lender’s regulatory status.
2. Understand the Total Cost
Next, look beyond the advertised interest rate. Check the amount you will receive, the total amount you must repay and any additional charges.
Also, confirm processing fees, late-payment charges and other applicable costs before accepting the loan. For example, requesting KSh5,000 does not necessarily mean you will receive the full KSh5,000.
A lender may deduct an applicable fee before disbursing the money. Therefore, compare the actual amount received with the total repayment amount.
3. Check the Repayment Period
Before borrowing, confirm exactly when the loan becomes due. More importantly, compare the repayment date with your expected income.
A short repayment period can create pressure if your salary or business income arrives later. Consequently, avoid borrowing simply because the application process is quick.
4. Review Data Permissions
Your personal information also matters. Before installing or using an app, read its privacy notice and check what information it collects.
Kenya’s data protection framework requires personal data to be processed lawfully, fairly and transparently. It also promotes data minimization and purpose limitation.
Therefore, be cautious when an app requests unnecessary access to your contacts, messages, photos or other personal information. The ODPC has also investigated complaints involving digital lenders and third-party contacts.
5. Check the CRB Impact
Finally, find out whether the lender reports credit information to a Credit Reference Bureau. Missed repayments can affect your credit record where the lender reports the information.
Therefore, understand the consequences of late payment before accepting the loan.
What Borrowers Should Remember
Most importantly, borrow only what you can comfortably repay. Compare several lenders, read the loan terms and verify the lender before sharing your information.
A quick loan can solve an emergency, but the repayment should not create a bigger financial problem.
