Results of a joint survey conducted by non-state financial inclusion agency- FSD-Kenya, Central Bank of Kenya, Kenya National Bureau of Statistics and Consultative Group have been released. According to the survey, the increased accessibility of digital loan platforms has not improved lives. In fact, the results indicate that most Kenyans have become prisoners of these loans. Here are the reasons why you should avoid the loans offered through mobile phones.
The easy availability of cash encourages engaging in vices.
The easy accessibility of these loans is likely to make you engage in vices like irresponsible gambling. This is due to the fact that cash is available in digital form any time you need it therefore easy to use for online gambling. According to the survey, of the 6.5 million Kenyans who borrow money using digital platforms, 31 percent used the cash to try their luck in betting.
You are likely to become a prisoner of the loans.
There are high chances of misusing the cash due to its easy accessibility. This leads to the borrowing of more loans to repay the existing loan as maturity approaches. The survey put the number of Kenyans who reported taking several loans to repay other existing loans at 800,000.
Mobile digital loans charge high interest rates.
The rates charged on digital loans are not bound by the Central Bank interest rate regime. While the regular loans are capped at maximum14.5 percent interest, digital loan providers are not regulated by the capping giving them a leeway to charge exorbitant monthly rates. Most charge between 7-10 percent monthly interest rates.
You are likely to end up listed with the CRB
The easy accessibility of digital loans makes most people reluctant to repay the loans especially after misusing the money leading to hefty penalties and eventually getting listed to the Credit Reference Bureau as defaulters. According to the survey, three million borrowers reported late loan repayment which led them to pay hefty penalties. Nine percent of the people ended up being reported to CRB as risk-averse loanees.
Next time you get a link forwarded to you about a certain platform offering accessible loans with low interest and no security think before clicking. It might end up being one of the worst financial decisions you made leading you to a nasty financial ruin.