For me, banking halls evoke different emotions depending on the objective of my visit. If it is enquiries, such as loan and account balances then I am very calm. If the objective is anything to do with opening an account or taking a loan then I am very cautious….it feels like naingia kwa mtego wa panya therefore I can’t let my guard down. For now and for brevity purpose, I am only going to talk about co-operative bank and it’s awkward way of processing monthly repayments for those on a check-off loan plan. This is a cleverly designed system that probably won’t be classified as illegal but will set you back cash-wise, slow you down on repayment of the principal amount, and worst of all without your knowledge.
Let’s get into figures…let’s say you take a 1.5M loan (18% interest p. a) at the co-op or any bank for that matter monthly repayment will be an amount close to 33,000 (I haven’t calculated this). Of course it will hardly be such an absolute figure so for explanation purposes let it be Ksh 33,766 (interest + principal). When this money lands in the bank it goes through several accounts, I know of 3…the settlement account, your loan account and the salary account all of which have account numbers (there is also a suspense account that I know little about). When the employer deducts 33,766 (interest+ principal)..The money has to land in the settlement account before it goes to the loan account to settle both the interest due and the principal. However, the bank will receive 33,766 from the employer but will carry forward an amount close to 33,766 from the settlement account to the loan account. For instance they may carry forward 33,266 to your loan account (a difference of 500 bob). The remaining amount accumulates in your settlement account throughout the course of the loan duration.
Now that’s pocket change to some but let’s see how much this is for a guy repaying the loan in 72 months 500 x 72 = 36,000. You would expect that this money is refunded automatically at the end of the loan, right? Wrong. You have to claim it. That is if you know a settlement account existed in the first place. But how do you know this? Request for a loan statement and check whether the amount deducted from your payslip tallies with that on the loan statement. If not ask the person at the loans desk to explain further and request for a statement of the settlement account.
If the bank has an agreement with your employer then you have a grace period of about a month or two sometimes three (moratorium) before repayment begins. However the employer may start making deductions to your salary immediately and deductions during this period will land in the settlement account as it awaits the loan to start running (after the grace period). However co-op will not channel this money to reduce the principal amount instead it will lie in their account again waiting for you to claim. If you don’t, I don’t know what happens. take for instance if it was two months (33,766 X 2 = 67,532)
Sorry for the long post!
But this clearly is not in the spirit of clean business as highlighted by the central bank here.
@Leo Mwangih leta comments ama matusi hapa all are welcome.
Let’s get into figures…let’s say you take a 1.5M loan (18% interest p. a) at the co-op or any bank for that matter monthly repayment will be an amount close to 33,000 (I haven’t calculated this). Of course it will hardly be such an absolute figure so for explanation purposes let it be Ksh 33,766 (interest + principal). When this money lands in the bank it goes through several accounts, I know of 3…the settlement account, your loan account and the salary account all of which have account numbers (there is also a suspense account that I know little about). When the employer deducts 33,766 (interest+ principal)..The money has to land in the settlement account before it goes to the loan account to settle both the interest due and the principal. However, the bank will receive 33,766 from the employer but will carry forward an amount close to 33,766 from the settlement account to the loan account. For instance they may carry forward 33,266 to your loan account (a difference of 500 bob). The remaining amount accumulates in your settlement account throughout the course of the loan duration.
Now that’s pocket change to some but let’s see how much this is for a guy repaying the loan in 72 months 500 x 72 = 36,000. You would expect that this money is refunded automatically at the end of the loan, right? Wrong. You have to claim it. That is if you know a settlement account existed in the first place. But how do you know this? Request for a loan statement and check whether the amount deducted from your payslip tallies with that on the loan statement. If not ask the person at the loans desk to explain further and request for a statement of the settlement account.
If the bank has an agreement with your employer then you have a grace period of about a month or two sometimes three (moratorium) before repayment begins. However the employer may start making deductions to your salary immediately and deductions during this period will land in the settlement account as it awaits the loan to start running (after the grace period). However co-op will not channel this money to reduce the principal amount instead it will lie in their account again waiting for you to claim. If you don’t, I don’t know what happens. take for instance if it was two months (33,766 X 2 = 67,532)
Sorry for the long post!
But this clearly is not in the spirit of clean business as highlighted by the central bank here.@Leo Mwangih leta comments ama matusi hapa all are welcome.
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