School fees and other school-related expenses can easily drain your pockets or demand from you amounts that you do not currently have due to various challenges - including all the liquidity issues associated with high cost of living.
The problem with school is that once it’s time for the kids to go back, there is no waiting for parents to earn the money they need to send them back - they have to join their classmates at the very same time.
This, inevitably, means once every while many parents will need financial support in the form of a school fees loan or “educational” loan to ensure their kids can resume schooling on time.
Then they can be left to get their finances back in order with the assurance that their children are not going to be sent home.
But looking for a school fees loan can be quite the task if you do not know where to look.
Yes, you want to give your child the best education, make sure they are not left behind at all costs, but you also want to make sure you don’t get stuck with expensive credit that could actually become problematic to repay.
That is why it is important to first understand the options you have and choose the loan type and lender that best fits your circumstances. In this article, we explore the school fee loans options available in Kenya to help you zero down on what may work best for you.
A school fees loan is typically a short-term credit facility designed to help parents and guardians take care of their children’s educational needs when the cash to do so is not immediately available.
Despite being termed “school fee loans”, the money can generally be used to take care of other school-related expenses such as the purchase of books, uniforms, shopping and transportation. As such, a school fee loan can also be called an “educational loan” to account for essential school expenses that are not strictly school fees.
That said, some lending institutions will insist on receiving the school fees structure as part of the loan qualification process and will only disburse the amount directly to the respective school’s account.
Other institutions will offer parents and guardians school fees loans without the need of documentation from the school and any restrictions on use. This type of loan will be disbursed to the borrower’s personal account making it easier for the parent to plan for all the school-related expenses if they needed the loan to cover more than the school fees.
From the above definition, it is clear that there broadly may be two types of school fees loans. One is school fee loans that are strictly meant to pay for the school fees, requires a fee structure from the institution and the funds are disbursed directly to the institution.
The second one is quite similar to a regular personal loan where the money is disbursed to the parent/guardian’s personal account and one can use the amount as they please.
Other features of school fee loans currently being offered in the Kenyan market include;
How much do you pay in school fees? Your child could be in a public secondary school whose higher annual fees limit has been capped by the government at Ksh54,000, or a private school where fees could even go up to several times this amount depending on the institution.
In reality, despite the capping, even public schools always find ways to request higher amounts from parents in the guise of welfare for students, after-school programs and other gimmicks.
Most parents are never able to resist these attempts at inflating the cost of education for fear of reprisals or, as often is the case, many are convinced the extra expense was justifiable in guaranteeing a better performance.
School fees loan products available in the Kenyan market today offer loan amounts of between as low as Ksh5,000 to highs of Ksh4 million.
The amounts will depend on the type of institution, with the more specialised institutions offering lower amounts, Saccos offering typically up to three times one’s savings, microfinances offering a fairly higher limit and banks offering generally the higher limit for an unsecured loan.
If the loan is secured, such as by an asset e.g. title deed or logbook, amounts can go quite high depending on the forced-sale value of the security. You could also negotiate a bigger amount if you choose a salary check-off loan depending on the internal processes of your lender of choice.
Commercial banks offer a near-similar interest rate for school fees loans beginning at an annualised rate of 15%. Note that some commercial banks have switched to risk-based lending which means for the same amount, two lenders may be charged different rates sometimes even 5 or more percentage points apart.
Saccos will typically give you the standard 1% interest rate per month unless you take a specialised loan product that has a different rate.
Microfinance institutions also typically express their interest rates in a monthly rate averaging at about 3.5% a month or higher for some of the institutions reviewed by Money254.co.ke.
This is generally the ballpark within which the interest rates will lie, but remember other fees lenders charge to process your loan will also have to be factored before deciding on a lender.
How long do you want to repay your school fee loan? Are you the kind of parent/guardian who pays the entire school year’s fees and wants a longer repayment period?
Or are you in a jam that you will soon come out of and want a shorter period to keep the interest costs down?
The good news is that school fees loan products in the Kenyan market today accommodate both short-term borrowing and longer tenures.
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A majority of the school fees loan products have a short tenure of between just one month and a maximum of three months (the typical length of one school term). This is especially for the first type of school fees loan that is strictly for “school fees” and disbursed directly to the educational institution.
If you require a longer repayment loan, there are many other lenders who will offer tenures of one year, especially microfinance institutions. But if you choose the secured loan option you can get even longer periods across institution types.
With school fees loans typically being short-term loans, the speed of disbursement is usually within a few days since application for most institutions.
Generally, the speed increases with the level of bureaucracy involved which reduces from commercial banks to saccos to Microfinance institutions to digital lenders.
If you qualify, a digital lender will typically be the fastest to disburse, followed by a microfinance institution and so on. This, however, is never always the case as your personal circumstances will play a role. Generally, the lesser the paperwork needed, the faster the loan will be disbursed.
For instance, the logbook loan school fees route, which is the forte of microfinance institutions, is one of the fastest ways to get a significant amount to pay school fees.
You can compare logbook loan options here on Money254 and determine if they are a viable school fees loan option for your needs.
As we have explored here, almost all lending institutions in Kenya have a form of a school fees loan product. This is either a specialised loan product for school fees only or a general personal loan that can be used to cater for school-related needs - what can be termed as an “educational loan”.
Nearly all banks have a special school fees loan product that one can choose, or opt for a general personal loan. Banks will typically offer a longer repayment period and larger amounts for secured options. Their interest rates begin at about 15% per annum, but with the entry of risk-based lending, the specific rate you will be quoted could be higher. Typical processing times may be the longest of available options.
MFBs operate in a near-identical manner to commercial banks save for the fact they cater for a more specialised audience typically in lower income levels. They too will have a specific school fees loan option but could have default tenures that are shorter than commercial banks as well as lower default amounts for unsecured loans. Their typical processing periods may be faster than commercial banks.
These are credit-only institutions that provide loans to the same target audience as MFBs (lower income or specific sector) but are not deposit taking. Due to this, MFIs will typically charge higher interest rates than banks and MFBs but may have less stringent eligibility requirements as well as faster processing times. For secured school fees loans such as a logbook loan, you could also qualify if you don’t particularly have the best credit history.
One of the most popular sources of credit, Saccos typically give credit against member savings. You cannot borrow if you have not been a member of that particular Sacco for a certain minimum (typically three months). The default is a loan maximum limit of three times your savings at 1% per month. You may be required to provide guarantors or collateral depending on the amount you are applying for. Their processing speeds will be typically slower than MFIs.
Depending on the level of education your children are in, you have just about a week or so to raise the amount needed to send your child back to school comfortably as the second term begins on August 28,2023.
As such, speed of processing can be one of the most important factors for you when deciding what loan option to take if you decide a loan is what you need for this purpose.
And this is where logbook loans shine among other shorter-term loan options in the market. Many lenders, and especially microfinance institutions promise to disburse funds for qualified logbook loan borrowers in record times of even just one day.
Logbook loans are personal loans backed by the value of your car. Any type of vehicle, including cars, trucks, buses, and other vehicles, can be used as collateral for a logbook loan.
Depending on the amount borrowed and the terms set by the lender, logbook loans have payback periods that can last anywhere from a few months to several years.
This is another feature of this loan type that may appeal to a parent needing longer repayment periods that may not be typically offered by typical school fee, emergency or personal loans.
Logbook loans give you quick access to the funds that you need while still allowing you to use your car normally.
Do you need a loan to clear your back-to-school bills? Check out the Money254 logbook loan comparison tool and see if there is a product that best fits your circumstances.
Before applying for this loan here is what you should put into consideration;
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Before beginning the loan application process, you should check and ensure that you match the lenders' minimum loan qualification standards. Some of the requirements include:
CRB status - Many lenders, especially banks will require your CRB status to be in good standing. Microfinance institutions, particularly, may be a little more flexible around this requirement and could lend to you despite being negatively listed.
Understanding the eligibility requirements of different institutions and loan types that can be used to pay school fees will help you get everything you need in order before even approaching a lender - reducing processing time and chances of a rejection.
When considering taking a school fees loan, you should also assess if the minimum and maximum loan amount available meet your needs.
For instance, you may be in need of Ksh50,000 for your child’s school fees but a lender only offers you a maximum of Ksh30,000 when you cannot raise the difference in time.
Are you willing to take a lesser amount and offset the balance from other sources? Does increasing the amount you want to borrow increase the cost of the loan and is it worth it?
Can the school allow you to pay the school fees in instalments? If so, this may reduce the amount you need to borrow today. Maybe your cash flow will improve next month and you will not need a loan then.
Not all lenders will quickly review your loan application, approve it, and deposit the money into your account. Some lenders take weeks, while others only need a day or two. How suitable the loan is for you depends heavily on how quickly the lender processes your application.
For instance, a loan with a one-week approval deadline may not be the best choice for you if your child is returning to school this week and you need money right away for school fees and other supplies. The decision is entirely up to you.
The logbook loan, for instance, is one of the fastest options to consider for school fees since many of the institutions offering this loan type promise fast turnaround times. For parents keen on getting the funds needed to take their children back to school, one can consider this option.
You, however, must ensure that you fully understand the costs and risks of logbook loans before signing the loan agreement since logbook loans may be typically more expensive than ordinary personal loans. And there is a real risk of losing your vehicle.
Nevertheless, many people still choose logbook loans due to among other reasons fast turnaround time, high loan amounts and fairly flexible eligibility requirements.
This has got to be the most important factor of consideration before going for the school fees financing option. As important as school is to your children, it will not do them much good if this term’s fees put their parent’s in a debt cycle that jeopardises their entire educational prospects.
You must know where the money to repay the loan will come from, that you will be able to comfortably pay back the school fees loan instalments and still meet your other obligations before you take a loan.
While evaluating your ability to repay, it may also be time to decide whether the school your children are currently attending is within your budget or are you, honestly, punching above your weight?
Once you are confident that you can comfortably repay the loan, you can then take the steps to choose the lender that best suits your circumstances.
In fact, an evaluation of your repayment ability will also help you negotiate for better terms, maybe a longer tenure and so on.
Read Also: 5 Ways to Successfully Repay a Logbook Loan
Are you in need of financing to take your child back to school? Despite the high level of urgency the anxiety of delaying the return of your child to school may have, a loan is a serious undertaking that you have to weigh options carefully before making a decision.
One of the most important steps you can take right now is to compare the options available in the market to know what the costs are, how much you can qualify to borrow, how long or short the repayment periods can be and whether you can get a loan tailored to your circumstances.
And you know what? You can do all that here on the Money254.co.ke. We have researched all personal loan options available in the Kenyan market today and created an easy way of comparing them on the terms that matter most to you.
We have also researched the logbook loans available in Kenya today and extracted all the key factors that may impact your decision so that you can quickly compare and decide what logbook loan provider best matches your needs.
Follow this link to check out the loan options available to you for free.
Oh, and if you choose a logbook loan with an “Easy Apply” icon, qualify and successfully get a loan, Money254.co.ke has a Ksh2,000 reward awaiting you.
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