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How to Pay Down a Ksh100,000 Loan in One Year
How to Pay Down a Ksh100,000 Loan in One Year
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How to Pay Down a Ksh100,000 Loan in One Year

Farah Nurow
September 14, 2023

Increasing inflation and rising interest rates have combined to make servicing debt expensive. Consequently, this has placed an undue burden on individuals, leading to losing sleep and anxiety over mounting debt. 

Reducing your debts can give you the financial freedom to use your hard-earned money for what truly matters to you, as you will have more disposable income to save and invest in your future. 

But it can sound like paying off large amounts of debt in a year can be impossible – it's not! You can even pay off Ksh100,000 in debt in just one year, whether you have personal loan debt, logbook loan, or credit card debt. All you need is a plan that ensures you meet the minimum monthly repayment with ease.  

First, you need to break down that number. The simplest way to do this calculation is to divide Ksh100,000 by 12. This would mean you need to pay Ksh8,333 monthly to achieve your goal. This number, however, doesn’t factor in the interest on your debt. 

The step is to determine where that money will come from and the actions you need to take to achieve your goal. This article will guide you on that. 

Read Also: Paying Off Your Loans Early: Everything You Need to Know

Create a Repayment Plan 

A debt repayment plan outlines the strategic approach you will take to repay your loan without losing control over your finances. 

It’s normal to want to repay all your debts as fast as you can. The first thing that could come to your mind is paying more than the minimum. However, if you don’t know where the extra money could come from, you will end up straining your budget and even find yourself borrowing more when you have a deficit. A repayment plan will help you avoid this trap.

A clear plan helps you understand the scope of your debt, how much you need to allocate from your income to cover repayments and the actions you need to take to achieve your goals. For example, consider whether you can afford to cut expenses to make more than the minimum repayment or if this approach could impact your lifestyle. Alternatively, consider if a better route might be to increase your income rather than cut expenses.

A repayment plan is also important if you have multiple loans, as it allows you to prioritize which loans to pay off first, depending on your needs. For example, if you want to lower your debt-to-income ratio (DTI), you could start with the bigger debts. But if you want to save money in the long run, you will start by eliminating the high-interest loans. 

Read Also: Struggling to Repay a Loan? Here's How to Create a Debt Repayment Plan

Negotiate Your Loan Terms

The first step is to review the terms of your loan, including the interest rate and any penalties for early repayment. Understanding these terms can help you identify opportunities to save money. Once you identify them, you can schedule a meeting with your lender and talk to them about changing the loan terms.

If there are any prepayment penalties, but you intend to repay your loan early, you can talk to your lender about reducing or eliminating it. Likewise, if the interest is too high, you can negotiate with them to lower it. 

For instance, say you have a logbook loan with an outstanding balance of Ksh100,000, and your current interest rate is 3.5% monthly. If you negotiate with your lender and they reduce it to 3% per month, you can save up to Ksh500 monthly or Ksh6,000 annually in interest payments. That's money you can put towards paying off your loan faster. 

Read Also: How to Avoid Regret After Taking Out a Loan

Free Up Money in Your Budget

When it comes to paying down your debt, one of the most effective strategies is to re-evaluate your spending habits and identify areas in your budget where you can cut back. This will help you accumulate extra funds to put towards your loan payments. This step is especially important if your loan has a high-interest rate or you cannot increase your income to make extra repayments. 

You can review your budget and cut on non-essential items like dining out, shopping for clothes or gadgets, or canceling upcoming vacations. Remember, these sacrifices are temporary, and ideally, they shouldn't affect your lifestyle or that of your family. 

Let's say you're making Ksh60,000 monthly, and you can only commit 10% to debt repayment with your current budget. To pay your Ksh100,000 debt in one year, you will need to find an additional Ksh28,000. If you can't find a side hustle to earn that extra money, you can identify Ksh2,400 monthly in discretionary spending that can be eliminated from your budget. That's an extra Ksh28,800 per year that you can allocate towards your loan to help you accomplish your goal. 

Read Also: High Salary, Low Net Worth. Why?

Increase Your Income

If you have extra time, most likely during evenings and weekends, consider creating an additional income stream and putting the money you earn towards those loan payments.

There are numerous ways to do this. You could leverage skills you use in your day job to establish a freelance business to run during your free time. Alternatively, you can consider monetizing a hobby, such as starting your own baking or crafting business. If you have access to a vehicle, you could also explore opportunities to drive for Uber or Bolt. These side jobs can yield at least Ksh5,000 per month in profit with minimal effort.

If you don't have the time to start a side hustle, you can explore other avenues to raise funds. For instance, if you own possessions you no longer use or need, you can sell them to use the money you make to lower your loan balance. Maybe you have an extra laptop you don’t use, and you can get Ksh20,000 if you sell it, or you have old furniture you can sell for Ksh5,000. Instead of holding onto them, consider using them to lower your debt burden. 

Read Also: How To Make Money Online In Kenya For Beginners

Direct Windfalls and Bonuses to The Loan 

Unexpected money doesn’t come easy, but when they do, resist the urge to spend it and put the funds towards something that matters—reducing your loan. Depending on the size of the windfall, you can make a one-time payment to get rid of your whole debt or reduce the principal balance, even if it is by the Ksh1,000 tip you received from a client.

While the chances that you will win the lottery or jackpot and use the proceeds to settle your debts are unlikely, there are many windfalls you will easily run into. This can range from a birthday M-pesa gift from friends to an end-year bonus from your employer. Direct the newly found money towards your loan payment.

Additionally, you can actively seek out windfalls. For instance, you can talk to your employer about increasing your salary by Ksh3,000. If they agree, over the year that could translate to Ksh36,000 that you can allocate towards repaying over a third of your Ksh100,000 loan balance.

Read Also: Bet on Yourself: How to Ask for a Salary Raise

Automate Payments

Setting up automatic payments for your loans ensures you never miss a due date and get penalised. Missing or delaying payments three or more times over the course of the year could result in late fees that could add up and affect your entire plan and budget.

Automatic payments will also help to prioritise debt repayments and track your progress. Additionally, timely payments contribute to a positive credit history, which is vital if you intend to borrow in the future.

The best way to automate your repayments is to schedule automatic monthly payments directly from your bank account using a standing order. Another strategy could be to talk to your employer and sign up for voluntary salary garnishment. This means that a portion of your salary e.g., 10% if you earn Ksh84,000, will be automatically deducted from your payslip and sent to your lender. 

Stick to Your Repayment Term

Once you have decided that you will repay the loan in one year, you should stick to that plan. Don’t rush the process or extend the repayment term down the line unless it is your only option. Sticking to your original debt repayment plan allows you to track your progress and prevents you from interfering with other aspects of your finances. 

For example, if you start spending much of your money to make extra payments on your loan, your lender might charge you an early repayment penalty. Likewise, this strategy might require that you concentrate on debt payoff and neglect saving for future needs. 

In the same breath, extending your repayment term can also have the same effect. While this strategy may lower your monthly payments, it can ultimately cost you more in interest. 

Read Also: 5 Ways to Improve Your Credit Score and Qualify for Higher Loans 


Paying a Ksh100,000 loan in one year may seem challenging, but it's achievable with a well-thought-out strategy and some financial discipline. 

Depending on your situation, you can adapt one or all of the above strategies to achieve your goal. For example, suppose you are on a tight budget due to many financial responsibilities you can't escape. In that case, you can combine increasing your income by at least Ksh5,000 and talking to your lender about lowering your interest rate. 

When you're on a mission to reduce your debt, you should avoid taking on more loans, as this can be counterproductive. New debts come with interest charges, can extend repayment timelines, and could increase your DTI, which could hurt your credit and strain your finances. 

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Farah Nurow is an experienced Content Writer who enjoys writing creative and educative articles meant to provoke readers' thoughts. He loves sunny weather and thick books. You can connect with him on LinkedIn.

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