If you have ever taken a loan, you might be well aware that sometimes one may not always be able to pay on time - a function of life’s unpredictability.
Even if you have never taken a loan in your life, it would be inconceivable that you have never heard of all the consequences of defaulting on a loan, or the cost that late payments add to the total cost of credit.
For many traditional loan types, “late fees”, are a nightmare that borrowers have to contend with and endure, unfortunately, if one is facing some financial difficulties during the loan tenure and can’t extricate themselves in time before payment is due.
If you had a loan whose payment was due in a couple of days and you knew you just cannot repay it in full, what would be the best thing you could hope for?
Other than being fully forgiven by the lender - which is very rare - the next best thing is getting an extension, allowing you to get your house in order and resume repaying. All this without incurring any penalties.
It then would come as good news to learn that there indeed are some lenders in the Kenyan market that already allow users to extend repayments.
LendPlus (legal name Aventus Technology Limited), began its Kenya operations in 2021 making it one of the more recent digital loan apps in the market that is offering Kenyans an alternative to more established apps and traditional lenders.
LendPlus lends a maximum of Ksh30,000 to its customers, which is a relatively high limit when considered against comparable options in the market.
For the first loan on the LendPlus digital loan app, one can qualify for a maximum of Ksh15,000, which is a high first loan amount of a digital lender in Kenya where many report qualifying for just about Ksh500 on their first application.
We asked one of our editorial team members to download the LendPlus Digital Loan app and see how difficult it is to reach the Ksh30,000 limit. He qualified for a Ksh3,000 first loan which he paid back within one day.
His loan limit was increased to the maximum Ksh30,000 after repaying, which indicates that it is possible to reach this high loan limit. But as LendPlus tells us, individual credit history, income and other customer-specific factors can affect your limit. Early or on-time payments is one of the factors that can contribute to qualifying for higher limits.
LendPlus loans are offered at a daily interest rate of 2% which is a comparatively higher rate, but the app allows you to select the repayment period you are most comfortable with which could, depending on the period selected, bring it up to par or lower than lenders who have a fixed period and rate.
In the two years of operations, LendPlus has been downloaded over 833,136 times ending 2022 with a 4.1 star rating - indicating a growing willingness by Kenyans to take loans from the lender.
One standout feature of the LendPlus digital loan app is the ability to extend your repayment several times by up to the number of days your loan was due. For example, if you had taken a 30-day loan and faced difficulties paying it back by the due date, you can increase it by a maximum of another 30 days at no additional cost - save for only the accrued interest (more on this below).
No other digital lender so far reviewed by Money254 seems to offer this useful option of extending one’s repayment period when a borrower finds themselves in a situation where they cannot repay the loan by the due date.
Some of the few options that come close to the LendPlus extension model charge some form of “late fee”, sometimes expressed as “extension fee”.
LendPlus is different in the sense that when you ask for an extension before your loan has gone into default (at least on the due date, not the next day), you get a free tenure extension with the only requirement being that you have to pay the interest accrued.
So, you could count this, e.g. for a 30-day-loan, as simply doubling your loan tenure (increasing interest due) with no extra fees. The cost of a 30-day loan extended by another 30 days will be equivalent to the cost of a 60-day loan at the same rate of 2% a day.
If you apply for an extension past the due date (e.g. on Day 16 for a 15-day loan), LendPlus applies a small fee as discussed below in detail.
If you choose to extend the repayment period of your LendPlus loan, the following applies.
If your loan was already in default;
Note that after the extension, even if you are able to pay back the money before the end of the extension period (e.g. after 5 days instead of 10), you will still have to pay the full interest due after the full 10 days which is the loan tenure you selected.
That is why you have to choose your extension period - and even your initial loan tenure carefully since, as is the case with other digital loans in Kenya, there is no early repayment discount.
If you are going through a tough time financially, extending the repayment period of your outstanding digital loan can allow you some time to recover.
Whether your debtors have delayed in paying you, or you are dealing with a financial emergency or any other reason that may be causing you liquidity challenges, having the option to extend your repayment can calm things down at least one notch.
In the LendPLus example, if you had borrowed say Ksh5,000 for 10 days and by the 10th day your debtors have not paid you or your salary has not checked in, if you apply for another 10 days extension, you will only need to pay Ksh1,000 (2% per day interest) and extend the loan for another 10 days (for Ksh1,000 more interest) when you will now have the money to pay back the full amount.
As discussed above, this would have been similar to taking a 20-day loan. The total cost of the loan would be Ksh2,000 which is the same exact cost for someone who extended a 10-day loan by another 10 days.
As you have seen from the example above, loan repayment extension (that has the advantage of exempting you from paying back the principal amount), means you only need to pay back a percentage of the amount due and get some more time to keep the money.
There is no perfect example of the advantage of being able to free up cash than this back-to-school period. If, for example, you need to raise money for something that cannot be postponed such as sending your child back to school or taking advantage of a quick money-making opportunity, you can extend your repayment and instead use the cash you would have made the repayment with to solve this more urgent need.
Since you have increased your loan tenure, the cost of the loan is bound to increase which may be a problem for you if you were extending because you are facing serious financial challenges such as loss of employment.
For example, with LendPlus charging a daily interest rate of 2%, the more the number of days you have borrowed, the higher the interest you will end up paying. It is important that you select the number of days that you think are enough for you to raise the amount needed if the additional cost is of concern to you.
Note that LendPlus does not change your interest rate after requesting extension as some traditional lenders would as a condition for accepting your extension request.
The cost could get really high if you keep extending your repayment date every time it is due - since LendPlus allows this.
It is advisable to have a good reason for extending the repayment period other than just because you have this option. A good reason for extending repayment has to include an element of your ability to repay when the loan falls due again.
If you were specifically working on ridding yourself of debt, then a loan repayment extension simply means you will have to stay longer in debt. This is a function of the added period, but also the increased cost in accumulated interest that could spiral into a debt cycle if you have not thought out your decision well.
If you are taking a loan and are unsure of when you will be able to repay, the number of digital lenders with an option to extend are quite few - with the LendPlus app offering one of the options that does not include “extension fees”.
If you think you may need to extend your loan repayment, it would pay to know which lender can allow this before you decide to borrow.