Where Can I Get a Loan Without Security in Kenya?

Every day, a large number of people in need of money regularly ask, "Where can I get a loan in Kenya without security?"

Whether you are in need of a quick cash injection in an emergency, want to take advantage of a business opportunity, have urgent bills to pay, or are going through a hard time and need some money to keep you going, unsecured loans can be your-go-to option given the relatively fast disbursement time and fairly lower eligibility requirements. 

This is as compared to secured loans that may require long collateralisation processes, possibly tedious guarantor-convincing tactics, and typically additional fees. 

Or, which is one of the biggest issues many face with secured loans, you just do not have any assets to offer as security for a loan - yet you need the money to handle whatever you need to be handled. 

If you need money to start a small business, manage your cash flow, or finance your next stage of growth, this article on unsecured loans is for you.

How to Know if Unsecured Loans Are Good for You

As the name suggests, an unsecured loan is one that does not require any type of security - shares, a title deed, logbooks, household valuables, machinery, livestock, etc. 

Unsecured loans are approved by lenders based on a borrower's creditworthiness rather than their assets as collateral. Unsecured loans include personal loans, educational loans, and credit cards.

There are no outright good or bad reasons to take an unsecured loan - all is solely based on your individual needs. 

But generally, the unsecured loan option is preferable to those who do not have assets to secure loans against, those looking for relatively smaller amounts, anyone keen not to keep third-party loan costs down, and to some extent, anyone looking to get financed urgently and the process of collateralisation would potentially slow disbursement down. 

Read Also: Full Guide: All You Need to Know About Personal Loans in Kenya

Some of the reasons to take an unsecured loan are discussed below. Please note these are not exhaustive since the use cases are limitless. 

When to Take an Unsecured Loan

• When you want to invest in yourself - This is taking out a loan to achieve something that will benefit your future self, like starting a business or paying for an online course in order to earn new skills.
  
  
• When you have an emergency - Unsecured loans can be a relatively quick option to get yourself out of a jam. Taking out an unsecured loan can help you acquire money to pay for an urgent medical procedure for yourself or a loved one, clear overdue school fees, and keep your kid in school or renew that expired car insurance that caught you off-guard.

• When you want to acquire an asset - This is where you take out a loan to buy something that will earn you money. For example, you can take out a personal loan and utilise it to purchase an appreciating asset such as land.
  
  
• When you want to consolidate your debt - If you have a high-interest loan, you can seek a lower-interest personal loan and utilise the money to pay off the high-interest debt. Because of the lower interest rates, you can get out of debt faster.

Read Also: What Is Debt Consolidation and How It Works in Kenya

Pros of Unsecured Loans

• No risk on your Personal Property 

The advantage of obtaining an unsecured personal loan is that your personal property is usually not at risk in the event of default. As a result, if you lose your job and find it difficult or impossible to make payments on time, you won't have to worry about losing your home or any other assets.

• The application procedures are simpler

Unsecured loans are easier to obtain nowadays since they are even available from lenders other than banks and Saccos. You can apply for a loan on a digital app or via USSD from a microfinance institution from the comfort of your own home. Furthermore, you can get the money disbursed to you within a few hours or a day straight to your mobile wallet. 

Cons of Unsecured Loans

• In the event of a default, your lender may take legal action against you.
  

Even if a personal loan isn't secured by a specific item of personal property, a lender could still be able to place a claim on your assets to assure repayment. In order to secure a claim, a lender needs to launch a lawsuit against you. In addition to the initial loan amount and late fines, you may be obliged to pay court charges and lawyer's fees.

• Loan amounts may be smaller

It is a well-known fact that lenders profit from the interest they collect on loans, but there is no profit if the loan is not repaid. Lenders go to great lengths to reduce the risk of borrower default as a result of this. They look into your credit history, validate your employment, and, in the case of unsecured personal loans, they may limit the amount you can borrow (especially if your credit score is low).

Read Also: How to Check Your CRB Report and Understand It

• Relatively higher repayments and Interest Rates

In most cases, unsecured loan interest rates are higher than secured loan interest rates since the lender is at greater risk. Higher interest rates may result in increased monthly payments. Note that there are many other factors that determine the cost of a loan including your risk profile other than just the type of loan you take. 

Read Also: BEWARE: Fees Your Bank Loan Will Attract

Some Requirements for Loans Without Security in Kenya

For most institutions in Kenya, some of the documents one will be required to furnish a lender with in one way or the other include:- 

• Credit ratings and worthiness
• Proof of business address for business people
• Proof of business continuity for business people
• Several passport-sized images of the borrower
• Identity documentation which may include a passport, driver's license, voter ID, and (any one proof)
• Utility bills, a passport, or other documentation of residency
• Latest three or last six months' payslips.

List of Lenders in Kenya Giving Loans Without Security

1. Online/digital lenders - Because of the high default risk, most digital lenders only allow you to borrow small sums of money. Loan limits are determined by your borrowing and payback history, as well as an algorithm's appraisal of your creditworthiness.

2. Commercial banks only offer unsecured loans to customers who have good credit, are employed and receive a regular paycheck, or are self-employed and have a regular income.‍

3. Microfinance Banks - These operate in an identical manner as commercial banks only that they operate at a relatively smaller scale and may be specialised to lend to particular sectors majorly. 

‍4. Microfinance Institutions - MFIs can also give unsecured loans, for example, salary advances to working people so that they can pay their bills while waiting for their next income. These loans are often repaid in 30 days or less. MFIs are not regulated by the Central Bank of Kenya and do not take deposits. They may have relatively higher interest rates but have some of the most flexibility eligibility requirements. ‍

5. Saccos - Most Saccos provide loans ranging from 2.5 to 6 times your savings, and will allow members to borrow against their savings. You'll also typically need to find other Sacco members to act as loan guarantees depending on the amount and loan type. 

How to Apply for Loans Without Security in Kenya 

• Check out lenders either offline or online to see their features then when you settle for one, you can visit their branches to start your loan application process.
• For digital loans, you can download the app from the Google Play or App stores.
• Create an account on the app or register online by filling out the required forms
• Upload all required paperwork for the request
• Borrow the amount of money you need
• Upon approval, your loan will be disbursed.

Pro-tip: Alway Compare Loan Costs Across Lenders and Products 

If you are looking for a loan without collateral, the total cost of the loan is most likely a big concern for you. Due to a perception of strict eligibility requirements, many potential borrowers may not look any further than the lenders they are familiar with or the ones they already have an account with. 

Why pay more, when there are cheaper alternatives? 

And did you know that the difference in the total cost of a loan is much more than the interest rates and could actually be in the interest structure, the processing fees, and the percentage and number of third-party charges that the loan affects? 

Well, if you are concerned about the total cost of your loan and are not sure how to evaluate alternatives, you can use the Money254 Loan Comparison Tool for free and ascertain if the lender you are planning on borrowing from is the one giving you the best deal according to your circumstances.