Factors to be considered when borrowing a loan

1.       Business concept
It is the duty of member to put together details of the investment to be undertaken- the purpose of the loan i.e. the loan for increasing stock, purchase of machine, purchase of building materials, purchase of land, etc.

2.       Character of borrower

Assess your character- how do you behave when you have money and when you don’t?

-put in safety measures to ensure you use the loan for the purpose intended/wisely.

-why are you borrowing? Is it because you need the loan or is it because the money is available?

-are you a trustworthy applicant? Hardworking?

3.       Capacity to pay

This is the ability to repay credit if extended. Assess your own ability to repay the loan in line with society’s loan policy and your personal financial position.

Consider your capital standing or financial strength i.e. monthly financial obligations not on the palsy that may hinder you from repaying the loan or make you suffer pecuniary embarrassment.

4.       Own contribution

This is the amount of funds borrower is willing to invest in the business. Do not expect your society to finance your project 100%

5.       Collateral for loan

These are details on security put forward by the borrower in good faith as a guarantee that money borrowed will be repaid.

In co-operatives this is basically a guarantor. However, members should use other forms of security e.g. share certificates and insurance policy, in case the society loan policy allows.

6.       Interest rate

Consider the interest rate of the loan to be borrowed and its effect on your income for the whole period of the loan repayment.

Members should concentrate on development loans for their own development and take school fees loan where necessary.

They should avoid unnecessary emergency loans at all cost because mostly one cannot do much and they reduce member’s ability to take a development loan.

RULES GOVERNING LOAN APPLICATION

An applicant shall be considered or accepted for the processing upon a members meeting the following conditions:

1.       Must have been an active member of the society for a period f not less than six months

2.       Must be consistent saver with the society for a period of not less than six months

3.       Must be willing to conform to all rules, by laws and co-operative societies act

4.       Must be a Kenyan citizen with a valid identity card and be a person of sound mind who has not been declared bankrupt or barred to contract for any reasons

5.       Must be earning regular income either from business or employment

6.       The loan application must be for prudent purposes and application must justify its legality by stating its purpose

7.       Must be willing to make all necessary disclosures of information necessary to facilitate loan processing and guarantorship