What You Need To Directly Qualify For Unsecured Loan At Your Bank, Tips For Faster Repayment

Applying for an unsecured loan can be a crucial financial decision. Whether you need funds for personal expenses, emergencies, or business ventures, understanding the process and ensuring timely repayment is essential.

In this article, we’ll explore the requirements for obtaining an unsecured loan and provide practical tips to expedite repayment.

What you need when Applying for Unsecured Loan

1. Transaction History

Most financial institutions closely examine the flow of transactions in your current account. Specifically, they assess both incoming income and withdrawals.

A “busy” account with consistent activity may attract a higher loan amount. The transaction history helps the loan calculator determine the maximum loan you qualify for.

2. Ability to Repay

Before approving an unsecured loan, lenders evaluate your ability to repay. Here are the key aspects:

Employment Salary: If you’re employed, the bank will require payslips for the past few months. These payslips provide details such as gross income, net income, and other cash benefits.

Employment Confirmation Letter: You’ll need a letter from your employer confirming your employment status. This letter includes information about your work ethic, any disciplinary cases, and whether there’s a notice to resign. Typically, the finance department collaborates with HR to draft this letter.

Callback Verification: Banks often call your employer to verify the claims made in the employment letter and by the loan applicant.

3. Memorandums of Understanding (MOUs)

Some companies have MOUs with banks to facilitate easy access to loans for their employees.

These arrangements may also offer special interest rates. For instance, if the bank’s standard lending rate is 23%, an MOU with your employer could reduce it to 19% or 20%.

4. Previous Credit History

A clean credit history, free of defaults, positively impacts your credit score. Lenders check this through Credit Reference Bureau (CRB) reports.

What you need to repay your loan on time

In an exclusive interview with TUKO.co.ke, personal finance expert Susan Mtana explained that paying your personal loan on time will grow your credit score and increase your eligibility for unsecured loans.

Mtana shared tips you can follow to ensure faster loan repayment:

1. Regular Income

Having a steady income—whether from a regular salary or business earnings—is crucial.

"Most loan repayments are billed monthly, so consistent income reduces the risk of default and accumulating unpaid interest," Mtana noted.

2. Additional income

She recommended earning supplementary income to support loan repayment.

"Balancing personal needs while repaying the loan ensures timely payments. Having a financial cushion during the grace period before income generation (for business projects) is also helpful," she said.

3. Pay installments at any time.

Mtana suggested paying off loan installments any time you get money rather than waiting until the end of the month to make payments.

"If your business generates daily or weekly cash flow, allocate it directly to the loan account to avoid spending it elsewhere."

4. Prioritise Loan Payments

She also advised making your loan repayment a priority in your monthly income budget.

"When funds come your way, prioritise loan payments. Channel any available money toward the loan after meeting essential needs. Consistency in repayment is key." she urged.

5. Pay More Than the Minimum

She recommended paying more than the required minimum loan instalment.

"Aim to pay more than the minimum instalment required. This accelerates loan repayment and reduces overall interest costs," she added.

6. Lifestyle Adjustments

The financial expert urged borrowers to adjust their lifestyle to enable them to fastrack their loan servicing.

"If additional income isn’t feasible, consider lifestyle adjustments to create room for loan repayment. Downsizing expenses may be necessary."

Following the guidelines will enable you to navigate the unsecured loan process effectively and ensure timely repayment.

"Remember that responsible borrowing and disciplined repayment contribute to financial stability," Mtana advised.

Is unsecured personal loan issued by banks?

Commercial banks like Co-op Bank offer personal loans ranging from KSh 50,000 to KSh 8 million with a fixed interest rate and repayment terms of up to 96 months.

Personal loans can be accessed without collateral, and customers can use them for various purposes, such as buying a new home.

To qualify for a personal loan, customers need an active salary account with Co-op Bank for a minimum of six months.

What to know about loan repayment

• A woman inspired many online users by demonstrating how a simple strategy can help pay off a significant loan faster.
• Financial expert John Ogara advised Kenyan borrowers to emphasise swift repayment to minimise interest on loans.