Recently, students went back to school after their mid-term break. Some parents might still be facing the stress of managing the associated financial obligations.
The school management's expectations to clear fee balances on time, coupled with other costs, can create a significant strain on family budgets, especially for those with multiple children in school.
In the face of these pressures, some parents may feel compelled to resort to borrowing as a means of covering the expenses.
However, before considering this option, it's crucial to understand the key factors that lenders evaluate when assessing loan applications, creditworthiness, and interest rates.
These factors include:
✔ Capacity: This is the most important factor, as it represents your ability to repay the loan. Lenders will closely examine your income, employment stability, and existing financial obligations to determine your capacity to make the required loan payments.
This is because the way a person handles personal credit often shows how he or she will manage future financial commitments.
✔ Capital: To get a line of credit, lenders will assess the amount of personal assets or savings you have, as this demonstrates your financial stability and commitment to the loan.
✔ Collateral: If you fall behind on loan payments, financial institutions want to make sure you have collateral, or another source of repayment for the loan, such as a property or a vehicle.
However, most lenders offer school loan products that provide unsecured options.
✔ Conditions: Lenders will evaluate the current economic and market conditions, as well as any specific circumstances surrounding your loan application, to determine the level of risk involved.
✔ Character: This includes your credit history, payment patterns, and overall reputation to assess your trustworthiness and reliability as a borrower.
Given these factors, it's wise to prepare and position yourself to secure favorable loan terms if borrowing becomes necessary to settle back-to-school expenses.
Kenya Bankers Association
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