Instant mobile loans are credit products made available to borrowers almost instantly through a website or a mobile app. Compared to traditional loans provided by banks or SACCOs, digital loans are processed and disbursed flexibly and are expected to be issued more quickly. Throughout the covid 19 pandemic, the loans gained popularity due to their online application and contactless nature, making them the go-to for various emergencies.

Mobile loans fall under personal loans; therefore, understanding their nature before you can apply will help you know what you are signing up for. Due to the increase of mobile apps such as Tala, Ipesa, Fuliza, and other digital loans, it's good to compare the terms of conditions before you embark on this journey.

Sure, you’re in a fix and need quick money, but can you repay the borrowed money in the stipulated time frame, and is the interest fee affordable? These and other factors are significant when choosing a mobile loan—Read on to find out more.

Other factors include:

1.      The credibility of the lender

 

Of late, you may have experienced or have friends who have had a bad experience with lenders. Some creditors may call up your friends when you cannot pay your loan due to unforeseen circumstances, while others may send you threatening texts every waking hour.

Yes, the deals may be good, but is your mobile lender credible and professional? This will go a long way in determining what lender you choose to get your loan from. You should also check if the Central Bank of Kenya approves your creditor.

 

2.      The purpose of the loan

 

In this day and era, Mobile loans are readily available. It is, therefore, vital to know how to utilize them for your benefit instead of getting into more debt when you cannot pay it back.

A fundamental question to ask yourself before you hit send on that application is, ‘how much money do I need?’. Once you have answered that, another critical question is, “do I need the loan?”

Have specific answers on when you need the money, how much you need, what you want the loan to do for you, and whether you can afford to pay the loan balance. If you have preexisting debts or have a salary that cannot cover your living expenses, it is evident that you cannot afford that loan.

 

 

 

3.      Minimum amount offered

 

Some apps offer as low as one Ksh and as high as 70000 ksh, depending on your creditworthiness. If you need a bigger loan, then you should visit the bank. If you do not qualify for the loan, you can borrow from a friend.

 

If the situation is not an emergency, you can save up for the extra cash, and when you have enough money, you can go ahead and make the purchase.

 

4.      Interest rates offered and fees imposed

 

The amount of money you borrow will determine the interest you pay. This principle determines how much your total repayment loan will add up to. Interest loans interest rates range from as low as 1% up to 20% on the borrowed amount. Some mobile loans' interest is calculated daily—others weekly, monthly, quarterly, or even yearly. You should pick a loan that does not provide high-interest rates.

You may have heard that some mobile lenders are notorious for hiking up interest once you take up your loan, while others have outright charged hefty fees. It is, therefore, wise to scrutinize the terms and conditions.

You should also consider if your loan is fixed or fluctuates throughout the repayment period.

Additionally, mobile loans come with fees imposed on them, which are processing fees or maintenance fees. It is, therefore, essential to read the fine print. Some also charge late payment fees, and in the long run, your loan may become an expensive liability.

 

5.      How soon can you get the funds?

 

Some mobile loans provide the loan immediately after it has been processed, whereas others may take a few hours, a day, or two to process the loan. If you are in a fix that needs urgent money, select lenders that guarantee faster delivery, but if you can wait, the better so that you can get time to evaluate other lenders.

 

6.      How do you plan to repay the loan?

 

Before you apply for any loan, you need to take into consideration your existing debt and liabilities. There may be instances when you already have an ongoing loan that needs to be repaid or credit card bills that need to be settled. It’s important to consider these obligations and calculate your debt-to-income ratio.

It is vital to have a way to pay for your loan, whether you get the portion from your salary or from that side gig you have going on. Taking a loan with no way to repay it is a recipe for disaster. If you fail to repay the loan within the stipulated time, you may incur more costs from the fees imposed.

 

7.      Time to repay the loan

 

It would help if you aimed to pay back a loan as quickly as possible after taking one out. Nevertheless, a lender that offers a short repayment period will ask for higher monthly installments. Therefore you should take into consideration the repayment period. If you default, then it will affect your credit score.

In the future, lenders may be less likely to approve loans for you if they see you have a history of defaulting on debt. Even though you may be hoping to pay off your debts soon, it's crucial to consider your ability to repay and choose a loan term that suits you.

Final thoughts

 

Picking the first digital loan option you find is not a good idea. To prevent you from taking out a loan from dishonest sources, you must verify any potential lenders' qualifications in the same way lenders evaluate you before giving you, their money.

Before applying for a personal loan, you might want to consider the legitimacy of the creditor and the caliber of their customer support while keeping your economic goal in mind.

 

Although there are many options for personal loans, choosing the best one requires a lot of research. Before filling out the application form, you should carefully weigh the benefits and drawbacks of several lenders, carefully study the loan agreements, and choose the one that offers favorable interest rates, flexible repayment alternatives, and an appropriate duration.