11 Types of Loans in Kenya and How to Qualify

Whether you want to buy a car or a house, get married, join college, or maybe you have more personal expenses, there are different types of loans to suit you. Today, you’ll know the different types of loans in Kenya and how to apply.

But before borrowing any loan, it’s essential to become acquainted with these types of loans and the finer features. This will help you borrow the right kind of loan when the need arises.

To make it easier for you, we have come up with the different types of loans in Kenya that might be suitable for you.

The following are are the 11 types of loans in Kenya:

  1. Business loans
  2. Unsecured loans
  3. Personal loans
  4. Home equity logbook loans
  5. Fixed-rate loans
  6. Home loans
  7. Check-off loans
  8. Non-check-off loans
  9. Payday loans
  10. Guarantor loans
  11. Mobile loans

1. Business Loans

Kenyan notes
Kenyan notes

A business loan is a type of loan specifically for business purposes. Its offered to entrepreneurs and startups. There are different sources of instant business loans in Kenya. 

Business loans in Kenya are also provided to business owners who what to expand their businesses.

It has average low-interest rates. Mainly it’s offered by banks since it requires huge capital. Such loans come as asset-based loans, business cash advances, micro-loans, and invoice financing.

2. Unsecured Loans in Kenya     

This type of personal loan is approved and offered without collateral. It’s based on your credit score. One of the advantages of this form of loan is that it does not require any collateral.

The con is that the interest rate will rise slightly. If a borrower fails to pay a personal loan, the lender will have no choice but to involve debt collectors or agents. These people assist in the recovery of bad debt. 

On the other hand, Lenders do not have the authority to take your assets, land, or other valuables as collateral. You agree to pay and provide proof of a steady income and good credit history.

Related: How to Get Capital to Start a Business in Kenya

3. Personal Loans

A personal loan is among the six types of loans you can apply for in Kenya. It’s used in solving individual pressing needs. You can apply this type of loan to settle household bills, pay off church dues, buy food, etc.

A personal loan allows you to borrow a loan from a lender for almost any individual purpose. Mainly with a fixed duration, fixed interest rates, and a month’s regular payment.

No collateral is needed, and online lenders, street lenders, and banks offer this loan. This is best for those who need a small amount of money.

4. Home Equity Logbook Loans

This is a type of loan that requires a borrower to submit all his home’s documentation to the bank to raise a loan. The loan might be 50% monetary value of the home. 

Landlords greatly benefit from this kind of loan, particularly when embarking on new projects such as re-roofing, education loans, and property acquisition among others. The loan amount is, however, determined by the valuation. 

5. Fixed-rate Loans

A fixed-rate loan is among the six types of loans in Kenya. This kind of loan maintains the same interest and monthly repayment till you offset the whole amount.

It’s a form of personal loan in which the interest rate stays the same throughout the loan duration or for a portion of it. Most Kenyans prefer fixed-rate loans to long-term loans.

To some extent, they have an idea of future costs and monthly repayments. 

6. Home Loan   

Types of loan in Kenya
House with a key

A home loan is a type of loan offered to people who want to buy a home. Typically, a borrower looks for a home before meeting with a financial institution to apply for a loan. The financial institution takes possession of the house until the borrower makes the last payment.

It incorporates fixed or adjustable rates and a repayment period. They mortgage the property in question to the lender as collateral until the loan is fully paid.

How to Choose the Right Loan Type in Kenya

Saving up money for huge expenses is an ideal financial plan but isn’t always possible, especially for unexpected emergencies or purchasing a home or a car.

Applying for a loan will be the only option left in such situations. But before deciding on the loan type, you need to consider several things, which include:

Loan Charges      

Consider charges associated with different loan types as you focus on interest rates. Additional charges include processing fees, late payment charges, loan cancellation charges, and service tax.

Banks charge differently; therefore, it’s crucial to weigh available options.

Loan Interest Rates

Money lenders such as banks offer loans at different interest rates. So no matter how attractive an interest may seem, it’s good to do research and shop around as you might come across a better offer.

Before deciding on any type, make sure you obtain information from the institution or financial website.

Repayment Flexibility

Some loan repayment terms and conditions are complex, while others are flexible. For example, you might be charged a small fee if you want to set off your debt before the tenure ends.

Pick a loan and a lander that charges a small fee if you intend to settle your loan and avoid future interest payments.

Affordability of Equated Monthly Installment

Once you get a loan, you will have to pay it back, no matter your situation. So, it is better if you have a rough concept of the equated monthly installment before opting for a specific loan type.

You must be sure you will be able to pay your monthly installments on time and accordingly.    

How to Qualify For a Loan in Kenya

Loan qualification is a measurement of the quality of loan requirements that banks and other financial organizations apply in their underwriting process. Lenders use a qualifying ratio to compare borrowers’ debt obligations with their income before approving a loan application. 

The following are ways to qualify for loans in Kenya:

  1. Check your credit score. If you have an excellent credit score, you’re eligible for an unsecured loan. 
  2. Pay any outstanding debts you may have 
  3. Provide evidence of a consistent source of income
  4. Obtain  a copy of your credit report from
  5. Demonstrate the readiness to pay early and provide proof of your most recent early payment.
  6. Conduct research and discover the best lender

Eligibility to Qualify For a Loan in Kenya

To qualify for any type of loan in Kenya, you need to be:

1.       Have a national ID

2.      Be above 18 years

3.      Possess an active phone number

How to Apply For Any Type of Loan in Kenya  

Loan application in Kenya is almost the same for all lenders except for slight contrasts. The following is the procedure of how to get a loan in Kenya:

  1. Visit the lender’s website and fill out the application form or download the loan app from the play store. Alternatively, you can visit the lender’s physical office and fill out the application form.
  2. Create an account on the loan app and fill in all the required fields.
  3. Give the app some time to read your details. Here you should also submit your documents if requested. If your lender is a bank, you’ll be told the number of days to wait.
  4. Wait for your loan to be approved and have it. 

Frequently Asked Questions

Which bank gives loan easily in Kenya?

KCB and Equity banks give loans easily in Kenya. However, to ensure faster loan processing, you should provide documents like your ID or passport and credit report when making the application.

Bottom Line  

In recent years, digital loans have transformed Kenya’s lending industry. We have a variety of loans. However, you must choose a type of loan that is ideal for you.

It’s essential to do thorough research and comparison and know under which type of loan your loan falls. When applying for a loan for an emergency or business expansion, it’s essential to know which kind of loan will best suit your needs.

We hope this list of the types of loans in Kenya will help you make the right decision in getting the best loan.