Sacco vs Bank loans, which ones are better?


There is a difference between Sacco and Bank loans. Normally, people prefer Sacco loans because of the following reasons:

SACCO loans DO NOT have hidden charges but Bank loans have A LOT OF HIDDEN CHARGES besides monthly charges. Some of these charges include:

  • Insurance fee.
  • Appraisal/ Processing Fee
  • Account Maintenance Commission
  • Accrued Interest Charges (Arrears Account)
  • Late Remittance charges
  • Premature Loan Clearance charges.

NOTE: Banks have yearly reappraisals to determine interests to charge. This implies that the interest rates will vary within the lifespan of the loan. As and when interests in the money market change (upwards), the interests on running loans are also adjusted (upwards) without giving notice to the loanee.

 Sacco loans have low interest rates. While Sacco loans can charge as low as 5% per year, loans offered by banks have high interest rates of up to 30% per year.

Sacco loans are easy and faster to get. They only require one to be a member and get reference from other members. Once you are a member, getting referees is easy because the members are people you know.

Saccos don’t harass members to repay the loans.Since Saccos are formed by members themselves, they are lenient on the loanees.Even if the repayment period lapses, they can add you more time to repay. Banks are very strict, in case you fail to pay,they will harass you and even auction your property to recover the loan.

Saccos don’t adjust their interest rates but loans do.

Saccos give loans based on the shares you have with them. Most Saccos give 3 or 4 times the total amount you have invested in them, If your shares amount to Ksh 1 million, they will give a loan of Ksh 3 or 4 million. Banks on the other hand give a loan based on the value of your assets or your salary. If you aren’t salaried, it’ s difficult to secure a loan from a bank.


Please enter your comment!
Please enter your name here