By Michelle Wanjiku
Mobile money lending apps are the latest craze in Kenya. I am sure you have heard of them, seen them advertised or even used them.
However, how do these money lending apps such as Tala, Branch, Timiza, M-Shwari, Saida and others impact your finances?
January is normally a tough financial month for most people who spent too much during the holidays. Because of this, if you are one of these people, you will find that you end up borrowing money in order to survive.
I know of someone who used one of the apps to borrow 5K shillings, he wasn’t able to pay it back and after being reminded to pay off the loan, he was listed in the CRB. He didn’t think that this was a big deal, but reality hit when he wanted to apply for a job at one of the top banks in Kenya but he couldn’t get a clearance certificate from CRB and missed out on the opportunity.
Sure there are some benefits to having instant loans at your fingertips, such as;
1. You get access to instant cash
Life is full of surprises and you never know what will happen tomorrow, you are likely to find yourself in a situation where you need money immediately and the only place to get an instant loan is on these money lending apps.
This can help bail you out especially in your time of need.
2. Faster loan processing
When it comes to borrowing from these apps, very few require guarantors, making it easier for you to access loans, unlike banks.
The only thing they need from you is your ID number and phone number
What are the negative effects of using money lending apps?
1. Encourages you to spend more than you can afford
Unless you are borrowing to invest, borrowing money to buy something you can’t afford is a bad financial decision. This is because you will be living above your means which is a sure way of preventing you from building wealth.
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2. Costs more money
Think about it, if you borrow 1K shillings today, you will end up paying back the full 1K plus interest. This means that you will end up paying back more than you originally borrowed.
Also, the longer it takes you to pay off the loan, the more interest you’ll have to pay.
Obviously, this is not a good thing if you are trying to improve your financial situation, because the extra money you end up paying could go into your savings account, your emergency fund or help you pay off things like your HELB loans.
From a typical financial standpoint, debt is never a good idea unless; you use the money to improve your financial situation. For example, taking a loan to buy a car you decide to use as a taxi. But borrowing money to finance your lifestyle is never a good thing.
In fact it is one of the deadliest money mistakes you can make.
According to Robert Kiyosaki, author of Rich Dad Poor Dad, “Debt-free living should be your passion if you want to achieve financial freedom”
Do you use any of these lending apps? What effect have they had on your finances?
The writer is a Communication Officer/Digital marketer at Career Point Kenya. Email: firstname.lastname@example.org