How Do Secured Loans Work in Kenya?
When you need money unexpectedly, finding a suitable source of financing can be challenging. Banks and other lenders may have different requirements, while some borrowers may not have the conventional collateral required for certain types of loans.
One alternative is a secured loan.
Secured loans allow borrowers to provide an acceptable item or asset as security in exchange for access to funds. This type of financing can be particularly useful for people who have valuable assets but need money for an urgent financial need.
In Kenya, GAWA Finance provides secured loans ranging from KSh 1,000 to KSh 50,000, subject to assessment and applicable requirements.
In this guide, we explain how secured loans work, what security means, the application process, and what you should consider before borrowing.
What Is a Secured Loan?
A secured loan is a loan that is backed by an asset or item provided by the borrower as security.
The security gives the lender an additional form of protection against the possibility that the borrower may not repay the loan according to the agreed terms.
The value and suitability of the security can be assessed before the loan is approved.
For example, a borrower may have a valuable household item or another asset but need cash urgently. If the item meets the lender's requirements, it may potentially be considered as security for a loan.
How Do Secured Loans Work?
The basic process is relatively straightforward.
A borrower identifies an amount they need, provides acceptable security, and submits an application. The lender then assesses the application and security before determining whether the loan can be approved.
A typical process may involve:
Determining the amount required
Identifying suitable security
Submitting a loan application
Assessing the security
Determining the loan amount
Agreeing to the applicable loan terms
Completing the required documentation or process
Receiving the approved funds
The exact process varies between lenders.
What Is Used as Security for a Secured Loan?
Security can take different forms depending on the lender.
GAWA Finance considers different types of security, including household items and higher-value assets, subject to assessment and applicable requirements.
Examples of items that may potentially be considered include:
Electronics
Household appliances
Furniture
Other valuable household items
Personal assets
Higher-value assets
The fact that an item belongs to one of these categories does not automatically mean that it will qualify.
The specific item must meet the lender's requirements and undergo assessment.
How Much Can You Borrow with a Secured Loan?
The amount you can borrow depends on several factors.
These may include:
The value of the security
Condition of the security
Type of asset
Requested loan amount
Your application
Applicable lending requirements
GAWA Finance offers secured loans ranging from KSh 1,000 to KSh 50,000.
A borrower requesting a smaller amount may provide security suitable for that amount, while someone requesting a larger loan may need security of sufficient value.
The final amount is determined after the applicable assessment.
What Is the Difference Between a Secured and Unsecured Loan?
The main difference is whether the loan is backed by security.
Secured Loan
A secured loan requires the borrower to provide an acceptable asset or item as security.
Unsecured Loan
An unsecured loan does not require the borrower to provide an asset as security, although the lender may have other eligibility and repayment requirements.
Each type has advantages and disadvantages, and the right option depends on the borrower's circumstances and the lender's terms.
Why Do People Choose Secured Loans?
There are several reasons why someone may consider a secured loan.
1. They Have an Asset but Need Cash
Someone may own valuable household items or other assets but temporarily need money for an emergency.
A secured loan can allow an acceptable asset to be used as security.
2. They Need a Relatively Small Amount
Not every financial emergency requires a large loan.
GAWA Finance offers loans starting from KSh 1,000, allowing eligible borrowers to apply for smaller amounts.
3. They Need a Larger Emergency Loan
GAWA Finance also provides loans up to KSh 50,000, subject to assessment and eligibility.
4. They Want an Alternative to Traditional Borrowing
Secured lending can provide another borrowing option for individuals who may find some conventional lending requirements difficult to meet.
How to Apply for a Secured Loan in Kenya
If you are considering a secured loan, the following steps can help you understand the process.
Step 1: Determine Your Financial Need
Start by calculating how much you actually need.
Avoid borrowing more than necessary simply because a larger amount may be available.
Step 2: Identify Your Security
Consider an asset or household item that you own and that may meet the lender's requirements.
Make sure you have the legal right to provide the item as security.
Step 3: Contact the Lender
Contact GAWA Finance and provide information about the amount you need and the security you intend to offer.
Step 4: Have the Security Assessed
The item or asset will be assessed according to the lender's applicable criteria.
This assessment helps determine whether the security is acceptable and the amount that may be offered.
Step 5: Review the Loan Terms
Before accepting the loan, carefully review the applicable charges, repayment period, security conditions, and other terms.
Step 6: Complete the Loan Process
Complete the required documentation and other procedures.
Step 7: Receive the Funds
Once the application has been approved and all required steps have been completed, the funds can be disbursed promptly.
What Happens to the Security?
When you provide an asset as security, it is important to understand the conditions associated with that security.
The security is connected to the loan agreement, and the borrower is expected to meet the agreed repayment obligations.
Before accepting a secured loan, ask the lender:
How the security is held or handled
When the security is released
What happens after full repayment
What happens if repayment is not made as agreed
What conditions apply to the security
Understanding these conditions before borrowing can help prevent misunderstandings.
Advantages of Secured Loans
Secured loans can offer several potential advantages.
Access to Emergency Funds
A secured loan can provide an option for someone dealing with an unexpected financial requirement.
Use of Existing Assets
Borrowers may be able to use an item they already own as security.
Different Loan Amounts
GAWA Finance provides loans from KSh 1,000 to KSh 50,000, depending on assessment and eligibility.
Potentially Simple Application Process
The application process focuses on the borrower's financial need, available security, assessment, and applicable lending requirements.
Fast Disbursement After Approval
Once the application has been approved and the required process completed, funds can be disbursed promptly.
Things to Consider Before Taking a Secured Loan
Secured borrowing should be approached carefully.
Understand the Total Cost
Before accepting a loan, ask about interest, fees, charges, and any other costs.
Check the Repayment Period
Make sure you understand when the loan must be repaid.
Understand the Security Conditions
Know exactly what happens to your security throughout the loan period and if repayment is not made according to the agreement.
Consider Your Ability to Repay
Your ability to repay should be one of the most important factors when deciding whether to borrow.
Borrow Responsibly
Only borrow what you need and what you can reasonably repay.
Secured Emergency Loans for Low- and Middle-Income Kenyans
GAWA Finance was established to help address the challenges faced by people who need access to emergency funds.
For low- and middle-income households, even a relatively small unexpected expense can create financial pressure.
GAWA Finance provides secured loans from KSh 1,000 to KSh 50,000, with different types of security considered subject to assessment.
This approach gives eligible borrowers another option when they need short-term financial assistance.
When Should You Consider a Secured Loan?
A secured loan may be worth considering when:
You have a genuine emergency financial need.
You have acceptable security.
You understand the cost of the loan.
You have a realistic repayment plan.
You understand the terms relating to your security.
You should avoid taking a loan simply to finance unnecessary spending or ongoing expenses that you cannot afford.
Frequently Asked Questions About Secured Loans in Kenya
What is a secured loan?
A secured loan is a loan backed by an asset or item provided by the borrower as security.
How much can I borrow from GAWA Finance?
GAWA Finance offers secured loans ranging from KSh 1,000 to KSh 50,000, subject to assessment and applicable requirements.
Can household items be used as security?
Yes, GAWA Finance considers different types of security, including household items, subject to assessment and the applicable requirements.
How long does it take to receive a secured loan?
Once an application and security have been assessed and approved, funds can be disbursed promptly after completion of the required process.
Is every household item accepted?
No. Security must meet the lender's requirements and be assessed before the loan can be approved.
What happens if I do not repay my secured loan?
The consequences depend on the terms of the loan agreement and the conditions relating to the security. Always understand these terms before accepting the loan.
Get a Secured Loan from GAWA Finance
If you need emergency financial assistance and have an acceptable item or asset that can be provided as security, a secured loan may be an option worth considering.
GAWA Finance offers secured loans in Kenya from KSh 1,000 to KSh 50,000, while considering different types of security ranging from household items to higher-value assets.
Before borrowing, make sure you understand the applicable costs, repayment requirements, and security conditions.
Contact GAWA Finance today to learn more about our secured loan options and find out how you can apply.
