It is now possible to shop for the cheapest lender from the convenience of your smartphone or computer before applying for a loan.
This follows a move by the Central Bank of Kenya (CBK) and Kenya Bankers Association (KBA) to launch a portal and android application that will disclose information on loan fees and charges by commercial banks at the click of a button.
The portal, www.costofcredit.co.ke, will allow customers to compare the amount of money different banks will charge on both secured and unsecured loans as well as mortgages.
“The website provides consumers with a simplified as well as an advanced total cost of credit calculator to inform their decision-making prior to taking a loan product,” said the two agencies in a joint statement.
Once customers key in their preferred bank, type of loan, amount to be borrowed and intended repayment period, the system will display the total cost and give them an option to print out an amortisation schedule.
The schedule shows how much they will pay per month as principal repayment and interest as well as the third party costs involved.
The website, which ropes in microfinance banks, also provides the Annual Percentage Rate (APR), which refers to the effective interest rate for a whole year as opposed to just a monthly rate.
The two agencies however advised customers to contact respective banks for details prior to entering into any loan agreements.
“It is in the interest of CBK and KBA to continue collaborating on innovative initiatives that promote greater transparency and full disclosure of credit information to enable customers make informed credit decisions,” they said.
Central Bank Governor Patrick Njoroge has been pushing for transparency in loan pricing as cases of bad blood between financial institutions and borrowers emerge.
Yesterday’s joint statement said transparency was the cornerstone of an effective, safe and sound banking system.
Previously, CBK has been publishing the average weighted lending rate for all banks but the data has not been as comprehensive and updated as the one expected on the cost of credit portal.
“The information provided on the website is intended to complement the information provided by banks licensed under the Banking Act and Micro-finance Act,” they said.