An Interview with Damalie Nankya Mubiru – Head of Lending Products, Stanbic Uganda
When is the right time for one to take a loan?
Today’s customer is looking for the right financial solutions that will help them meet their current and future obligations. When customers are searching for a loan, they either search as individuals, groups or businesses. However, the need/purpose of the loan is usually the determining factor of the timing; coupled with a number of key requirements that must be met prior to applying for a loan.
As individuals, it’s important to think carefully about the purpose of the loan and search the market for the best rates. It’s also critical to remember that affordability of the loan is usually based on your salary or other cash inflows, other loan repayments if any and other household expenses.
Businesses also need to follow the same approach. However, they need to search the market for the best financing solution that fits the business needs and assess the business’s affordability based on cash flows, other loan repayments, and other operating expenses. You know you’re in a good position to borrow if your business is doing well, with positive cash and you have evaluated your contingency plan options.
When cash flows are steady and growing, this is the best time to consider the favourable line of credit. It can be a lifesaver in case you have unforeseen emergencies or if you need credit during a slow season. In the case of long-term investments, you might consider longer tenor credit line options.
What are the different loan facilities available?
Stanbic Bank offers a wide range of loan facilities and these include: Personal Loans (Loans to individuals), Business Loans, Trade Loans, Overdrafts, Home Loans, Vehicle & Asset Loans and Credit Card facilities. All these solutions/loans are dependent upon the need to borrow, cash flows, collateral where applicable and how long their will want to have the facility.
When does a loan work or benefit the borrower?
A loan works well when; It’s easy to access, provided in the shortest possible time, directly fits the need of the individual/business, tagged to the salary of the individual or cash flow cycles of the business and is affordable to the customer/business in regards to repayment capability.
Why do we see loans fail (failing to benefit the borrower)?
Most loans can fail due to various reasons and these may include; misuse of funds, for example loan diversion; misalignment of repayments to source and timing of income, say: salary income or business cycles; Job losses; winding down of businesses and sometimes, increases in the commercial interest rates.
How does one best manage a loan?
Once you have taken a loan, it is important to ensure you make payments on time. This is essential because defaulting on your loan can negatively/adversely impact your credit score. If you anticipate difficulty in making a payment, contact your provider right away to find out your options.
Explore the different repayment options available to repay your loans and get to know your financing bank. Keep in touch with them by availing them with updated Know Your Customer (KYC) information and whereabouts in the event of any potential failure to repay the loan. Also, this helps you to be informed of any changes that the bank might take which may affect your loan repayment obligations.
What would be the perfect guide to taking a loan?
I will share a number of useful guidance points that will help any customer looking for a loan facility:
- Don’t borrow more than you can repay. This is the first rule of smart borrowing and it’s what our elders have been telling us from time to time: don’t live beyond your means. Take a loan that you can easily repay.
- Keep tenure as short as possible to avoid any unforeseen changes in the economy, Job or cash flows which might impact your ability to repay the loan. Ensure timely and regular repayments to avoid bad credit profile which may hinder your chances of taking a loan for other needs in the future.
- Don’t borrow to splurge or speculate for example invest in fixed deposits and bonds.
These investments will never match the interest you pay on loans and are too volatile. If the market declines, you will not only suffer losses but will be strapped with a delinquent loan. “Don’t borrow to buy a luxury car.”
- Borrow from a licensed lender as there are laws and regulations that protect the borrower from any form of exploitation.
- Take insurance with all loans. It is best to take insurance cover as well. Buy a term plan of the same amount to ensure that your family is not saddled with unaffordable debt should anything happen to you. The lender will take over the asset (house or car) if your dependents are unable to pay the monthly commitments.
- Understand the terms and conditions of the loan. Some loan documents are lengthy, therefore it’s important to understand the terms and conditions of the loan before accepting the offer. This will allow you to avoid unpleasant surprises. Take advice from a friend or a lawyer for nay terms you don’t understand and “don’t be signature happy”.
- Have minimal loans at a time. If you have too many loans running, it’s a good idea to consolidate your debts into one omnibus loan to avoid multiple commitments yet in most cases, they might be serviced by the same cash flow pool or salary.
- Keep your spouse or family in the know about the loan. Before you take a loan, discuss it with your family. This is important because the repayment will impact the overall finances of the entire household. In many instances, if you are married spousal consent may be required.