The different types of bank loans in Kenya.

In Kenya, many people rely on loans to meet their needs, from starting a business to paying school fees.

However, getting a loan isn’t always easy, as some are locked out by strict rules, while others take loans they can’t afford.

Loans are usually available from banks, mobile apps, and SACCOs, but many Kenyans struggle to qualify.

Some are usually lacking the required documents like payslips or security, while others take loans without fully understanding the costs and end up in debt.

Now, understanding the loan types is crucial as it helps you make an informed choice.

Each loan is designed for a specific need, and here are the main ones in Kenya:

Let’s start with the most common type of loan, which is a Personal Loan.

These are designed for needs like school fees, emergencies, or family events, and they’re flexible but often expensive, requiring proof of income and a good repayment record."

Secondly, business loans support SMEs, startups, and large enterprises by funding working capital, expansion, equipment purchases, or real estate investments.

These loans can be challenging to access without security or formal records, but some lenders, i.e., banks like Co-op bank.

Now, these business loans include term loans (fixed schedules), working capital loans (short-term), micro-loans (SMEs), and lines of credit (flexible borrowing), based on financial statements and collateral. i.e., Co-op Bank provides tailored SME loans and equipment loans

Thirdly, mortgage loans are for buying or building a home, financing the purchase, construction, or renovation of residential or commercial properties, including affordable housing initiatives.

These loans typically require longer repayment periods and substantial paperwork

Fourthly, car loans help individuals buy vehicles either for personal use or work purposes. They cover cars, motorcycles, taxis, or even heavy machinery, with the vehicle often used as security

Lastly, for those with formal employment, payroll loans can be a quick solution. These are loans where repayment is automatically deducted from your salary, making them easy to manage.

They’re often used for emergencies, school fees, or personal expenses. And if you're using a bank like Co-op, you can access up to Sh9 million, with repayment periods of up to 10 years.

Before you opt for any loan, think about your specific needs.

If you need a larger amount for personal goals like building a home, paying school fees, or covering emergencies, personal loans might work well—especially if you have a stable income.

If you're planning to invest in a business, expand operations, or buy equipment, a business loan may be the better option.

These often require a clear plan, and sometimes security, but they can support long-term growth.

Credit: Moe Academy Kenya