The pitfalls of loan buying and selling

There was an outbreak of personal bankers in the country. They are everywhere; in the banking halls, in offices and on the streets. Because they earn handsome commissions when they net you to take that personal loan to buy a car or upgrade your furniture, they are bold and convincing.

You have a dream? They promise you instant fulfilment of that dream. The bankers also tempt you with life in paradise when they offer to buy your loans off – that is repay all the loans you have from various institutions and you start repaying their bank an amalgamated loan.

A while back, a family member was convinced by a sweet-talking personal banker about 'selling' them the three loans he was serving. He gladly appended his signature without reading the fine print to 'sell' his loans totaling Sh2 million to the bank. The banker was ever present during the 'wooing' period, making it possible to change his account from his bank of many years to the new one buying the loans.

Once he signed all the papers – which the personal banker gladly availed at his office for his convenience – he sat back to enjoy the comfort this new arrangement was supposed to bring him. At the end of the first month when the transaction was effected, he was shocked to find only a fraction of what he usually earned after all deductions had been made.

He checked with the accounts department to establish if his salary was actually disbursed as usual. With this clarification, he sought the banker to explain what had happened to his income that was now paper thin.

The initially available personal banker was out of reach. But when he finally got her, she responded coldly to his utter disappointment. Well, she told him that he should read the contract he signed with the bank before the deal was settled. "But you explained everything and it was very good," he protested.

"Just read the document. Let me call you later as I have a client," the banker dismissed him. There were no pleasantries. There was no point for this as he had already been netted. The truth is, he had not read the fine print that hugely favored the bank at his expense.

The bank literally robs him every month with costs such as insurance, commission fee, interest rate that fluctuates (usually on the higher side) and other costs that the sweet-talking personal banker did not warn him about as she called any extra expense 'minimal'.

With the kind of money he now gets at end month, he is unable to meet most of his responsibilities and sometimes borrows to make ends meet.

Needless to say, this situation has caused a lot of havoc in his relationships, especially with his spouse who was not privy to the arrangement. He has had to forego many things and avoid family functions that require some financial obligations.

Before you commit to 'sell' your loans to one financial institution to make your repayment a one-shop stop, always remember that the bank is not really about your interest; it is about milking you dry so that the next time they are giving their financial reports, they say they made profits in terms of billions; a sign that they are doing well in business.

Approach this kind of transaction with a selfish view. Remember it is you who is giving the bank money, not the other way round. So ask the personal banker questions. Read the fine print and let her or him explain everything that you do not understand.

To avoid my relative's trap, enter the contract with sobriety. Make sure the banker calculates how much you will be repaying every month and sleep over it to be sure you really want to go that way before you append your signature.