Beware: if you skip a loan instalment, interest will accumulate

By MUNGAI KIHANYA

The Sunday Nation

Nairobi,

08 March 2026

The Kiswahili saying that “kukopa ni harusi, kulipa matanga” (borrowing is a wedding, paying a funeral) should be posted in all banking halls and at the offices of all money lending companies. In fact, this should be made a mandatory requirement as a warning on all promotional materials for loaning services. The same way that we have health warnings on cigarettes.

I say this because it never ceases to amaze me the number of people who borrow money from banks and don’t feel the obligation to pay back on the terms that they had agreed. And when the lender comes to auction their property, they play victims of unfair lending practices.

It is indeed unfortunate that when people borrow money, they will say something like “the bank gave me money for my business”. Let us be very clear on this: banks don’t give money; they sell it!

Over the last 23 years that I have been writing this column many readers have written to me complaining about unfairness of banks and other money lenders. But in each instance, it always turns out that the borrower defaulted on the repayment terms. The most recent complaint came from Christine (not her real name). She borrowed Sh1M at 15 per cent interest for a period of three years (36 months). Her monthly instalment came to about Sh35,000.

Then, after paying for nine payments, her employer face some financial challenges and she was put on unpaid leave for three months (it was better than losing her job outright). She assumed that after regaining her income, she would simply continue paying the Sh35,000 for the remaining 27 instalments (36 – 9 = 27).

At the end of 27 the 36 instalments, she was shocked when the bank told her that she still owed them Sh42,000! “Isn’t this daylight robbery?”, she asked me. It wasn’t easy explaining to her that, when she missed three instalments, the interest on them remained unpaid over the rest of the period and was accumulating throughout.

What she should have done when employment was paused was go to the bank and explain everything. The bank would have recalculated a new instalment after the three-month pause – it comes to just under Sh36,000. This way she would have added only one thousand shillings over the 27 months, which is Sh27,000, instead of the Sh42,000 that the bank is now demanding – a saving of about Sh15,000.