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5 main charges, levies added to your loan interest that banks don’t tell you

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When you go to the bank to ask for a loan, you are usually told what interest the loan will attract over a year.


For example, the current interest rate for bank loans in Kenya is capped at 13.5 per cent – and this is the figure your bank will tell you when you inquire about getting a loan from them.

But what many of you might not know, and the bank won’t tell you, is that, on top of the 13.5 per cent interest rate, there are multiple fees, levies and charges that account for up to 6.4 per cent addition to the bank interest rate.

We take a look at five of the charges;

Government taxes

The charges that your bank imposes on your loan are subject to exercise tax – usually at the rate of 20 per cent.

For bank fees that range from Ksh20,000 to Kshh40,000, the excise charge is usually between Ks4,000 and Ksh8,000 per loan application.

Loan application/processing fees

Depending on the bank, these fees include an appraisal, negotiation fees and loan arrangements.

Banks normally deduct this fee from the loan amount, although some will ask that the borrower pays it upfront. These fees vary from lender to lender, and are normally pegged as a percentage of the loan amount—and can therefore add significantly to the total cost of borrowing.

Lawyers’ fees

When you apply for a bank loan, there is usually collateral involved and the bank will have to seek the services of a lawyer to run due diligence on the collateral property.

This process is meant to ascertain ownership, and compliance with regulatory levies such as land rates and ensure that it is not charged on other loans.
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The lawyers will also handle the process of charging the property on the loan, and the release when payment is completed.

Some lenders will engage external legal help for drafting loan contracts, which adds to the cost for the borrower. The borrower also covers the government fees for registering the security.

Credit Life Insurance

A third-party mandatory fee that is meant to cover the lender in case a borrower is unable to service the facility as a result of death, job loss, disability or terminal illnesses that impair the ability to service a loan.

Also known as loan protection cover, it is taken out by the borrower on behalf of the lender, where they pay a premium against which the lender will be compensated in case of the borrower’s death, for instance.

The average annual insurance fee for an Sh1 million unsecured loan in a tier one lender is between 0.4 per cent and 0.6 per cent of the loan amount.

Valuation fees and stamp duty

Borrowers using land, vehicles or property as collateral for loans also incur costs related to the valuation of these securities when taking up the loan. These valuation fees are also applicable for mortgage borrowers.


Banks need the valuations done so as not to be left short in the cover for the secured loan facilities.

Home loans also attract stamp duty, levied by the Kenya Revenue Authority (KRA) at 4.0 per cent of the cost of property or value on the open market, and an additional 0.1 per cent of the loan amount upon making a charge on the property for collateral purposes.

Baoriat Agencies is committed to helping you find the best place for you to settle in Eldoret town. We walk you through the entire process of acquiring your own property in Eldoret until it has been transferred into your hands.

To learn more about buying a property in Eldoret, 

Call 0721-554937

WhatsApp  https://wa.me/0721-554937  

Email evekibet@gmail.com or 

Visit us at  Juma Hajee Building room number 16, Eldoret town 

Follow our Facebook Page Boariat Agencies for the latest deals.

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