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HELB Loan Penalties: How failure to repay your helb loan can Ruin you financial life.

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Helb loan penalties is a crucial financial topic which university students in Kenya are not well informed about.
With the high unemployment rates in Kenya , Helb loans beneficiaries are struggling to pay up their education loans.

Repayment of such loans at a tender age has drastically reduced the growth and emergence of new businesses by the youths since the little money that they get from their monthly hustles is channeled to the repayment of the loans and other basic needs thus leaving minimal capital for starting a business and expanding it.

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WHAT INTEREST RATES DOES HELB CHARGE?
As per the helb loan act students who benefited from the loan are required to pay back the loan with interest so as to facilitate future generations to also have access to such loans
The interest rates are divided into two categories i.e according to the year your loan was awarded
      1. Between 1974-1995 the interest rate is 2%
      2. Between 1996-2016 the interest rate is 4%

HOW TO CALCULATE HOW MUCH YOU WILL PAY FOR THE HELB LOAN
Helb loan repayment amounts can easily be calculated using a helb loan calculator which is found on their site.
Follow the link for the calculator: Helb Loan Calculator

HELB PENALTIES FOR NOT REPAYING YOUR STUDENT LOANS 
 This is our main point of interest since many students accumulate huge amounts of fine which is amounts to almost the same amount of money they borrowed.
Helb requires that students start paying their loans 1 year after they have finalized their university education regardless of whether they have secured employment of not.
The penalties are as follows
      1. Fine of ksh 5000  per month if you fail to pay the monthly amounts.
              e.g if you fail to pay the loan for one yr the fines will amount to 60000
                         5000*12= 60000
         However the first month of defaulting will earn a 10,000 fine
     2.  Helb works closely with the credit board and thus failure to repay will have your name        blacklisted and this will hinder you from borrowing money fromany financial institution in kenya
     3. Some government institutions will not offer your a higher employment rank e.g manager if you have not cleared your helb loans

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CASE STUDY OF LOAN FINE EXAMPLE
We used the helb loan calculator to do the math
HELB loan limits are 35000-50000.
Lets assume that Kwarula was awarded a loan of 40000 per year and he received it for 4 years.
Total amount he received =40000*4=160000
If he paid the loan on time with the normal interest of 4% and monthly payments of 2000 ksh he would pay a total of =186,403 ksh
However if he defaulted for 1 yr this is what he would be required to pay= 160000 + 1 yr fine (5000*12)=220000 ksh
We hope you have seen the difference.

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Article was written by : Brian (Financial consultant and                                      contributor of Hustle Yetu Blog)
This article should not be reproduced without authors permission.