I am 36. I am a single mum of three, living and working near Nairobi. I have been earning a net salary of close to Sh60,000. This was enough to meet my household budget (around Sh40,000). A few months ago, I met this man who said he was willing to become my husband and stepdad to my children. I was swept off my feet.
A few months in, he told me that he had a business idea and wanted to venture into the matatu industry. However, he did not have enough capital and asked if I could take a loan of Sh2 million since I am employed in the civil service. We agreed that I would take the loan with a repayment period of 60 months, but he would be the one making the repayments. I gave him all the money once the loan was processed.
He topped up the money, bought the matatu, and started disappearing. When I confronted him about it, we had a big fight, and he ran away. I tried to contact him in vain. The vehicle was in his name, but the loan was in mine. I am now struggling to repay the money in instalments of Sh35,363 while raising three children, with the firstborn due to join senior secondary next year.
After loan deduction, I am left with about Sh20,000 to survive on. I had savings of about Sh400,000, but they have been reduced to about Sh330,000 due to top-up withdrawals for my budget. What should I do? Should I move to a smaller house? Is there a way out of this loan for me? Joyce
Alex Kibebe is the founder of Rubiani Wealth Management Ltd and an investment consultant and business development coach:
Your experience is painful, particularly because you now have to bear the financial consequences of a decision you made in good faith. However, you can recover from this setback and emerge financially stronger.
First, you need to separate this unfortunate decision from your overall financial position.
I had savings of about Sh400,000, but they have been reduced to about Sh330,000 due to top-up withdrawal.
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Before this experience, you were comfortably meeting your household expenses and had accumulated savings of Sh400,000. This demonstrates your ability to manage your finances well. Rather than allowing this experience to overwhelm you, focus on restoring your previous financial stability.
I would advise you to consult a lawyer to establish whether there is any legal recourse available to recover your money or establish a claim over the vehicle. Although the loan is in your name and the vehicle is registered in his name, the circumstances surrounding the transaction may provide grounds for pursuing recovery.
Meanwhile, you will need to restructure your household budget to accommodate the loan repayments. Your monthly repayment of Sh35,363 leaves you with approximately Sh25,000. Since your previous household expenses were Sh40,000, you will need to reduce your monthly spending by approximately Sh15,000 to live within your remaining income.
Moving to a smaller or more affordable house is certainly an option, particularly if it can significantly reduce your rent. You can also review your food, transport, utilities and other household expenses to identify where you can make reductions. Given that you have three children, you will need to balance these reductions against their essential needs, including education. Consider these adjustments temporary sacrifices to help you through the loan repayment period.
You may also approach your lender to explore whether the loan can be restructured to reduce your monthly repayments. This would be particularly helpful if reducing your expenses to fit within your remaining income would substantially compromise your ability to meet essential household needs.
For example, extending the original repayment period by two years to seven years at the same interest rate could reduce your monthly repayment to approximately Sh25,845. This would release about Sh9,500 monthly, substantially easing the pressure on your budget. However, you would pay more interest over the extended period. Your actual repayment will depend on the outstanding loan balance and the lender's terms.
You should also protect your remaining savings. The Sh330,000 you have accumulated is an important financial buffer, especially given your responsibilities. If you are not already doing so, consider investing the fund in a low-risk, interest-earning investment such as a Money Market Fund (MMF). At an illustrative net return of 9 per cent annually, your investment could generate approximately Sh2,475 monthly.
You could withdraw this interest to supplement your household budget without drawing down the principal, provided the fund maintains this return. However, returns fluctuate, so you should not depend entirely on this income.
If practical, consider establishing an additional source of income that aligns with your strengths and opportunities and requires minimal capital. For example, you could resell household goods or explore legitimate online work opportunities during your free time. Even an additional Sh5,000 monthly would considerably ease the pressure on your budget. Avoid committing substantial savings to a business before fully establishing its viability.
Once you clear the loan, you will have room to ease some of the pressure on your household budget. However, I would advise you to maintain some of the spending habits you will have developed and redirect Sh15,000 to Sh20,000 of the freed loan repayment towards savings and investments. If you invest Sh20,000 monthly in your MMF, your existing investment of Sh330,000 could grow to approximately Sh1 million in slightly over two years, assuming the net return remains at least 9 per cent annually and you do not make withdrawals. This will help you rebuild your financial security, increase your investment income and gradually pursue your other financial goals.
