Today, we want to share with members the differences between GNAT Loans and bank loans, how the interest rate is calculated, and how one can qualify for a huge amount.
What is the difference between a bank loan and a mutual fund loan?
One thing fund contributors must note about the mutual fund loan and the bank loan is that bank loans being rural or commercial have high-interest rates than the mutual loan. Some banks have as high as 41% interest rate on loans per annum whereas mutual fund has 16%.
Ghana Commercial Bank (GCB) currently has a 32% interest rate on loans as compared to GNAT’S 16%. This means one cannot get a better loan than what a mutual fund offers.
How is the GNAT mutual Fund Loan Interest Rate Calculated?
It can be difficult to understand how a loan is calculated, so it’s essential to take the time to discuss those calculations with your dependable financial advisor to get clarification. Along with making sure the loan’s requirements are met, it’s important to always make sure you understand how the interest is going to be computed.
GNAT mutual fund loan is calculated using the reducing balance method. Loans with the greatest expense savings are those with the lowest balances. This implies that only the loan’s outstanding balance is used to compute and charge interest on a monthly basis. There are two components to the weekly repayment. The principle is part of the payment that lowers the loan’s outstanding balance. The price you pay for having access to the money interests.
What does reducing balance mean as it is associated with loans?
With a reduced balance loan, the monthly payment amount stays the same, but the interest portion of the payment decreases as the loan’s total is reduced each month by the amount that is added to the principal. Nearing the loan’s conclusion, you’ll notice that the total interest payment is at its lowest.
What are the elements added to the GNAT Mutual Fund Loan?
There are other elements added to the processing of the mutual fund loan and they are;
Controller and Accountant General processing fee of 4% and these are imposed and determined by the government.
Insurance of 2% as a way of protecting members’ contributions against loan defaulters and the death of a member on a loan. This means that all mutual fund loans have been insured hence one’s beneficiaries can go in for his/her contributions while insurance takes care of the outstanding loan.
Why Does a Mutual Fund Need A Reasonable Interest Rate?
To make the fund sustainable: without a reasonable interest rate, the fund will collapse since members take loan amounts higher than their total contribution to the fund and pay over a period of time.
To make a profit for members: the profit of the loans is shared among all members based on the percentage of their contribution to the fund.
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