Forum > Lender Questions > Why do borrowers pay back immediately, then post a new loan? Forum Guidelines

  • Will
    United States

    Feb 7, 2018

    I have seen the following happen several times.

    1. A loan gets funded with an extended repayment period, say 12 or 24 months
    2. Within a few weeks of getting funded, the loan is repaid in full.
    3. The borrower immediately sets up a new loan.

    Why do borrowers do this? Is it a way to inflate their loan repayment rate? I don't understand why you would immediately repay a loan that you were just granted and then set up a new one.

    • Volunteer Mentor
      Su Rono
      Grobogan, Indonesia

      Feb 8, 2018

      Hallo Lender,
      in my personal experience, when getting a small loan, they accelerate the mortgage because to pursue the credit limit to go up, I also do it when getting a small loan, speed up the duration for repayment, and the borrower also has his own Strategy to increase the credit limit, on the dash page can also visible credit line notice, there reflects the notification, if paying payment before the specified time, will get an additional bonus credit. therefore after paying off, they will make a new loan application .

      Translated by Google     Show original

      Hallo Lender,
      in my personal experience, when getting a small loan, they accelerate the mortgage because to pursue the credit limit to go up, I also do it when getting a small loan, speed up the duration for repayment, and the borrower also has his own Strategy to increase the credit limit, on the dash page can also visible credit line notice, there reflects the notification, if paying payment before the specified time, will get an additional bonus credit. therefore after paying off, they will make a new loan application .

    • Volunteer Mentor
      George Offei
      Agona Swedru, Ghana

      Feb 8, 2018

      Increasing their current on-time repayment rate is one of the reasons. In addition, some also do that in order to increase their credit limit but forgetting that they need to hold the current loan for a minimum period of time before they can qualify for that increase. Lack of understanding of some of this rule makes a borrower pay off his/her loan within some few weeks of the loan fully funded. Hence we (Volunteer Mentors) need to educate them very well.


      Mary Nyarko, Su Rono and Julie like this.
    • Volunteer Mentor
      George Kiio
      Muthwani, Kenya

      Feb 8, 2018

      Hi Will,
      This is usually termed as fraudulent especially if the loan limit is way big.But the loan adjustment allows it. Which is better? failing to pay or not paying. But take for example a new member who applies for a loan in Kenya and is granted a loan of only KES 25. It is much better to repay it immediately and fail to request another or request than failing to pay. Many assume small loans seeing no obligations to pay them. Like in Kenya you cant be reported to CRB with just a loan of KES 100 and less. This is because the penalty is way destructive. Its not so good to generalize the situation at hand.


    • Zacchaeus Odwoli
      Bungoma, Kenya

      Feb 14, 2018

      Hi Will,
      Thanks for the question. In my view, the reason are as follows
      1. To get the early repayment bonus
      2. To increase the loan limit
      3. To win lenders trust
      4. To get more money and get to the highest loan limit.
      We believe that this is what is expected from we borrowers by lenders.
      Does it mean that you don't like this?
      What do you lenders expect from borrowers? help us to understand. Thanks for the question.


      Samwel Nyangi likes this.
      • Volunteer Mentor
        Samwel Nyangi
        Nairobi, Kenya

        Feb 19, 2018

        hello Zacharias
        your very right my brother why do people want to be rich in one day .
        you need to build trust with the lenders , by being honest borrower ,

        there's no elevators to success you need to go/ climb the stairs upwards.


        Julie likes this.
    • Edwin Mmwacha
      Nairobi, Kenya

      Feb 20, 2018

      I think for faithful borrowers this is in a bid to increase the the limits to take more e funds in future. Would kindly ask Will please help me in funding my loan I could really use your help.



  • Volunteer Mentor
    Sulissetiyowati Sutrisno
    Batang, Indonesia

    Feb 8, 2018

    Hai will i know this is make you confused why borrower do it like that,its true surono this is strategic to make loan going up faster when you paying your loan faster thats make you got bonus and your credit limit going up, but this is make some people make fraud's when the credit limit its going up some people disappear or the number not active, this make VM can't contact again, I'm just hope please Indonesian borrower dont do that because lenders just want a help you please your responsible with your loan,

    Translated by Google     Show original

    Hai will i know this is make you confused why borrower do it like that,its true surono this is strategic to make loan going up faster when you paying your loan faster thats make you got bonus and your credit limit going up, but this is make some people make fraud's when the credit limit its going up some people disappear or the number not active, this make VM can't contact again, I'm just hope please Indonesian borrower dont do that because lenders just want a help you please your responsible with your loan,


    Alex Tsuma likes this.

  • Martin Kimani Mwangi
    Bahati, Nakuru, Kenya

    Feb 8, 2018

    Hello Will.
    This happens to increase the credit limit. You are kindly lending to some of us who have been previously prejudiced by strenuous requirements in the traditional SACCOs and banks, hence impoverished to to almost below poverty levels. Therefore, we would love to increase the credit limits so as to meet out business objectives. Kindly, bear with such kind of scenarios. Kind regards,
    Martin


    Su Rono likes this.

  • Joshi
    United States

    Feb 8, 2018

    I have often seen full repayment done within a week and at times, even before the first repayment date!

    I do see the need to have credit limit increased quickly. However, in my mind, doing it this way defeats the purpose why the process has been set up this way. The idea is that you prove credit worthiness by starting with small amounts and paying back fully+in time. The increased limit needs to be backed up by such performance.

    I dont know about other lenders, but if I see such speedy payments in previous loan payments, I tend to stay away as I am not sure how well the repayments will be for larger amount. I rather take my chance on someone who might have struggled with repayments and has lower rating for On Time Repayments.

    • Zidisha Volunteer
      Joost
      Noord Brabant, Netherlands

      Feb 9, 2018

      Hi Joshi,

      You could also send them a link to the Borrowers FAQ
      www.zidisha.org/faq#faq-55

      Or you could tell the borrower that you don’t want to be repaid early. And that you like them to reinvest the money they have earned to make more profit till it’s time to do a repayment.

      But you are right. They must proof their creditworthiness by being able to generate an income from the money they lend.


  • Volunteer Mentor
    Ahmed Bishir
    Techiman, Ghana

    Feb 8, 2018

    I agree with you all although I am not a victim but let's look at it this way; someone will take a loan of $450 and adjust the weekly repayment amount to $1or less than that. Doesn't this situation also cause for concern
    I think such a repayment amount will take years before making a full repayment of the loan. So I suggest that there should be a limit on the adjustment amount.


    • Lender since 23 Jan 2015... Staff Member since 26 Mar 2015
      Laurie
      United States

      Feb 8, 2018

      It is my understanding that currently there is a limit of 5 years (60 months) to repay a loan. I think the system will automatically adjust the repayment amount if someone tries to lower it to such a small installment amount that it would take more than five (5) years to repay the loan.

      To clarify, too, "repay a loan" means making all of the installment payments due, the total amount of which is made up of any fee or fees owed--the 5% Service Fee, charged on each loan; and possibly the Membership Registration Fee and/or the Members Loan Fund [MLF*] Deposit Fee, usually charged on a first loan, which have to be paid--plus the Net Disbursement, which has to be repaid.

      Regarding repaying a loan early, that never is a good idea at Zidisha because that will not help increase the credit limit. There are only two things that go into the calculation of the on-time repayment rate: (1) on-time repayments, and (2) late repayments.

      --> Late repayments hurt you.
      --> On-time repayments help you.
      --> Early repayments do nothing at all for you.

      That's why sometimes you see a new borrower with a fully repaid loan but there isn't any on-time repayment rate recorded. The borrower made all of the installment payments early, so an on-time repayment rate was not established (and the credit limit, therefore, will not increase much, if at all).

      --> Therefore, always try to repay on time... not late... and not early.

      *[Note that the MLF Deposit Fee is an optional fee. The borrower can opt into that, in order to raise the credit limit faster; and if he/she does opt in, then it has to be paid. There is no requirement, however, to opt in.]

      • Volunteer Mentor
        George Kiio
        Muthwani, Kenya

        Feb 8, 2018

        Hello Laurie.
        Thank you for this sufficient information. I agree with you at some point. But part of support ticket someone mentioned on-time repayment is any payment made in between -10, +10 days of weekly payment due date. And quickly concluded that any payment outside this range was termed as late payment and hence the reason one of my invited friend had a low repayment rate despite of making payments way long earlier. Could you clarify how the systems puts into account on -10+10 days thing. And for sure early repayments helps with nothing.But could help if for eg in Kenya there is this time when loan limits for new members was KES 25, I used to tell them to pay and apply again coz this can only buy a half a bread and is not accountable to be paid in a months time.


      • Lender since 23 Jan 2015... Staff Member since 26 Mar 2015
        Laurie
        United States

        Feb 9, 2018

        It's my understanding that anything credited within the grace period that you mentioned is considered "on time". Prior to that is "early" and doesn't count toward the on-time repayment rate. Later than that is "late" and hurts the on-time repayment rate.

        Do you mean KES 25 after deductions?
        www.zidisha.org/forum-threa...
        "Sometimes, some borrowers haven't understood well and think that they only have to remit the Net Disbursement amount and that that completes their obligation. That is not true (unless they cancel the loan very soon after receiving the Net Disbursement and before making any additional remittance which would begin paying the Fees they agreed to)."


        Fitri Fauziyah Machmud and Joost like this.
      • Zidisha Volunteer
        Joost
        Noord Brabant, Netherlands

        Feb 11, 2018

        Thank you for this info. It it possible to add the info about the repayment score calculation to the Borrowers FAQ?

        Also it would be nice if there was more info in the Borrowers FAQ about the one time membership fee. It’s only mentioned in the Lenders FAQ.

        And at last an explanation how to create a support ticket would be nice as well. That a borrower needs to click on “help” to create a support ticket isn’t logical for all borrowers.

      • Lender since 23 Jan 2015... Staff Member since 26 Mar 2015
        Laurie
        United States

        Feb 16, 2018

        Hi, Joost. I apologize for the late reply. I only just now saw your post about this!

        Julia is the only person who can approve and make changes to the FAQs.

        You are welcome to ask her, of course! :-)


  • Volunteer Mentor
    Su Rono
    Grobogan, Indonesia

    Feb 8, 2018

    apologize first ,

    the bonus is applied if they can hold the minimum loan period and Finish repay the loan before the specified time, why zidisha apply bonus like that ?? I think it is a strategy so that the borrower can pay repayment on time, and it is also a strategy so that borrowers do not delay in paying off the repayment,

     if the new borrower holds a loan for a week or two and immediately repay, it is not good. because it is too fast in paying the repayment.

    I mean not like that.

    accelerate the installment due to the pursuit of repayment before the specified time.

    Example: The frequency of our repayment is Juny, but zidisha give a bonus if we can pay before the time specified, ie in May, we are also in the value also counted (on time Repayments)

     we only chase 1 month faster to get bonus, if repayment faster before frequency repayment then fund lenders will quickly return and can to give to other borrower.

    Translated by Google     Show original

    apologize first ,

    the bonus is applied if they can hold the minimum loan period and Finish repay the loan before the specified time, why zidisha apply bonus like that ?? I think it is a strategy so that the borrower can pay repayment on time, and it is also a strategy so that borrowers do not delay in paying off the repayment,

     if the new borrower holds a loan for a week or two and immediately repay, it is not good. because it is too fast in paying the repayment.

    I mean not like that.

    accelerate the installment due to the pursuit of repayment before the specified time.

    Example: The frequency of our repayment is Juny, but zidisha give a bonus if we can pay before the time specified, ie in May, we are also in the value also counted (on time Repayments)

     we only chase 1 month faster to get bonus, if repayment faster before frequency repayment then fund lenders will quickly return and can to give to other borrower.



  • Mimin Munawaroh
    Cilacap, Indonesia

    Feb 9, 2018

    if the case like that, it is certain that the main purpose is to increase the loan limit quickly.
    Many such cases occur in the month of September-November 2017 when the expedited system is still available and borrowers do not need to hold the loan for up to 1 month to increase the loan limit.

    The purpose of the zidisha loan is to be utilized and developed on the business or the purpose of the loan, but some borrowers exploit the expedited system just to achieve the maximum loan limit possible.

    Their pattern is to apply several loans within 1 month, the loan is repaid after a few days or maybe 1 week of funds received, after reaching certain loan limit (usually 4 digits loan), they stop that loan pattern and change the installment into the smallest installment, resulting in the duration loans become very long to tens of years.

    Although now there is a policy that the maximum duration of the loan is 5 years, but there are still some loans with a very long duration that initially use the loan pattern I mentioned above to achieve the highest loan limit.

    Translated by Google     Show original

    if the case like that, it is certain that the main purpose is to increase the loan limit quickly.
    Many such cases occur in the month of September-November 2017 when the expedited system is still available and borrowers do not need to hold the loan for up to 1 month to increase the loan limit.

    The purpose of the zidisha loan is to be utilized and developed on the business or the purpose of the loan, but some borrowers exploit the expedited system just to achieve the maximum loan limit possible.

    Their pattern is to apply several loans within 1 month, the loan is repaid after a few days or maybe 1 week of funds received, after reaching certain loan limit (usually 4 digits loan), they stop that loan pattern and change the installment into the smallest installment, resulting in the duration loans become very long to tens of years.

    Although now there is a policy that the maximum duration of the loan is 5 years, but there are still some loans with a very long duration that initially use the loan pattern I mentioned above to achieve the highest loan limit.

    • Volunteer Mentor
      Su Rono
      Grobogan, Indonesia

      Feb 9, 2018

      I see your loan in desember 2017 also with the pace of repayment

      Translated by Google     Show original

      I see your loan in desember 2017 also with the pace of repayment


      • Mimin Munawaroh
        Cilacap, Indonesia

        Feb 9, 2018

        as you said in the Indonesian sub forum, each member has the right to increase or decrease the amount of installments according to his current condition.
        for me, when I get additional income would not hurt if I pay early, as long as done in a natural way.
        I mean here is the pattern of loan repayment very quickly (in just a few days or a maximum of 1 week after the funds received) repeatedly done at several loans in 1 month with the aim to reach the highest loan limit, I am sure you understand with that pattern and can distinguish a reasonable early loan repayment or with the above objectives.

        Note: for me as a clothing seller, December is a great month because sales increase during high season Christmas and New year, so I can paid off my loan earlier.

        Translated by Google     Show original

        as you said in the Indonesian sub forum, each member has the right to increase or decrease the amount of installments according to his current condition.
        for me, when I get additional income would not hurt if I pay early, as long as done in a natural way.
        I mean here is the pattern of loan repayment very quickly (in just a few days or a maximum of 1 week after the funds received) repeatedly done at several loans in 1 month with the aim to reach the highest loan limit, I am sure you understand with that pattern and can distinguish a reasonable early loan repayment or with the above objectives.

        Note: for me as a clothing seller, December is a great month because sales increase during high season Christmas and New year, so I can paid off my loan earlier.


        Fitri Fauziyah Machmud and Joost like this.

  • Edwin Mmwacha
    Nairobi, Kenya

    Feb 9, 2018

    Someone who repays within few days on all loans taken is really not in need and he is there to just rise the loan limit ladder but someone who takes 1 month plus is genuine because the funds he took have already been spent and he is trying his best to gain the limit bonuses. I have been paying my loans quickly because my business growth is stable and much returns are realised and this puts the loan amount or credit limit too small or fixed to meet my business needs but all the same I can never borrow what I dont need. Am grateful for zidisha.



  • Josiah Cheruiyot
    Nairobi, Kenya

    Feb 11, 2018

    Hi guys, I'm so embarrassed to say this right now BUT my on time repayment rate has slid from 100% to 14% due to a default in repayment over the past few weeks. I was looking to raise my on time repayment rate back up to 80% over the next couple of weeks/months by abiding to my repayment schedule and making on time repayments.

    Has any other lender been in such a position and is it possible to raise my on time repayment rate back to where it was?

    Looking forward to hearing from you.


    • Zidisha Volunteer
      Joost
      Noord Brabant, Netherlands

      Feb 11, 2018

      You should try to do your repayments in the period between 10 days before and 10 days after the scheduled date.

      In the screenshot of your current and previous loans only 2 repayments where on time.
      The green ones where paid on time. This increases your score.
      The yellow ones where too early. This doesn’t increase or hurt your score.
      The red ones where late. This hurts your score.

      So instead of paying early you should first change your installment amount so your scheduled repayment dates are recalculated and then you can do 1 large repayment.
      If you don’t have enough money to pay your scheduled loan amount then you could lower your installment amount.

      • Volunteer Mentor
        Samwel Nyangi
        Nairobi, Kenya

        Feb 13, 2018

        therefore my current limit would have remains constant because i made early payment !!!!

        it should not have been reduced from 140 to 114!!!



  • Josiah Cheruiyot
    Nairobi, Kenya

    Feb 12, 2018

    Thanks for the clarification Joost, this is highly useful.

    So I presume if I continue making repayments on the remaining balance on time as highlighted above, there is a probability that my on time repayment rate will slowly but surely move up again?

    Looking forward to learning from you on this and thanks again for your selfless service to the Zidisha community.

    • Feb 12, 2018

      I think so. Every payment that is on-time (i.e. +/- 10 days, according to Joost) should improve your rating.

    • Volunteer Mentor
      Fitri Fauziyah Machmud
      Kota Surabaya, Indonesia

      Feb 12, 2018

      Yes. Its gradually up in slowly pace. I don't know the number percentage will add to your score when your payment count as ontime payment. When your payment count as ontime, it will adding the number inside parenthesis. And please remember they credited to US Eastern Time.

      Translated by Google     Show original

      Yes. Its gradually up in slowly pace. I don't know the number percentage will add to your score when your payment count as ontime payment. When your payment count as ontime, it will adding the number inside parenthesis. And please remember they credited to US Eastern Time.

      • Josiah Cheruiyot
        Nairobi, Kenya

        Feb 12, 2018

        Hi Fauziyah,

        Thanks for the detailed explanation. What do you mean by "..and please remember they credited to us eastern time."?


      • Volunteer Mentor
        Fitri Fauziyah Machmud
        Kota Surabaya, Indonesia

        Feb 13, 2018

        Zidisha base is at 21900 Muirfield Circle #104 Sterling, Virginia 20164 USA, so every payment will credited to our account according the time there. For example, Indonesia is 12 hours ahead of zidisha base, when I pay my installment early in the morning on Feb 11, it will credited to my account on Feb 10.
        That's why when there are payment made and hasn't credited to borrowers account directly, zidisha ask the borrowers to wait 3 days before making a ticket on the procedure page for reporting uncredited payment. Usually borrowers just after paid the installment and their payment hasn't credited to their account yet, they will directly on that day making a ticket and post that in the forum. I'm sure that make a lot of work for zidisha volunteers and staff, if they just wait for 3 days as the procedure on that page, they will give more time for zidisha staff to works on others things that need fast response. The grace period is 10 days. So when one payment hasn't credited to their account, they will still count ontime if they pay their installment as the schedule, it just look a week behind. They can inform their lenders about their uncredited payment and what they've done to inform zidisha staff about their payment. That's my opinion.

        Translated by Google     Show original

        Zidisha base is at 21900 Muirfield Circle #104 Sterling, Virginia 20164 USA, so every payment will credited to our account according the time there. For example, Indonesia is 12 hours ahead of zidisha base, when I pay my installment early in the morning on Feb 11, it will credited to my account on Feb 10.
        That's why when there are payment made and hasn't credited to borrowers account directly, zidisha ask the borrowers to wait 3 days before making a ticket on the procedure page for reporting uncredited payment. Usually borrowers just after paid the installment and their payment hasn't credited to their account yet, they will directly on that day making a ticket and post that in the forum. I'm sure that make a lot of work for zidisha volunteers and staff, if they just wait for 3 days as the procedure on that page, they will give more time for zidisha staff to works on others things that need fast response. The grace period is 10 days. So when one payment hasn't credited to their account, they will still count ontime if they pay their installment as the schedule, it just look a week behind. They can inform their lenders about their uncredited payment and what they've done to inform zidisha staff about their payment. That's my opinion.

      • Lender since 23 Jan 2015... Staff Member since 26 Mar 2015
        Laurie
        United States

        Feb 14, 2018

        Just a quick clarification...

        The team credits payments from many locations throughout the world. Team members are located all over the globe. Only Julia, our Director, is located in Sterling, Virginia, United States. Some of us also are in her same time-zone, but most actually are not. Also, sometimes she is in Indonesia, visiting her husband's family, and she sometimes works from there. :-)

        Payments get credited on the Zidisha website with the date that the borrower paid through the money-transfer partner (for example, through M-Pesa in Kenya), not the date that the team posts the payment onto the Zidisha website. If there was any temporary indication on the Zidisha website that the payment was "late", as long as the payment was paid through the money-transfer partner within the grace period, then that "Repaying Late" notation gets automatically corrected by the system to "Repaying On Time" as soon as the payment is posted on the Zidisha website.

        • Volunteer Mentor
          Fitri Fauziyah Machmud
          Kota Surabaya, Indonesia

          Feb 14, 2018

          Thank you for the clarification Laurie. I see, so for borrower in Indonesia the date credited to our account base on xendit, the money transfer patner zidisha in Indonesia then. I ever paid my installment on 3 am Indonesia time on Jan 27 and on my repayment page showed I paid it on Jan 26, but if I paid it on afternoon, it will wrote as the same date as I made the payment.
          I wish to meet her if she is in Indonesia, unfortunately her husband family I guess living in Bali (I can only guess from some of her picture) Bali is another island from mine.

          Translated by Google     Show original

          Thank you for the clarification Laurie. I see, so for borrower in Indonesia the date credited to our account base on xendit, the money transfer patner zidisha in Indonesia then. I ever paid my installment on 3 am Indonesia time on Jan 27 and on my repayment page showed I paid it on Jan 26, but if I paid it on afternoon, it will wrote as the same date as I made the payment.
          I wish to meet her if she is in Indonesia, unfortunately her husband family I guess living in Bali (I can only guess from some of her picture) Bali is another island from mine.


        • Lender since 23 Jan 2015... Staff Member since 26 Mar 2015
          Laurie
          United States

          Feb 14, 2018

          Thank you for that clarification, too, Fitri. Yes, I think you are right that it is according to the United States Eastern Time-Zone, so if a borrower is close to the end of the grace period, he/she should be careful to stay within the grace period, taking our time-zone over here into consideration. However, since you are ahead of us, and most countries where we have borrowers are ahead of us, most borrowers won't have to worry about being late. They may have to worry about paying *early*, though, since early repayments don't count toward the on-time repayment rate (only the on-time and late payments go into that calculation).

          My second paragraph above, though, still stands. I know you already knew what is there, Fitri, but I wrote it for any others who may not know.

          It would be nice if you two could meet sometime. Idk where her husband's family lives, though, but you could ask her. :-)

        • Volunteer Mentor
          Fitri Fauziyah Machmud
          Kota Surabaya, Indonesia

          Feb 14, 2018

          Yes laurie. I understand the second paragraf. Dave had explain to me very well on VM forum and old thread in borrower forum. Btw I rarely see Dave now. It's look like he works behind the scence, only saw his trace on 'like'.

          I will ask her when the time is right ;)

          I love the sentence no news mean good news. This usually apply when my brother forget to give the task and I already run away to avoid the task by silence my phone hehehe ;)

          Translated by Google     Show original

          Yes laurie. I understand the second paragraf. Dave had explain to me very well on VM forum and old thread in borrower forum. Btw I rarely see Dave now. It's look like he works behind the scence, only saw his trace on 'like'.

          I will ask her when the time is right ;)

          I love the sentence no news mean good news. This usually apply when my brother forget to give the task and I already run away to avoid the task by silence my phone hehehe ;)


          Josiah Cheruiyot likes this.

  • Josiah Cheruiyot
    Nairobi, Kenya

    Feb 12, 2018

    "So instead of paying early you should first change your installment amount so your scheduled repayment dates are recalculated and then you can do 1 large repayment."

    I've found this piece of advice, especially useful. I will implement it in certain circumstances. Thanks


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