How to Clear Your HELB Loan Faster: A 7-Step Guide

For a university student, there is no better notification than a Higher Education Loans Board (HELB) disbursement notification. For most university students, this is the first large sum of money at their disposal. To spend as they see fit.

As some students spend this money, they pay little attention to the fact that it is a loan. Many students have struggled to pay back this loan once they are out of school. Partly because of the high unemployment rate in the country.

However, if you want to clear your HELB loan faster, here are seven steps you can follow: 

Calculate How Much You Owe 

Before offsetting any loan, it is important that you understand how much you owe. With a HELB loan being disbursed in chunks, you might not know exactly how much you owe.

To know how much you owe, you can visit the HELB website and login to your account in the HELB portal. Consequently, you can visit a Huduma Centre and they can help you check your balance at the HELB desk.

Knowing how much you owe is essential to developing a proper repayment plan.

Read Also: How to Apply for HELB Postgraduate Scholarships

Choose A Suitable Repayment Plan

A suitable repayment plan is based on three things: 

• How much you earn
• How fast do you want to pay back the loan
• The interest rate applied to it

The HELB loan interest rate is at 4% per year. This is a favourable interest rate. However, if the loan is left unattended, it can accumulate quickly.

The repayment instalments will depend on how much you earn and how fast you want to pay back the loan. Not many people get lucrative employment right off campus. Hence, you might not have much to spare to pay the loan. 

Nonetheless, here is a hypothetical that you can relate to your situation and understand how fast you can offset your loan.

Assuming you owe Ksh250,000 and you can pay Ksh5,000 every month. At the 4% interest rate, it will take you 55 months to repay the loan. If you paid Ksh10,000, it would take you 26 months.

Use The Grace Period To Your Benefit

HELB usually gives you a one-year grace period after your graduation. The loan does not accumulate any interest within this year. 

You can take advantage of this period by paying off as much as possible. This will reduce the principal amount and subsequently, the interest you ultimately pay because it will be applied on a lesser amount. 

For instance, using the example above, if you started paying Ksh5,000 immediately after campus, you will have paid Ksh60,000 before the interest starts accumulating. If your loan was at Ksh250,000 your first interest cost is calculated at Ksh190,000 instead of Ksh250,000. 

Read Also: Who Qualifies for HELB Loans; Undergraduate, TVET, Graduate and Scholarships

Automation

Once you have figured out how much you owe and how much you will be paying every month, it will be of much help if you automate the process. 

Automation reduces the load of having to remember and manually deposit some money to your HELB repayment amount. 

You can automate the payment through your employer or by using standing orders in the bank where your salary goes through. 

Continue Your University Lifestyle

Once you are out of campus and start earning, one is tempted to level up your lifestyle. Levelling up your lifestyle tends to consume more of what you earn. 

Instead, it is wise to maintain the university lifestyle for the first few years after graduating. This will give you much more room to set a strong foundation financially, including clearing the HELB loan debt. 

Furthermore, for most people, responsibilities such as family come a few years after school. Hence, it is possible to live a simple lifestyle with minimal expenditure.

Don’t Take On More Big Debts Right Away

A HELB loan is a huge commitment that you make when you are barely 18 years old. It is advisable that you clear it first before taking on any other big financial commitment. 

After school, many people are tempted to take a loan to start a business. Statistics show that most first-time businesses fail because the founder lacks experience. 

When you are immediately out of campus unless you had a business while on campus, taking a loan to start one because you cannot secure employment immediately is a huge risk that you will be taking and might sink you deeper into debt, which will affect your financial stability.

It is advisable that you clear one loan first before taking any other loan.

Read Also: Frequently Asked Questions on HELB

Increase Your Income

The easiest way to clear your HELB loan faster is by increasing your monthly instalments. By increasing your income, you get much more disposable income, which you can commit to repaying the loan. 

The higher your instalment, the faster you repay the loan, which allows you to pay less interest on the loan.

If you are employed, find a side hustle, such as online writing, or freelancing, to increase your income.

Wrapping Up

The HELB loan is a significant loan that is useful for many students who come from underprivileged backgrounds. It has helped many get through campus, which would have been difficult otherwise. Nonetheless, it is not a grant, a scholarship or a bursary. It is a loan that has to be paid back. The more it is left unpaid, the more interest. Therefore, it is essential that you start paying it back as fast as you can.