One of the biggest advantages of borrowing from a Savings and Credit Cooperative Society (SACCO) is that many loans are guaranteed by fellow members instead of requiring physical collateral. However, this system can become challenging when the people you have asked to guarantee your loan decline to sign the application.
It can be disappointing, especially if you need the money urgently. But a refusal does not necessarily mean your loan journey has come to an end. There are several practical steps you can take to address the issue while maintaining good relationships with your fellow members.
Find Out Why They Declined
Before reacting, take time to understand why your guarantors refused.
Their decision may have nothing to do with you personally. Some common reasons include:
- They have already guaranteed several other members.
- Their available deposits are insufficient to support another loan.
- They are uncomfortable with the loan amount.
- They are worried about the risk if you fail to repay.
- They have personal financial commitments that limit their ability to guarantee another member.
Having an honest conversation can help you understand their concerns.
Avoid Taking It Personally
A guarantor carries financial responsibility if the borrower defaults.
For that reason, many SACCO members carefully evaluate every request before agreeing to guarantee a loan.
Respect their decision and avoid damaging personal or professional relationships over a financial matter.
Explain the Purpose of the Loan
People are often more willing to support a loan when they understand its purpose.
If the funds are intended for:
- Expanding a business.
- Paying school fees.
- Purchasing productive assets.
- Building a home.
- Medical treatment.
Explain how the loan will be used and how you intend to repay it.
Transparency helps build confidence.
Demonstrate Your Ability to Repay
Potential guarantors want reassurance that they are unlikely to be called upon to settle your debt.
You can strengthen their confidence by showing:
- Stable employment.
- Regular income.
- Business performance.
- Previous successful loan repayments.
- A realistic repayment plan.
The stronger your financial position appears, the easier it may be to secure guarantors.
Reduce the Loan Amount
Sometimes the requested loan is simply too large.
Lowering the amount may reduce the level of guarantee required and make it easier for members to support your application.
You can always apply for a larger loan later after increasing your savings or repaying the initial facility successfully.
Ask Different Eligible Members
If your first choice declines, consider approaching other eligible members.
Choose people who:
- Know you well.
- Understand your financial discipline.
- Trust your ability to repay.
- Have sufficient deposits to act as guarantors.
Avoid pressuring anyone into guaranteeing your loan.
Explore Alternative Loan Products
Some SACCOs offer loan products that have different qualification requirements.
These may include:
- Salary-backed loans.
- Emergency loans.
- Asset financing.
- Short-term loans.
- Mobile or digital loans.
Some of these facilities require fewer or no guarantors.
Speak to your SACCO’s loans department about available options.
Strengthen Your Savings
Higher deposits increase your financial standing within the SACCO.
Members may be more willing to guarantee your loan if they see that you have consistently built your savings and demonstrated commitment to the cooperative.
Improved savings also increase your future borrowing limit.
Maintain a Good Repayment History
If you have successfully repaid previous SACCO loans, remind potential guarantors of your track record.
A history of timely repayments demonstrates responsibility and lowers the perceived risk.
If you have previously defaulted, work on rebuilding trust before seeking larger loans.
Discuss Options With Your SACCO
Your SACCO may have alternative arrangements for members facing guarantor challenges.
Depending on its lending policies, the SACCO may recommend:
- Different loan products.
- Partial guarantees.
- Additional security.
- Loan restructuring.
- Lower initial borrowing limits.
The loans office can guide you on the most appropriate solution.
Common Mistakes to Avoid
When guarantors decline, avoid making decisions that could worsen the situation.
Common mistakes include:
- Becoming angry or confrontational.
- Hiding information about the loan.
- Pressuring members to sign.
- Applying for an amount beyond your repayment ability.
- Seeking expensive loans from unregulated lenders out of frustration.
Maintaining professionalism and patience will serve you better in the long run.
How to Increase the Chances of Finding Guarantors in the Future
Building trust within your SACCO community can make it easier to secure guarantors when you need them.
You can do this by:
- Saving consistently.
- Repaying loans on time.
- Participating actively in SACCO activities.
- Building positive relationships with fellow members.
- Being financially responsible.
Members are generally more willing to guarantee borrowers who have demonstrated reliability over time.
Author: Andrew Walyaula
Andrew Walyaula is a seasoned multimedia journalist. Email: [email protected]
