What does the Option of RenMoney School Fees Loan offer Struggling Parents?

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Wednesday, October 05, 2016 01.07 PM / TheAnalyst

As schools resume the new academic session, only few have managed to avoid the ‘new normal’ of an increase in the number of families unable to meet their obligations.

The options for financing private education is limited and far in between. We have however observed an increasing number of schools pushing the RenMoney Loan offer to students/families as a way out.

In this piece, our research team analysis the option/offer to make access to school fees “loans” easier and faster for parents and guardians.

The Current Situation and Drivers
As economic hardship bits harder, income earners, particularly the parents, continue to device reasonable ways and reliable options of meeting obligations and sustaining status quo ante- The salary-cut, delay in salary  and outright job loss as a result of current economic recession have made it more difficult for majority of income earners to meet concurrent obligations as at when due.

As consumption is constant, so is children school fee, which has put so many households under pressure while many parents considered borrowings to pay children' school fees. This had consequently created market for payday loaners and cash advance industry at large.

Understanding the nature of loans, the interest involved and how to survive it is very key. For instance, you must make sure you are not using short-term loans for long term projects because of the High-interest rates, your debt-to-income ratio should not be more than 30% after you have considered all other outstanding loans and your source of repayment must be reliable, so you won’t have reason to put yourself in bigger mess.



The RenMoney Loan Offer and Criteria
According to a statement, parents who meet RenMoney’s credit criteria can enjoy lesser interest rates and faster processes on school-related expenses such as tuition, registration, books, lunch, sports, etc. for their children or wards if the school they attend is in partnership with RenMoney.

The Chief Executive Officer, RenMoney MFB Limited, Graham Lee, said RenMoney was commitment to providing simple money solutions to Nigerians.

He said, “Getting fast access to cash should not be a problem especially when it affects the future of your child.

“RenMoney is bridging that gap and providing an enabling environment between school administrators and parents in terms of fees so that children can stay in school and learn.”

A Hypothetical Case – Doing the Numbers
A single parent with fixed monthly income of N150k, has a child (11yrs  old) in private school, Basil International, around Ilupeju Lagos area is considering the option of approaching microfinance bank to borrow N100k to complete her son’s school fees. The boy, a returning student into Js3 class would be paying around N320k for his first term.

On a same vein, my little nephew, a returning Js3 student of Wellsprings School, around Omole Phase II, Isheri, Lagos would be paying around N310k as his first term school fees. His dad just got new job, he has not paid, but his is considering borrowing from any available lender.

Also, a result of delay in salary, a friend approached pay-day loaners to borrow 240k to register his daughter as new intake into high school, Dee Unique, around Omole Phase II Area, Lagos.



According to this table, the single parent with 150k income has better chance and financial posture to secure the short-term loan.

What other Options/Products Exist?
·         A loan from family, friend colleague would be much better since it attracts zero interest

·         You may consider finding cheaper school with same quality

·         You may approach the school to structure the payment to meet the timing of your cash-flow

·         If you are out-of-job person, you may hire home-tutor for your kids while you are in search of new stream of income

What happens in Case of a Default?
In case of default, the guarantors would be held responsible or if it was a collateralized loan, the borrower may forfeit the collateral.

Conclusion
It is advisable to explore other options first before embarking on borrowing from micro-finance banks or pay-day loaners

Related Links
1.       RenMoney

2.      School Fees Loan - RenMoney

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