Teachers have no allowance apart from their salaries, other professionals have different form of allowances which has made their economic conditions better than the teachers. Most teachers are suffering from economic hardship due to high interest rates of loans from financial institutions. Micro finance companies and other financial institutions are always chasing teachers to come for loan, agents of these financial institutions have been visiting school to school to lure teachers to take loan. They only tell the teacher our interest rate is three percent without explaining to the teacher the type of interest rate.
There are essentially three main types of interest rate: the nominal interest rate the effective rate, and the real interest rate.The nominal interest of an investments or loan is simply the stated rate on which interest payments are calculated. Compound interest is the addition of interest to the principal sum of a loan or deposit, or in other words, interest on interest. It is the result of reinvesting interest, rather than paying it out, so that interest in the next period is then earned on the principal sum plus previously accumulated interest. Compound interest is standard in finance and economics.
Agents of the financial institutions lure teachers to believe their interest rate is 2.5 or 3 percent without explaining further as to what type of interest rate. A rate of 3 percent is 36 percent, that is the three percent multiply by twelve months, with the compound interest they pay over 60% percent of the principal as interest.
A teacher who’s salary is not enough for him becomes poor when loan deductions set in. Financial institutions have been sending messages to teachers advertising mouth watering interest rates, Some loan fraudsters have also taking advantage to send messages to teachers, these fraudsters create a platform for teachers to submit the necessary documents for loan, others even request for teachers’ staff ID and password to access their mandate form as part of the requirements. The fraudsters later use the documents to take loan in the name of the teacher.
Teachers are targeted by the financial institutions just because it is save for them to retrieve their monies direct from the teachers payroll at the Controller and Accountant General’s office. Some years back teachers were rather begging the financial institutions for loan, the loan collateral was difficult to be met by teachers. Currently the only collateral the banks need from the teacher is the pay slip, mandate form and affordability. The mandate form is generated from the electronic pay slip to authorize the financial institutions to make deductions from the payroll. The electronic pay slip has been structured in such a way that employee’s deductions should not be less than half of the net salary, the affordability generated from the electronic pay slip serve as evidence to determine whether the remaining affordability can qualify employee to take additional loan.
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