Written by the Kopesha team · Last reviewed 23 September 2026 · No lender pays for these guides · How we write them
What security actually is
Security, or collateral, is something you name in the agreement that the lender may take and sell if the loan is not repaid. It lowers their risk, which is why a secured loan is usually cheaper and larger than an unsecured one.
The trade is straightforward and worth stating plainly: you are exchanging a cheaper loan for the possibility of losing a specific thing. Whether that is wise depends entirely on what the thing is.
What is usually accepted in Tanzania
Business stock and equipment. Vehicles, bajaji and motorcycles, with the registration card held by the lender. Land or a house, with a title or a letter of offer. Household goods — a television, a fridge, furniture. A guarantor, who pledges their own property or income on your behalf. And in group lending, the other members of the group.
Ask which of these the lender registers formally. A charge over land or a registered security interest over goods is a public claim, and it affects what you can do with that property until the loan is cleared — including selling it.
What the process looks like if you default
It is rarely sudden. Typically: a reminder, then calls, then a visit, then a formal demand letter with a deadline, and only then any attempt to take the security. Each of those steps is a chance to restructure, and the earlier you use it the more room there is.
For a licensed Tier 2 lender the law sets minimums. Under Regulation 41, mortgaged property may not be sold until sixty days after the lender has issued a written demand for the outstanding loan, and other security only after the notice your agreement provides. Before any sale the lender must appoint a registered independent valuer.
Ask, before you sign, exactly what the lender may do and what needs a court. Taking a pledged item from a business is not the same as entering a home, and a lender who is vague about which is which is a lender to be careful with.
Recovery is not free either. Valuation, storage, auctioneer's commission and legal costs are usually added to what you owe, so a debt of two million can be a debt of two and a half by the time an item is sold — and if the sale does not cover it, the balance normally remains yours.
Never pledge the thing that earns the repayment
This is the mistake that turns a difficult month into a lost business. The machine that makes the product, the bajaji that carries the passengers, the freezer that keeps the stock — take those away and the income that was going to repay the loan goes with them.
Where the asset is the loan's own purpose — asset finance for that same bajaji — the risk is unavoidable and understood. Pledging a working asset for unrelated money is a different decision, and a much worse one.
If somebody asks you to be their guarantor
You are not providing a character reference. You are agreeing to pay the debt if they do not, and the lender may come to you without exhausting every option with them first.
Before you sign: read the same schedule they read, ask what you would owe on the worst day, and ask what happens to your own property. Then decide as if you were borrowing the money yourself — because in the way that matters, you are.
A licensed Tier 2 lender must give a guarantor a written statement of the liability being taken on: the lender's name and address, the loan number, the borrower's name, the loan amount and the date the loan was granted (Regulation 55). If you have not been given one, ask for it before you sign.
Get the release in writing
When the last payment is made, ask for two things: a clearance letter saying the loan is fully settled, and the return of every document and item held as security. Collect the registration card, the title, the logbook — whatever they took.
Where a security interest was registered, ask for it to be removed from the register as well. People discover years later, when they try to sell, that an old loan is still recorded against their property — and by then the officer who could have signed it off has moved on.
Sources
This article is general information about borrowing in Tanzania. It is not advice about any particular lender, and the worked examples are examples only — not a quote or an offer from anybody.
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