Cheapest Logbook Loans in Kenya

Cheapest Logbook Loans

If you have been cash-strapped and in urgent need of a loan, you might have thought of putting your car on the line to get a Logbook Loans.

Logbook loans have risen in popularity over the years in Kenya with multiple lenders including banks and microfinance institutions offering this secured loan option. 

If you are considering putting your car as collateral to quickly access a loan for a personal or business need, you need to be armed with all the information you need to help you make an informed decision. 

This article works as a guide to give you all the essential information you need about logbook loans in Kenya. 

Also, if you want to compare logbook loans, we’ve got you covered. Look through our logbook loans product list above to compare some of the fastest and cheapest logbook loans available in Kenya today to make the right decision for you.

What Is a Logbook Loan?

A logbook loan is a type of loan that uses your motor vehicle as security – a car, van, tractor, or motorbike. It allows you to borrow an agreed amount from the lender against the value of your vehicle.

In return, the vehicle owner is temporarily transferred into joint ownership with the lender until you fully repay the loan plus interest. 

To secure the loan, you provide the lender with the vehicle ownership documents – the logbook. During the loan period, you can continue using the vehicle normally. 

However, a logbook loan should not be confused with a vehicle loan (asset financing). A vehicle loan is a loan that allows you to finance the purchase of a vehicle (if you can’t afford it or are not willing to purchase it in cash). In contrast, a logbook loan allows you to take a loan using an existing vehicle as collateral. 

Who Offers Logbook Loans in Kenya?

Logbook loans are offered by a wide range of microfinance institutions (MFIs) and are also beginning to be offered by some commercial banks. Many of these MFIs have branches all across Kenya. 

Advantages of Taking a Logbook Loan

There are many reasons why logbook loans are persistently gaining popularity currently. These include:

  • Accessibility. In Kenya, logbook loan lenders are currently sprouting up everywhere. So if you urgently need cash and have a vehicle, you just need to find a lender, check your eligibility, and your loan will be with you as quickly as possible – Some lenders process the loan within 24 hours.
  • Simple approval process. Your loan will be approved and processed swiftly with the correct requirements and documents. Most logbook loans in Kenya offer a 24-hour turnaround from application to approval. 
  • Flexible loan amount. The loan is based on the value of your vehicle, and you can therefore borrow as much as you need up to the value of the vehicle – depending on the lender. In general, the minimum loan size is as low as Ksh50,000  and the maximum for some providers goes to Ksh25M- depending on your car value. Usually, you can borrow somewhere between 50-80% of your car’s value. 
  • No credit check. For most loan types such as unsecured personal loans, a lender will typically use your credit history to determine your creditworthiness. However, for a logbook loan, the proof of ownership of the vehicle and the fact that it passes a valuation assessment that satisfies the conditions of the lender is enough to get you approved for the loan. Note that some lenders will, nevertheless, check your credit history. 
  • Use as you want. Unlike other loan types such as business loans, logbook loans do not have limitations on what the funds can be used for. You can use it to cover whatever costs you need to, provided you have the plan to repay it in full.

Considerations Before Taking a Logbook Loan

  • Think about what you need the money for. Logbook loans are helpful for taking advantage of quick opportunities such as buying land, etc., dealing with an emergency, or growing your business but before you decide to take a logbook loan, you should first think about why you need the money and what for.
  • High upfront fees. Some logbook loan providers may charge an applicant upfront fees that have to be paid before the loan is disbursed. Since these fees can significantly raise the total cost of the loan, it is important to do the math, compare options and only make a decision when you are confident of the facts. Other logbook loan providers charge no upfront fees, and instead have an application fee that is bundled into the loan amount. Call a Money254 agent and your agent can help you better understand the differences between the fee structures and what they mean to you.
  • The value of your vehicle.  The qualifying loan amount is pegged on a percentage of the vehicle’s forced sale value (FSV). FSV is the amount the car would sell at if needed to be sold. So 50% of FSV means if your car’s FSV is Ksh600,000 you can only get up to Ksh300,000.  
  • Repayment period. In most cases, the repayment period is determined by the lender. The lender might ask you for a weekly payment.
  • Penalty. There are penalties for missed payments. Also, you might get a penalty for clearing the loan too quickly without a prior discussion with the lender. 

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Fees Associated With Logbook Loans

In addition to the quoted interest rate to the loan, other common fees to have in mind include:

  • Processing Fee (2.5% and above depending on the lender)
  • Valuation (Charged upfront before the loan is approved. Note if the loan is not approved, the valuation fee is not refundable)
  • Logbook Search + Discharge (fees associated with the National Transport Authority (NTSA) search and transfer)
  • Car Tracker (this must always be fitted at the borrower’s expense)
  • Comprehensive insurance cover – if your car only has the basic third-party insurance policy, you will need to take a comprehensive cover at your own cost before you can qualify for a logbook loan. 

These are the common fees across all lenders, however, some firms have additional fees, such as legal fees.

Risks Associated With Logbook Loans

Although a logbook loan might come in handy when you need it, they carry a few risks and may not be your first option when you are looking to borrow urgently. The risks include:

They can be expensive 

Logbook loans may charge a higher interest rate than other personal loan types, potentially making them some of the most expensive loans in the market today. 

As such, you might need to dig a lot deeper in your pocket to repay the loan. 

That said, a logbook loan may be the only option for someone to get at least more than Ksh50,000 in under 24 hours if they do not have a relationship with a lender for a period of at least 6 months.

One of the quickest loan options is a digital loan. But the amounts start from as low as Ksh500 and take you a while to raise your limit. 

So, if you do not have a bank account with an appropriate balance for about six months, are not a Sacco member, do not have a big loan limit with a digital lender, etc, a logbook loan may be the fastest way to get a large amount of money. 

Loss of vehicle 

Like any other secured loan, the lender has the right to repossess the collateral in the event that you default on your repayments. This is because the minute you sign the loan agreement, you temporarily jointly own the vehicle with the lender. 

READ ON: Top 4 Banks With Cheapest Loans In Kenya

This means that the lender has the bill of sale to your car and the right to repossess the vehicle if you fail to repay the loan – If you miss payments for a predetermined number of successive months. 

If you feel like you are struggling to repay, you can always reach out to your lender and work with them on a repayment plan to avoid losing your car. 

Additional charges

The lender has the right to charge you a penalty if you miss a payment. This is to cover for the inconveniences of the repayments missed. 

To find out the rates for the penalty, ensure to carefully read the fine print on the loan agreement before you sign. 

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Written by The County Info

Amos is an experienced SEO expert. He has an interest in finance, IT, business ideas, and investments. He has also contributed to many global web portals.

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