If you don’t have enough money and urgently need a loan, you might have considered using your car to get one. In Kenya, logbook loans have become more popular over time, and many lenders like banks and microfinance institutions provide this type of loan where your car acts as security.
What is a logbook loan?
A logbook loan is a form of secured lending in Kenya. It’s a type of loan that uses your car as security. You borrow an agreed sum of money from a lender against the value of your vehicle (the asset). They then temporarily take ownership of your car until you pay the money back.
A logbook loan is a secured loan. This means that the money that you borrow is secured against your property, in this case, your vehicle. This offers the loan provider a level of security, which means they may be willing to lend to you even if you have bad credit.
The borrower transfer ownership of their car to the lender as security for a loan. So, the lender owns your vehicle until you pay back the loan. However, while making repayments borrowers keep possession of their vehicle and continue to use it. This means the lender now temporarily owns your vehicle. When the logbook loan is repaid in full, the borrower regains ownership of their vehicle.
How logbook loans work
With logbook loans you can borrow depending on how much your vehicle is worth. Although some firms will only lend up to half of your vehicle’s value.
When you take out a logbook loan, you will usually be asked to hand over your vehicle’s logbook or vehicle registration document. This is why it is given the term, ‘logbook loan.’ These documents prove you are the registered keeper of the vehicle.
Logbook loan lenders have the right to use bailiffs to seize your vehicle if you don’t meet repayments. But most lenders won’t do so and won’t sell the vehicle until you have fallen behind with several repayments.
The lender is normally entitled to sell your car to recoup their money if you do not keep up with your repayments. If they do not receive enough money to cover the agreed loan amount, then they could take you to court to recover the rest.
By law, they must send you a default notice first, giving you 14 days to make up any missed payments.
How much can you borrow?
The amount of credit that you can borrow depends on the value of your vehicle. Some logbook lenders will ask you to get it independently valued. Adding extra cost on the load applied.
Loans are typically offered for Ksh 50,0o00 – Ksh 10,000,000 and you can apply to borrow up to 80% of your vehicle’s value.
How long could it take to repay the logbook loan?
Most logbook loan terms are payable over a 52-week period, although you are usually entitled to pay it back earlier.
In some cases, you may only be repaying the interest charges until the last month of your contract.
What to consider before getting a logbook loan
Is your car eligible?
Can you risk losing it if you don’t keep up with the repayments?
Is the lender regulated?
What are the terms of your credit agreement?
How much is the interest on the loan?
Can you afford the repayments?
Is there a cheaper, less risky way that you can borrow?
Some of the best logbook loans providers in Kenya
- Mwananchi Credit
- MOGO Kenya
- Auto Advance Logbook Loans
- Jijenge Credit Limited
- FinCredit Limited
- Bidii Credit Limited
- Platinum Credit
- Momentum Credit
- Citizens Credit Limited
- Ngao Credit Limited
Before borrowing, please evaluate your ability to repay the loan. Also, look at the interest rates and fees carefully.
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