Nowadays, getting a quick loan in Kenya is easier if you have a car with a logbook. Most logbook loans in Kenya take about a day to process, making them an attractive option when a financial emergency strikes.
What most Kenyan car owners are either not aware of or are just ignorant of is the risk that comes with such a decision. Mark you, I’m not just talking about the probability of losing your car after an undervaluation but also the financial impact of such a decision on your life.
With so many lenders charging an array of upfront fees disguised as valuation, log book search, car tracker, and processing fees, you have to wonder if these loans are worth it. And if they aren’t, what’s in for you?
I’ll discuss those issues to help you make a better financial decision. Here’s what to look forward to learning about logbook loans in the country:
- What are logbook loans?
- How do long book loans work?
- What should you know about logbook loans?
- Are logbook loans worth it?
- What should you go for instead?
In a rush? Below is a summary of the offers by the leading logbook loan companies in the country:
Top 12 Logbook Loans Companies in Kenya
|–||Lender||Expected Amount||Repayment Period||Monthly Interest||Car Valuation|
|1||Umba||Up to 50% of the car’s value||3 months – 2 years||2.49%||–|
|2.||Mogo||Up to 75% of the car’s value||6 months – 5 years||2.5%||–|
|3.||Hakki Car Finance||Up to 50% of the car’s value||3 months – 2 years||3.1%||Ksh 3,000|
|4.||Ngao Credit||Up to 60% of the car’s value||3 months – 2 years||3.5%||Ksh 3,000|
|5.||Izwe||Up to 75% of the car’s value||6-18 months||3.5%||Ksh 3,600|
|6.||Watu Gari||Up to 50% of the car’s value||3 months – 2 years||3.5%||–|
|7.||Mwananchi Credit||Up to 60% of the car’s value||3 months – 2 years||3-6%||Ksh 4,000|
|8.||Momentum Credit||Up to 60% of the car’s value||3 months – 2 years||4%||–|
|9.||Platinum Credit||Up to 60% of the car’s value||3 months – 2 years||4%||Ksh 600|
|10.||Kifedha Credit||Up to 50% of the car’s value||3 months – 2 years||5%||Ksh 3,000|
|11.||My Credit Limited||Up to 60% of the car’s value||3 months – 2 years||5%||Ksh 3,500|
|12.||Bashy African Limited||Up to 50% of the car’s value||1-12 months||10%||Ksh 2,500|
What Are Logbook Loans?
Logbook loans are secured loans offered against your vehicle’s logbook. Though you don’t surrender the car to the lender, you must submit the logbook to the NHTSA for joint ownership amendment. That means the lender becomes a joint vehicle owner from when you get the loan to when you pay the last coin.
It’s worth noting that the logbook must be in your name, lest you won’t get the loan. Another important note is that the lender can sell the car to get their money back if you default on payment.
How Do Logbook Loans Work?
As I mentioned, logbook loans use the vehicle’s logbook as security, and your name must be on the logbook to secure a loan. The lender generally offers you a loan amount up to a certain percentage of your vehicle’s value.
Depending on the lender, you could get up to 50-75% of your car’s value. The lender determines the rates, and they employ ‘Forced Sale Value,’ which means the amount they may be forced to sell the car if you default in payment. So, you won’t get the actual value of your vehicle from the estimate.
Like other emergency loans, logbook loans attract monthly interest, which, as you can see from the top lenders in the above table, is about 2.5-10%. In addition, other charges are also involved, including logbook search fees, car tracker fees, comprehensive insurance, and processing fees, to name a few.
Until you pay the last coin you owe the lender plus the interest, you can’t sell the car. So, even though you’ll be driving it, you’ve limited power over it.
What Should You Know About Loans On Logbook in Kenya?
Before you can run to get a logbook loan, you should know what you are getting into. Here are some essential things you must know beforehand.
1. Not all vehicles qualify for logbook loans in Kenya
Different lenders have different eligibility requirements, but most require your car not to be older than 15 years.
The other note is that while you can get a logbook loan on a private car, motorbike, or commercial vehicle such as a pickup or truck, you most likely won’t get it on a PSV like a Matatu (Nissan), bus, or taxi.
2. High fees are involved beforehand.
The lender imposes several fees upfront, which are, without a doubt, exorbitant. According to Business Daily Africa, most lenders charge Ksh 500 – Ksh 3,000 for logbook search, Ksh 2,000 – Ksh 5,000 for car valuation, Ksh 4,000 – Ksh 7,500 for car tracker installation, Ksh 1,400- Ksh 2,000 for tracker maintenance, 2-7% loan processing fee, among many other upfront charges.
So, you may end up paying up to Ksh 20,000 in upfront fees and still have to make up for the monthly payments and interest.
3. Monthly payments plus interest are expected
After paying the upfront charges, the lender expects you to pay down your loan every month. So, you’ll need to make monthly payments without failure, plus the applicable interest. The table I shared shows that the monthly interest is about 2.5-10%, depending on the lender.
4. Penalties are involved for missing deadlines and sometimes for paying the loan too soon
The lender expects you to pay the loan monthly and sometimes weekly without failure. If you don’t, then they’ll penalize you, which means paying more than usual.
What surprises me is that some lenders will even penalize you for paying the loan too soon without notifying them beforehand. It seems these lenders want you to continue paying the high interest and do not want you to leave them soon. If that’s not a debt trap, I don’t know what is!
5. What you get is not a true reflection of your vehicle’s worth
As shared earlier, the lender estimates your car’s value using the ‘Forced Sale Value’ formula. That is the amount they could be forced to sell off the vehicle if you default in payment.
Noticeably, the value is much lower than your car’s true worth. And since the lender outsources the valuing agent, you can expect the price pendulum to swing to their side more.
6. The lender pries into your privacy
You submit the car’s logbook and your personal information upon application for a logbook loan. That includes your ID, KRA pin, passport photo, and bank statement. So, the lender will have a lot of information about you, which compromises your privacy somewhat.
7. You could lose your vehicle
The moment you sign the agreement, you give the lender the right to sell off your car when you fail to repay the loan. Frankly, no one buys a car so that they can lose it for cheap. You want to keep your vehicle as long as you can, and if you must sell it, you want the best price, and a logbook loan is far from that.
8. You could end up on CRB’s Blacklist
Though these lenders don’t perform CRB checks on you when applying for a logbook loan, nothing stops them from forwarding your details to the credit watchdog when you fail to pay the loan. They can do it even after selling off your car.
Ultimately, you may have a bad credit record that can affect your eligibility for public service jobs and credit by other lenders.
Are Logbook Loans Worth It in Kenya?
Yes, logbook loans have a few merits worth highlighting. For instance, they are easy to access and are fast-processed. The amounts are also flexible since you can get up to 50-75% of your car’s estimated value, and no one dictates how to use the money.
But wait a second;
Have you considered the upfront fees, repetitive monthly interests, and regular payments? How about the outrageous car valuation?
Generally, you must ask yourself these questions if you want to know if a logbook loan is worth it or not:
- Do I have to borrow?
- Am I aware of the costs involved?
- Do I have a repayment plan?
- Can I beat the deadlines?
- Am I willing to lose my car?
- Is the lender transparent with the terms?
- Have they provided all the needed information before I get the loan?
- Are the customer reviews about the lender good?
- Is the lender reliable?
If the answer is NO, which I think is in most cases, then the logbook loan is not worth it. Frankly, so much is at stake that makes this loan not worth it. Let’s see what you can do instead.
What Should You Go for Instead?
There’s no doubt that logbook loans in Kenya are not a solution. In fact, they are a debt trap that should stay away. That, however, doesn’t mean that you can’t do anything.
Let’s go to the root of the problem;
Most of us would get a loan against our much-loved car because of a financial emergency. It could be something like an unforeseen medical expense, an unplanned travel expense, an abrupt relocation, or something else.
Well, have you considered setting up an emergency fund? Its job is to take care of these unforeseen events.
The other thing you can do is to develop a saving culture. Learn to save for what you cannot afford.
Some of us make large purchases or commit to enormous expenses impulsively just because we have a logbook. That shouldn’t be the case. You can save up for it and avoid risking your car.
Lastly, you can think of starting a side hustle to complement your principal source of income. In doing so, you’ll have enough to cater to your unpredictable needs and wants.
More importantly, it’s best to learn about money, and that’s where we come in as Cent Warrior. We have a lot of financial goodies on our online shop that you can use to study to manage your finances, get out of debt, start a side hustle, and grow financially.