Access to credit remains one of the biggest hurdles for many Kenyans, especially for individuals and small business owners who need quick financing.
Traditional financial institutions' loans often involve long approval processes, strict requirements, and substantial security, making them inaccessible for many. This has led to the rise of alternative lending solutions, such as logbook loans, which likely offer faster and more flexible access to funds.
A logbook loan is a type of secured loan that allows car owners to borrow money using their vehicle as security collateral while still retaining possession and use of it.
The lender then holds the car’s logbook, essentially its ownership document, until the borrower repays the loan in full.
Once the debt is cleared, ownership is transferred back to the borrower, allowing them to be able to use their logbooks for their desired financial decisions.
The amount one can borrow through a logbook loan usually depends on the car’s market value and the lender’s assessment criteria.
Most lenders offer between 60 and 80 percent of the car’s appraised value, meaning that a vehicle worth Ksh1 million could qualify for a loan of between Ksh600,000 and Ksh800,000.
“One of the most striking features of logbook loans is the speed of disbursement. In some cases, loans are approved and processed in as little as six hours. For many borrowers, that efficiency makes all the difference, especially in emergencies,” explained Levis Otieno, an expert in the financial sector.
“The mission is to empower clients to achieve financial freedom without unnecessary bureaucracy,” adds Otieno. “With logbook loans, clients can access funds quickly and securely, while continuing to use their vehicles.”
Pros and Cons
One of the major advantages of logbook loans is the speed of access. Unlike traditional financial institutions, which may take weeks to process a loan application, logbook lenders can disburse funds within a few hours or on the same day.
The required documents are also relatively straightforward and include the car logbook, national ID, KRA PIN, insurance certificate and a recent bank or mobile money statement.
Additionally, the repayment terms also tend to be flexible, depending on the lender, as borrowers can choose repayment periods ranging from a few months to a year or more.
Some lenders allow early repayment without penalties, which helps borrowers save on interest costs with the ability to also restructure the loans to suit individual cash flows, especially for business owners or self-employed individuals.
However, logbook loans can also carry significant risks. Since the car acts as collateral, failure to repay the loan can result in repossession. Therefore, as a borrower, it is important to evaluate your repayment ability before committing to a loan.
Interest rates on logbook loans can also be higher than those charged by traditional financial institutions due to the higher risk profile of unsecured or non-salaried borrowers.
The good news is that traditional financial institutions are regulated by the Central Bank of Kenya (CBK) by law, and the CBK determines lending rates, thereby eliminating the risk of high interest charges.
Credit sector experts often advise borrowers to read and understand the terms and conditions of a loan agreement, paying particular attention to the total cost of the loan, the interest rate, penalties for late payment and the lender’s repossession policy.
