Things to Look Out for When Comparing Logbook Loans

If you are going for a logbook loan, you want to make sure that you land the best deal ever from your lender. After all, a loan always comes at a price, but the lower the total cost of credit, the easier and faster it will be to pay back the loan.

However, even with the cost in check, finding a suitable logbook lender is not always easy - because there’s a lot more to keep in mind when deciding which lender to borrow from. To make sure you choose the right logbook loan for your situation, here are things to look out for when comparing logbook loan offers.

Do You Mind Paying Upfront Fees

Typically, there are a few upfront charges that you might need to pay before you are qualified for a logbook loan. Such charges include:

• Valuation. Although there is a fair share of logbook loan lenders who will not charge you a valuation fee and will instead absorb it, most will still require you to pay this upfront. 
• Logbook search. A lender will conduct a search on the vehicle ownership and registration on National Transport Authority (NTSA) TIMS’s portal before they qualify you for a loan. Some will charge the fee upfront while some will choose to absorb it. 
• Car tracker. Lenders will need you to have a car tracker installed upfront if you do not have it already.
• 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 qualifying for a logbook loan.

Before you settle on a lender, you need to understand their terms and decide if you are comfortable with the necessary upfront fees. 

NOTE I: Some of these costs such as valuation, spending on the lender, are non-refundable regardless of whether you end up qualifying for a loan or not. 

NOTE II: Some lenders will not charge you some of the fees such as valuation. Others will require you to pay off-pocket for the fees upfront before the borrowed amount can be disbursed. Others will give you the option of adding the fees to the principal amount and charge you interest on them as their repayment is factored into the monthly (or weekly depending on the agreement) repayments

NOTE III: Upfront fees may be a big factor when deciding on which lender. For example, some lenders will charge you a monthly fee for the car tracker which may, in some cases, significantly increase the total cost of the loan. Some lenders will have fees such as ‘application fee’, ‘membership fee’, ‘CRB check fee’, ‘Insurance fee’ that other lenders may not have. 

The Difference Between Market Value and Forced Sale Value of the Car

For logbook loans, lenders specifically use the Forced Sale Value (FSV) of the car - which, unlike regular valuation, determines the sale price the vehicle can reasonably go for if it was put on sale for a period too short to allow for proper marketing. 

Think of the FSV as the amount the car would fetch if it were sold at an auction based on a short time of between 60-90 days which would typically attract a smaller pool of buyers.

So before settling on a lender, ensure you understand what this means and how it will affect your loan overall. You will typically have no control over how your vehicle will be valued - but it is possible to get different valuations from different lenders, which if you are looking for the highest amount possible will be a factor for you when comparing lenders. 

The Percentage of the Car Value They Will Actually Finance

Also, the other thing to look out for when shopping for a logbook lender is the amount of loan you are likely to get approval for. 

Typically, logbook lenders will approve a loan equivalent to a percentage of the vehicle’s FSV value, usually between 50% and 80%. 

For instance, if your vehicle’s FSV is Ksh500,000, and your lender finances 50% of the FSV, you will get approved for only Ksh250,000. If you need more than this amount, you might need to settle for a lender who offers higher financing. 

Also read: Things to Consider Before Taking a Logbook Loan in Kenya

Interest Rates

Typically, logbook loan interest rates range from a low of 1.6% a month to a high of 10% on either a flat rate or reducing balance interest structure. The interest rate can vary within this range depending on the lender and their risk profile assessment.

But this notwithstanding, it is crucial to put into consideration other fees and charges instead of considering only the interest rate number. Frequently, additional costs that a lender includes on the fee structure might end up making a low-interest loan more expensive than a loan with a higher interest rate.  

Thankfully, we have made the whole process easier for you. On the Money254 Logbook Loan Comparison page, you can easily and quickly compare the logbook loan lenders available in the market to help you make the right choice. 

Hidden Charges

Often, slick advertising will promise you attractive terms, such as a high loan amount and low-interest rates, but not mention other fees that may be found in the fine print. 

Common examples of such fees include: 

• Origination fees (fees for taking out a loan), 
• Commissions
• Late charges
• Loan application fees, or 
• Disbursement fees (fees charged when you have received your loan). 

Not being aware of such extra fees that might add up to the loan expense can cause your loan to be more than you are able to pay back comfortably. 

Also read: Predatory Lending in Kenya: Don’t Be a Victim

Other Terms and Conditions

Terms and conditions cover everything, including:

• Payment period/Loan tenure 
• Due date (is it weekly, monthly, or otherwise) 
• Early or lump-sum payments terms, etc. 

For example, the exact payment period that’s best for you depends on your own financial circumstances and your capacity to pay, so find a lender that best matches your needs.

In addition, check the terms in case you can make lump-sum payments towards your loan or choose to pay it off early. A bonus from your employer or unexpected extra cash might allow you to make those early payments, but some lenders may charge early exit fees.

Your Credit History

Before you apply for a logbook loan, check your credit history. Do you have outstanding loans, or have you defaulted in the past? 

Although some logbook lenders forego credit checks, some will check your credit and payment history, which will affect your loan terms. 

Also read: 6 Deadly Sins When Taking a Logbook Loan

Ask Questions

Last but not least, do not forget to ask questions. If in doubt, always get confirmation from your logbook lender, and don’t leave anything to chance. 

Write them an email or a text, call them, and, where possible, sit down with them and ensure you understand right from the application process, what they offer, as well as any other details you might need during your loan process. 

WRAPPING UP

Taking time to compare logbook loan offers is vital, as some lenders offer significantly better terms than others. You don’t need to pay more to borrow than you need to. Hence ensure that you follow the above tips when you shop around for your logbook loan.

Our logbook loan comparisons page should be your first stop on your journey. We have done most of the work for you. You only need to log in to shop for some of the best logbook lenders in the country today.