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When Does Taking a Logbook Loan Make Sense?
When Does Taking a Logbook Loan Make Sense?
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When Does Taking a Logbook Loan Make Sense?

Farah Nurow
March 21, 2023

Logbook loans have gained significant popularity in Kenya due to their accessibility, making them a go-to option for car owners needing consumer and emergency loans. Despite the high application fees and interest rates, some car owners prefer them over other types of loans. 

However, logbook loans have risks, including possibly losing one's car. While they make sense for anyone with a car, they may not suit every situation. Therefore, evaluating your needs before taking out a logbook loan is essential. 

As with any financial decision, you should consider all available options and choose the best one that fits your needs and financial situation.

With that in mind, when does taking a logbook loan make sense? 

This article will explore six scenarios when you can consider logbook loans in Kenya.

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

When You Already Have An Existing Loan and Need Quick Cash

Getting a loan when you have an existing loan can be challenging. Traditional lenders like banks and Saccos look at your credit history to determine your eligibility. If they notice you have an existing loan, they will measure it against your income to determine your debt-to-income (DTI) ratio. 

If your DTI exceeds 35%, they will likely deny you a loan. For instance, if you earn Ksh80,000 but spend Ksh30,000 servicing loans, you will have trouble finding a lender.

However, logbook lenders will often not consider your DTI when borrowing and will loan you money if you can convince them of your ability to pay. You can get as much as you qualify for.

Logbook lenders can overlook your DTI as you will put your car as collateral for the loan. Your car will act as security, and in case you default, they can repossess the car and sell it to recover their money. This feature also makes logbook loans a solid alternative if you want to consolidate your loans.

While logbook loans can be handy when you have an existing loan and need quick cash, you should be careful when borrowing. Ensure you have a solid repayment strategy before applying and service your debt in time if approved. 

Read Also: Break the Cycle: 7 Simple Ways to Dig Your Way Out of Debt

When You Need Cash Fast and in Large Amounts

Logbook loan lenders evaluate your vehicle’s forced sale value to determine how much you qualify for. Forced sale value refers to the amount your car can sell for following a repossession at an auction. The forced sale value is typically lower than the vehicle's market value.

Most lenders can outright offer you a 10% - 80% loan of your vehicle's value. For instance, if you have a 2015 Toyota Fielder with a forced sale value of Ksh1M, you can qualify for any amount between Ksh100,000 and Ksh800,000. 

While you can qualify for large amounts using your car, that doesn’t mean you should take as much as you want. Borrow as much as you need or as much as you can comfortably pay back. Remember that the loan isn’t free. The more you borrow, the higher the cost and your chances of defaulting.

Read Also: How to Avoid the Trap of Consumer Debt

When You Need Cash But Have Poor Credit

Getting a loan when you have poor credit or are blacklisted by the CRB is challenging. Most lenders, especially banks, Saccos, and digital lenders, often rely on CRBs to determine your creditworthiness. They will be hesitant to lend you if you have a default history. And if they consider your case, they might require collateral plus a cosigner.

Logbook loan lenders will often consider your case depending on the reason for poor credit and if you have rectified it. For instance, if you once defaulted but managed to get clearance from CRB, you can get a loan. Additionally, they will loan you if the amount or reason for your default isn’t very significant.

You should, however, keep in mind that poor credit might still hurt your loan application in multiple ways, including:

  • The amount you receive - The lower your creditworthiness, the less you receive.
  • High interest - Despite offering your car as collateral, a lender will still consider you a high-risk borrower, which might hurt your negotiation power. They will likely charge you higher rates.
  • Strict terms - The terms of your loan will be less friendly if you have poor credit. For example, a lender might require you to service your loan weekly instead of monthly.

Read Also: How to Check Your CRB Report and Understand It

When You Need a Loan But Have No Credit History 

Mr. Ouma, a 36 years old local businessman who imports cereals from neighboring countries and sells at farmer's markets, has never taken a formal loan. When he’s cash-strapped, he usually relies on his family and friends, who always come to his rescue. However, earlier this year, he was in a predicament that led to huge losses, and he couldn’t count on them.

One of his employees made a mistake when storing his cereals. When it was time for the products to go to market two months later, Mr. Ouma found that his storage unit was infested with fungi that attacked and spoiled everything. He lost almost Ksh500,000 worth of produce.

While he could have counted his losses and started fresh, that wasn’t an option today. His customers had already made their orders, and they expected him to deliver. Snubbing them could hurt his business in the long run. Mr. Ouma needed money, and he needed it first.

He contacted his networks, but no one had the Ksh500,000 loan he needed. He approached some local banks, but none could lend him as he had no credit history. Most lenders will want to see you have a history of paying back debt, but if you have never taken a loan, they won’t find any they can refer to.

When he thought he was out of options, one of his friends suggested he take a logbook loan. Mr. Ouma owns a 2013 Mitsubishi FH worth Ksh2.2M. He decided to use it to secure financing and save his business. Even without a credit history, he secured a Ksh500,000 loan from one logbook lender within a week.

A logbook loan might suit your needs if you are like Mr. Ouma and need a loan but don’t have a credit history. 

Read Also: 7 Devastating Effects of Financial Instability you Must Know

When You Have an Emergency Expense and No Other Financing Options

Your options are usually limited when you have an emergency and need money fast. Applying for personal or other types of emergency loans can take time, sometimes days to weeks, depending on the amount you need. This can be gravely inconvenient.

But if you have a car and the logbook is in your name, you can apply for an emergency loan and get approved within a day. The process is simple. All you need to do is apply online through a lender's website or visit an office. Your application will be processed, and the lender will send you to an appraiser to determine the value of your car. 

Once this is done, you complete the paperwork, agree to the loan terms, and the lender will commerce the NTSA in-charge process. All this can take a few hours; by the end of the day, you will have your money in your account. This fast approval makes logbook loans a good option during emergencies when you need money quickly.

Always ensure you have read the lender's requirements on their website to make the process faster. Before applying, ensure you tick all the boxes. 

Read Also: How to Waste Loan Money in 8 Simple Steps

When You Need a Short-Term Loan, You Can Repay Quickly 

Most logbook loans have a tenure of 3-24 months. However, you can negotiate with your lender to repay it faster within a month or two. These attributes make logbook loans attractive for anyone looking for a short-term financing option. 

Logbook loans make sense for you if you have a financial fix but don't have access to your money. You may be dealing with a delayed salary, waiting for a check to mature, a business deal to go through, or you want to avoid the loss of liquidating an investment. 

But before you take a logbook loan, you should be 100% confident of your repayment ability. Anything can happen, and if things don't go as planned, you could default, leading to paying extra changes or, worse, losing your car. When applying for a short-term loan, always have a backup plan to protect yourself. 

Read Also: 10 Warning Signs You Are Not Ready to Take a Loan


Logbook loans are easily accessible, and they can seem suitable for every little financial hiccup you face. But they are not. When applying for any type of loan, you need to have a solid plan for spending the money and how to repay it. While logbook loans can help you during emergencies, they can lead to more financial troubles when misused. 

To avoid all this, always ensure that you borrow money responsibly. This means ensuring that a logbook loan is the right type of loan for your needs, not borrowing more than you need, and understanding the cost of the loan. If you don't understand the terms or the fees the lender charges, consider getting help before committing yourself. 

Farah Nurow is an experienced Content Writer who enjoys writing creative and educative articles meant to provoke readers' thoughts. He loves sunny weather and thick books. You can connect with him on LinkedIn.

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