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Logbook Loans
January 18, 2024
You can now directly apply for the newly-launched Umba Microfinance Bank logbook loan via Money254, Kenya’s premier financial marketplace.
This is after the two institutions signed a partnership agreement that allows car owners in Kenya intending to borrow funds against their logbooks to have a seamless application process.
As a microfinance bank regulated by the Central Bank of Kenya (CBK), Umba’s products are expected to enhance competition in the Kenyan logbook loan market, offering borrowers a wider choice and competitive pricing.
The maximum amount one can qualify for the Umba Logbook Loan is Ksh1 million while the minimum amount one can apply for is Ksh100,000.
The Umba Logbook Loan is offered at a minimum monthly interest rate of 2.49% per month.
This applies to logbook loans with a tenure of 24 months.
Umba Logbook Loans that have a tenure of 18 months attract a 2.75% interest rate per month while those that have a tenure of 12 months attract a 2.99% interest rate per month.
If you opt for the 12-month logbook loan, the minimum tenure allowed is 3 months while 12 months is the upper limit.
For the 18-month logbook loan that attracts a 2.75% monthly interest rate, the minimum tenure is 13 months and maximum tenure is 18 months.
The 2.49% monthly rate applies to loans that have a minimum tenure of 19 months and a maximum of 24 months. This is also the longest tenure for the Umba logbook loan.
Like any other logbook loan, the amount you can borrow is determined by the car you offer as collateral. To qualify for the Umba logbook loan, you must own a car that is not older than 15 years. As of 2023, you must have a car whose year of manufacture is 2008 and below (2008-2023).
Umba finances up to 50% of the car’s forced sale value. The forced sale value differs from the actual value of the car. It is the amount the vehicle can fetch if it was to be put up for sale for a period that is not long enough to allow for sufficient marketing.
So, for example, if the valuer determines that your car is worth Ksh700,000, the forced sale value - the amount it can fetch in a quick sale - could be determined to be, for example Ksh600,000 - meaning the maximum loan amount you can qualify for with Umba Logbook Loans would be Ksh300,000 i.e. up to 50% financing.
The concept of applying the forced sale value when determining the amount a potential logbook loan borrower can qualify for is a standard across the entire logbook loan market in Kenya and beyond.
Beyond the monthly interest rate, Umba charges a one-time 2.5% processing fee. This is charged against the loan principal amount.
For example, if you apply and get approved for a Ksh200,000 loan, the processing fee is Ksh5,000.
This fee is capitalised i.e added to your loan amount. In the example given, the total loan becomes Ksh205,000 even though Ksh200,000 is disbursed to you.
This can be great for anyone who may not be able to raise the processing fee at the point of applying for the loan. Capitalisation also allows one to get the exact take-home amount they applied for as opposed to deducting the processing fee from the amount to be disbursed.
In the example above, if the processing fee was to be deducted from the amount to be disbursed, you would receive Ksh195,000.
The second one-time fee is the credit life insurance fee which is charged at 1.75% of the loan amount. In the example above, the credit life fee would be Ksh3,500.
Credit life insurance is a type of insurance cover that ensures in the unfortunate event of the untimely death of the borrower, the outstanding loan balance is paid. You do not leave any debt for your loved ones to deal with.
The third one-time fee when applying for the Umba logbook loan, is a Ksh2,500 valuation fee. This, however, is reimbursed back to you after you qualify for the loan and receive your disbursement.
Umba does not charge any disbursement, valuation, car tracker, or NTSA logbook in-charge and discharge fees.
Umba Microfinance Bank Logbook Loans are offered at a monthly interest rate of between 2.49% and 2.99% depending on the loan tenure as discussed above.
This is a fairly lower monthly rate when compared to logbook loans offered by microfinance institutions that range from 3.1% to a high of 10% per month.
However, note that Umba is a Microfinance Bank regulated by the CBK. A microfinance bank is a deposit-taking institution, so you can have a current account, savings account etc. but a Microfinance Institution (MFI) is a credit-only institution that is not under the supervision of the CBK.
Both institutions types however target the same customer type i.e. groups typically excluded from traditional banking. The logbook loan products from these institutions are, as such, comparable as alternatives where a customer may use the interest rate as a decisioning factor.
Umba only charges a 2.5% loan processing fee and a 1.75% credit life insurance fee.
Notably, although the valuation fee is charged upfront, it is given back to the customer after the logbook application has been approved. Most lenders charge a non-refundable valuation fee. Note, however, if your vehicle fails the valuation, the valuation fee is not refunded.
Umba also stands out for absorbing some of the most standard upfront fees in the logbook loan application fees. This is quite unique in the Kenyan market where applicants often cite the high upfront fees as a challenge when applying for logbook loans.
The charges that are paid by Umba and not transferred to the customer include:
Umba stands out because the industry practice is to have these fees paid upfront by the customer, while some lenders capitalise them when issuing the loan. Some of these fees can be quite significant.
For example, most lenders charge a monthly fee for the tracker, which averages Ksh2,500 per month. For a 24-month loan, the tracker fee would be Ksh60,000.
If you are formally employed with a payslip or have a business that is formally registered and has a registration certificate, you can qualify for the Umba Logbook Loan.
You will qualify too if your vehicle is for personal use not commercial or being used as a PSV such as in the taxi-hailing business. Note, there are specific loan products that target PSV car owners, compare here.
If your vehicle year of manufacture is from 2008 onwards, then you are eligible for the Umba Microfinance Bank Logbook Loan subject to other eligibility factors.
Finally, Umba Microfinance Bank has only one branch in Nairobi. This means that if you are within the Nairobi Metropolitan Area, you can easily access the branch to complete the application process. If you are further from the Nairobi Metropolitan Area, you will need to drive to the Umba branch in Nairobi to complete the process.
The Umba Logbook loan has a number of use cases, particularly because of its fast turnaround time of about 2-3 days. Examples of use cases where the Umba Logbook Loan can come through include:
These are some of the common use cases for the Umba Logbook Loan but based on the nature of the product, you can use your funds for whatever personal needs you have. There are no restrictions on the purpose for which you want to deploy your Umba Logbook Loan money.
To qualify for the Umba Logbook Loan you must;
You can now apply for the Umba logbook loan on Money254. To get started, click on this link
You will be directed to the Money254 application form where you will be requested to provide standard information that allows Money254 to fasten your application.
A Money254 agent will call you back instantly to give you a detailed quote and offer advice on the application process. After this, a relationship officer from Umba will contact you to complete the process which also includes opening an Umba Microfinance Bank account where your loan money will be deposited.
Once your loan is disbursed, you will get a Ksh2,000 cash bonus for using the Money254 platform in your application process.
Note that Money254 is not a lender. Money254 is Kenya’s first fully integrated financial marketplace that is helping Kenyans find the financial products that best meet their needs.
This service is offered to all Money254 users at zero cost. Learn more about Money254.
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