What You Need to Know About Logbook Loans in Kenya

Let's talk about logbook loans.

You've probably heard about them, right?

Maybe you're even thinking about getting one.

Well, before you do, let's go over some important things you should know.

What's a Logbook Loan, Anyway?

When you take out a logbook loan, you're entering into a temporary joint ownership arrangement with the lender.

This is done through the NTSA in-charge process.

It sounds complicated, but here's what it means:

1. The lender gets temporary ownership rights to your car.
2. They can claim your car if you don't pay back the loan.
3. You still get to use your car, but it's like you're borrowing it from the lender.

There's also a law called the Movable Property Security Rights Act 2017 .

This law gives lenders even more power.

Here's what you need to know about it:

1. If you miss payments, the lender can take action without going to court first.
2. They have to send you a notice telling you what's wrong and what will happen if you don't fix it.
3. If you don't sort things out quickly (usually within seven days), the lender can: Sue you for the money you owe Hire someone (like auctioneers) to take your car Sell your car Even make your car unusable where it is.

The Good, The Bad, and The Ugly of Logbook Loans

First, the good: Logbook loans are usually quick and easy to get. You can often get the money on the same day you apply. And you can keep driving your car while you're paying back the loan.

Now, the bad: These loans often come with high interest rates. This means you'll end up paying back a lot more than you borrowed.

And the ugly? If you can't pay back the loan, the lender can take your car. Yes, you read that right. They can actually come and take your car away.

How You Could Lose Your Car

Let's break this down a bit more.

When you take out a logbook loan, you're basically telling the lender, "If I don't pay you back, you can have my car."

Now, let's talk about the biggest risk: losing your car. Here's how it could happen:

1. You miss some payments.
2. The lender sends you a notice.
3. If you can't pay, they can come and take your car.
4. They can sell your car to get their money back.
5. If the sale doesn't cover what you owe, you might still be in debt.

And get this: even if you find the money to pay off the loan after they've taken your car, you might not get it back if they've already sold it.

Warning Signs: Are You Heading for Trouble?

Before you take out a logbook loan, ask yourself these questions:

1. Are you borrowing more than you really need?
2. Do you have a solid plan for paying back the loan?
3. Have you added up ALL the costs? This includes interest, valuation fees, logbook search fees, NTSA transfer fees, tracker fees, and insurance.
4. Is the interest rate fixed or variable? Variable rates can go up, making your loan more expensive.
5. Are you taking this loan to pay off another loan?
6. Did you compare different lenders, or are you going with the first offer?
7. Have you thought about what you'd do if you had an emergency and couldn't make a payment?
8. Do you have a poor credit history? This could mean you'll get a worse deal on your loan.

If you answered "yes" to any of these questions, you might want to think twice about taking out a logbook loan

How to Protect Yourself

If you do decide to get a logbook loan, here are some tips to help you stay safe:

• Only borrow what you absolutely need. The less you borrow, the easier it will be to pay back.
• Make a detailed plan for how you'll pay back the loan before you take it out.
• Calculate all the costs. Don't forget about fees and insurance.
• Look into other options. Could you get a different type of loan? Or sell something you don't need?
• Compare different lenders. Don't just go with the first offer you get.
• Try to save up some emergency money. This can help if you have trouble making a payment.
• Work on improving your credit score. This can help you get better loan terms in the future.
• Consider loan protection insurance. It might help if you lose your job or get sick.
• Understand the repossession terms. Know what counts as a default and how it might affect your car usage.

The Bottom Line

Logbook loans can help in a pinch, but they're not without risks.

If you're thinking about getting one, make sure you understand what you're getting into.

Read the agreement carefully. Ask questions if there's anything you don't understand.

Remember, your car is probably one of the most valuable things you own. Don't risk losing it if you don't have to.

Stay informed, borrow wisely, and take care of your finances. Your future self will thank you!