Using Your Car As Loan Security In A Bank In Kenya

(Last Updated On: June 20, 2016)


Once in a while an investment opportunity pops up or you run into financial difficulties and you may require a bank loan so as to help you out during your time of need. As usual banks in Kenya will ask you for security if you are applying for one of large loans and this involves leaving your property to the bank.

You should note that the bank has to first ascertain that you have the ability to pay the loan and if it gets approved you may just get a fraction of the amount you asked for.


Here Are Some Of The Things You Need To Know If You Use Your Car As A Loan Security In A Kenyan Bank

There are 5 key procedures that will take place when you go to the bank for money and you want to use your car as a collateral

1.Presentation of the log book to the bank

2. The bank does a search for the document presented

3. Valuation of the car to see if it can cover the loan

4. Joint registration with the bank

5. Other due diligence procedures.


Valuation is done by agents who are appointed by the bank at a cost of between Ksh3,000 and Ksh5,000. They will give two values, Market Value and Forced Sale Value (Is usually lower). The bank will consider the forced sale value.

Your car must have a comprehensive insurance cover. Most banks usually have their own insurance agents and if your car is not covered under an insurer that is within their panel you will have to cancel your former cover and take a bancassurance with the lender.  You must also have the bank interest noted in case of any write off and insurance company decides to pay you without involving the bank.

Your log book will be altered to show joint ownership between the bank and you. You will be the one to bear the cost of transfer whose fees range between Ksh2000 – Ksh6,000 depending on the engine capacity of the car.

Some banks will insist that your car must be installed with a tracking device by the bank’s appointed agents which may cost you Ksh30,000. This practice is common when the car is of very high value.

Due to this many expenses and practices, you car may just fetch a loan worth nearly half its market value. The bank will end up staying with the log book until you clear your loan then do another transfer of ownership at your cost. You will also leave two blank vehicle transfer forms which you have already signed so it can be easily auctioned when the need arises.

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