How to Get a Cheap Car Loan in Kenya; Easy Steps
How to Get a Cheap Car Loan in Kenya; Easy Steps

How to Get a Cheap Car Loan in Kenya; Easy Steps

August 1, 2023
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Are you looking forward to buying a car in Kenya but don’t have the necessary finances? Well, don’t worry yet because, in Kenya, there are many ways you can acquire a car without necessarily having the money to purchase one. In this article, we will delve into how to get a car loan, that will help you buy your dream car in a few days, to do whatever you intend it for in Kenya.

Let’s dive in…

Step 1: Do research for car loans in Kenya

Just like any other loan in Kenya, you must do market research on car loans from different institutions. These institutions include Saccos, traditional banks, microfinance organizations, etc.  

As you do research, you will need to focus on a few pertinent details and compare them against each other. These details include:

  • Car loan Rates
  • Terms & Conditions
  • Repayment periods
  • Policies of the company or institution offering the car loan

Step 2: Check for eligibility

Once you have done the research, the next important step is to check whether you are eligible for the loan that you have chosen.

Eligibility criteria will include certain parameters. Some have been listed below:

  1. Credit score and report from the CRB – High credit scores (720-850) generally put you in an advantageous position. You will be able to negotiate for lower interest rates as compared with loanees with scores between 300-600.
  2. Income requirements – some lending institutions need to know that you are employed and have a stable monthly salary. If you have a business, you may need to prove that your earnings are stable or that you can be able to repay the loan on time.
  3. Age – Most car loan lending institutions require an age bracket of between 21 to 60 years for one to apply for a car loan in Kenya.
  4. Down payment – you may need to make a down payment of around 10 – 20% of the loan amount towards the car’s cost. Different institutions have different policies, and therefore, you should do prior research.  
  5. Guarantor/collateral – some lenders may require that you get guarantors depending on your income level and your past credit history

Step 3: Gather documentation

Before applying for any car loan, you will need to have the necessary documentation that will be needed for the application process. Documents that you will need to gather include but are not limited to:

  • KRA PIN and certificate
  • Proof of income/pay slip
  • National ID or Passport
  • Bank/M-Pesa statements

Step 4: Apply for the car loan

Assuming that you have already selected a preferred lending institution in Kenya for your car loan, you will then have to visit their offices where they will direct you on how to apply and get the loan.

As you apply, you may need to have a percentage of the total car price that will act as a down payment. This was explained earlier in this post.

Here are some institutions that offer car loans in Kenya

  1. Traditional banks e.g., Equity Bank, Kenya Commercial Bank (KCB), Cooperative Bank of Kenya, Barclays Bank of Kenya etc.
  2. Mogo car loans – Mogo provides financing to passenger cars, logbook loans and bodaboda financing. Loan amounts range from Ksh.50,000 to Ksh.250,000.
  3. Autochek Africa – This institution offers a wider range of loaning options, with loans below Ksh.1M to those above Ksh.5M.

Please keep in mind that the popularity of lending institutions can change over time. While this list is not exhaustive, it represents the top car loaning facilities in the country.

Step 5: Wait for approval

car loan approval process
Wait for Car Loan Approval

After submitting your application and documents, you will then have to wait for the institution to approve your loan request.

Read More: Mortgages in Kenya & How to Apply.

What happens if the loan application is rejected?

If your loan application is rejected, the lender will usually provide you with a reason for the rejection. This could be due to a variety of factors such as a poor credit score or insufficient income. However, you should not lose hope as other lenders may be willing to give you a loan. It is important to understand why your application was rejected and take steps to address those issues before reapplying.

Step 6: Repay your loan

Repaying a car loan typically involves making regular monthly payments to the lender over the loan’s agreed-upon term. Here’s a step-by-step guide on how to repay a car loan:

  1. Understand the Terms: Familiarize yourself with the terms of your car loan. This includes the loan amount, interest rate, repayment period, and any additional fees.
  2. Payment Schedule: Review your loan agreement to find out the payment schedule. Most car loans have fixed monthly payments, but some may have other arrangements. Make sure you know when payments are due.
  3. Automated Payments: Consider setting up automatic payments from your bank account. This ensures you never miss a payment and helps maintain a positive payment history.
  4. Budgeting: Include the car loan payments in your monthly budget. Ensure you have enough funds to cover the payment along with other essential expenses.
  5. Early Payments: If possible, try to make early or additional payments. This can help reduce the overall interest paid and shorten the loan term.
  6. Penalties: Be aware of any penalties for late payments. Avoid late payments to maintain a good credit record.
  7. Loan Statement: Regularly check your loan statement to keep track of your remaining balance and confirm that all payments are being correctly credited.
  8. Loan Completion: Once you’ve made all the payments as per the loan agreement, you will have fully repaid the car loan. The lender will provide you with documentation confirming the loan’s closure.

Also, read; How to Apply and Be Accepted as an Uber or Bolt Taxi Driver

What are the interest rates for car loans in Kenya?

To obtain the current interest rates for car loans in Kenya, it is crucial to inquire with multiple banks and financial institutions. Thorough research and rate comparisons are always imperative before making any decisions. Your credit score, income, and down payment amount may also influence the interest rate provided, so keep these factors in mind.

Conclusion

In summary, getting a car loan in Kenya requires that you follow all the steps listed in this post. Remember to use your loan wisely, in a way that will make you profits that you can use to repay the loan and build yourself financially.

Check out our loan calculator here: Loan Calculator – Auto Hub

Good Luck!

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