If you have a poor credit score and you’re looking to borrow money then you probably realized by now that it isn’t easy to avail financing. In most cases, you’ll get rejected for a personal loan. Most providers, after all, are averse with transacting business with people they might lose money from. In the case that you can’t find anywhere else to borrow money from, this is where logbook loans can help.
But what are logbook loans? And why should you apply for this type of loan? This quick guide should help you understand how the financial product works.
A quick overview
Logbook loans are loans that require collateral. In this case, the borrower must be willing to secure the loan against his or her vehicle to get approved. Logbook loans therefore fall under the category of secured loans. This type of secured loans is specific for people with bad credit. Even if you have a poor credit rating, you can still avail a logbook loan provided that you meet the eligibility criteria.
The eligibility criteria for hassle-free logbook loans include the borrower being of legal age, a UK resident and a vehicle owner. If you’re eligible and you can provide the necessary documents including V5 document, MOT certificate and proof of income, you’re ready to get approved for a logbook loan fast.
If you’re eligible to avail a logbook loan, you’ll have access to deals that offer loans from £500 up to £50,000. Lenders will have to look at your vehicle’s official trade value and your income to determine the maximum amount you can borrow. In most cases, you can borrow as much as 50% of your vehicle’s value. But whether you’re borrowing the minimum or maximum amount, it’s clear enough that logbook loans have generous offers than a typical unsecured personal loan for borrowers with bad credit.
In terms of repayment plans, you can repay your loan between 12 months and 36 months. Depending on the loan amount and your preference, you can choose to pay the loan back weekly or monthly. Either way, you have a fixed monthly amount you need to pay off. Otherwise, you put your vehicle at risk or you may incur hefty late payment fees in the end. Repayments can be completed through accredited payment centers or through a direct debit deception arrangement with your bank.
Unlike personal loans for people with good credit, logbook loans can be pretty expensive. In fact, most experts advise borrowers to stay away from this type of loan because of the incredibly high interest rates. On average, logbook loans are advertised with a representative APR of 400%. This is inclusive of your loan’s interest rate, admin fees, set-up fees and other charges associated with your loan. Based solely on the APR alone, you can see that logbook loans will cost you a lot. If you want a cheaper deal, you’d want to look for deals with lower representative APRs.
As you know by now, logbook loans are secured loans. Since the loan is secured against your vehicle, you understand the possibility of vehicle repossession. When you signed the loan terms and agreement, you’ve given your lender the right to repossess the vehicle in the event that you can no longer repay the loan. This is why it’s important to keep your repayment up to date. Late or delayed payments will not only ramp up your loan’s cost but you risk losing your car to repossession. If you signed the “bill of sale” document, you also let your lender resell your vehicle if necessary.