Logbook Loans - Everything You To Know
Logbook loans have become increasingly more popular year after year and for good reasons. Aside from the no credit check applications, the financial product offers flexible loan amounts and terms not to mention same day processing. But there are also some downsides. So if you're planning to take out a logbook loan, it pays to do your homework.
Giving you a jump-start on your research is this quick guide on logbook loans.
Logbook loans are personal loans secured against your vehicle. In order to avail the short term financing, you need to own a vehicle you are willing to put as collateral. Depending on your car's brand or type, you can borrow anywhere between £500 and £50,000. Some lenders let your borrow up to 50 or 70% of your car's official trade value. The loan can be repaid in 12 up to 36 months.
Once approved for a logbook loan, you will be paid the money by cheque or wire transfer to your bank account. Cheques usually take days to clear while wire transfer offers a quicker service and is now becoming a more preferred option. The downside, lenders may charge fees in exchange for the quicker processing time.
For a more in depth look at logbook loans head over to Money Advice Service.
Since logbook loans are secured loans, your lender will ask you to hand over your vehicle's logbook document along with your MOT certificate and insurance details. In essence, you are like handing over temporary ownership to your lender. You still get to keep and use your car but you don't really own the vehicle until you repay the loan and get your documents back.
As part of the application process, your lender will also ask you to sign a credit agreement and a bill of sale form. The bill of sale is what lenders use to sell your once repossessed to cover for your outstanding balance.
Seeing that logbook loans are secured loans, the risks lie mainly on the possibility of vehicle repossession. This usually happens if you are unable to pay the loan for several months as agreed on the credit limit. Lenders, at first, will attempt to contact the borrowers by sending out a debt collector or by setting up a new payment arrangement. If you are still unable to repay the loan, this is when the lender recovers your car.
Logbooks loans, in short, are very risky especially since you may lose your property if you can't repay the loan. What makes it even riskier is the fact that it comes with steep interest rates. On average, logbook loans come with representative APR of 400%. Some lenders even offer more than that. But thanks to stiff competition, more and more lenders are offering deals with APR below the market average. In any case, it's very important to pay attention to interest rates as well as hidden fees. Otherwise, you may end up paying more in interest in the end.
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