Guide to Logbook Loans
Looking for easy finance? Or not getting loans from high-street lenders due to adverse credit rating? If you have your own car, it’s possible for you to easily get a loan despite a bad credit score. Many people have a history of poorly-managed credit in the past. They find it very difficult to get unsecured personal loans. However, secured personal loans are easier to come by, especially if you own assets like a motorbike or car.
What Are Logbook Loans?
Logbook loans are secured loans given against a vehicle you own like a motorbike or car. It’s an excellent option for people who don’t want to go through the traditional route and waste time. Even in case of bad credit, lenders give logbook loans as there is less risk to them. They can be a quick and convenient way to get the cash you need when you need it.
How Do Logbook Loans Work?
Before you hand over your logbook, you must understand how such types of loans work. This will give you a clear idea of what you’re getting yourself into. Logbook loans provide credit if you own a vehicle and are ready to use it for getting credit. Usually, the ownership of your car passes temporarily into the hands of your lender. That’s because you’re getting money only on the value of the vehicle. You can still drive the vehicle so long as you keep to the terms of the credit agreement. You can borrow a sum upto 70% of the value of the vehicle. Depending on your financial situation and worth of the vehicle, a payday loan may allow you to borrow significantly more. So, it’s a good idea to explore various options before signing on the dotted line.
Most lenders offer interest rates starting from as low as 99%. Once you pay off the entire loan, the lender will return your logbook and the car will be yours once again. Yet, if you struggle to keep up with the repayments, the lender may sell your car to recoup their money. Every lender has different criteria and you should check how much amount of loan you qualify for based on your vehicle. Generally speaking, your car should have a resale value of at least a £1,000, free from any car finance you’ve taken (or nearing end of agreement) and be less than 10 years old.
Is There A Vehicle Check Before Getting Approval?
Logbook loans require you to prove your ownership with a logbook or V5 registration document. The lending company will take this document into their possession once you sign the credit agreement. There will be an HPI check on your vehicle to establish its value, term of vehicle finance debt and your ownership of the vehicle. Once this is done, you’ll have to give your personal details such as address, income and monthly expenditure. The lender will run a credit check to assess how much you can afford to borrow. But, you should do a self-check and not leave it to a third party to make decisions for you.
How Can I Apply For These Loans?
You can take out a logbook loan either in person, over the phone or online. Sometimes, you get approval within one or two hours. Also, you can choose how you want to receive the money- by cash, cheque or directly into your bank account.
Is It Different Everywhere in the UK?
If you are a resident of England, Wales or Northern Ireland, you’ll usually sign a Bill of Sale at the time of the agreement. This Bill authorizes the lending company to repossess your vehicle without a court order if things don’t go as expected. It also transfers temporary ownership of your vehicle. Lenders allow their customers to drive their motorbike or car if they keep making repayments on a regular basis.
In Scotland, the law works differently. If you apply for a loan here, it’ll be under a different agreement as Bill of Sale doesn’t apply. You’ll more likely get an offer for Hire Purchase Agreement that offers a higher level of consumer protection.
Okay… How Much Do Logbook Loans Cost?
Remember that these are an expensive form of credit with APRs nearing 400% or higher. In addition to this, you may also have to pay substantial loan charges. In some ways, taking out a standard personal loan may be cheaper. It’s a risky business, so be clear on what you’re doing.
What Are the Benefits of Logbook Loans?
This kind of secured loan can be beneficial as well as fraught with risk for you as a borrower. Although you get cheap lending, you also stand to lose your car if you don’t keep up with the repayments.
- Lower Interest Rates:
Typically, logbook loans carry lower interest rates compared to other types of loans for bad credit like payday loans. The APR (interest plus fees) is between 99% – 450%. These vary among lending companies so you should compare and choose. You can reduce your interest payments by opting for a low APR deal and clearing the loan as soon as possible.
- Borrow Upto £50,000:
As it’s a secured loan, you might be able to borrow upto £50,000 which is higher than any payday or personal loan you can get. The amount you can get depends on the following factors-
The value of your car
Your credit history
Your income and expenses
The maximum limit the loan provider offers
- Longer Repayment Period:
As compared to payday loans, you can repay logbook loans in small instalments over 12-36 months. This allows for budgeting and getting your finances in order.
- No Early Repayment Penalty:
Lenders won’t charge you a penalty if you decide you want to pay back the loan early. Sometimes, partial resettlement is possible so that interest on the remaining amount reduces. By all means, aim to repay logbook loans early if you can afford it.
What Are the Risks of Logbook Loans?
The risks of logbook loans are outlined below:
- You may lose your car if you don’t repay the monthly installments.
- The level of consumer protection is not the same as a Hire Purchase agreement.
- You need to be the legal owner of a vehicle having a value of over £1,000 and with no debt on it.
- Interest is much more for this secured loan than for an unsecured loan from a mainstream lender.
Get Free Advice
We offer free loan advice if you have doubts whether a logbook loan is the one for you. Get in touch with us, if you have bad credit & need doorstep loans.