A logbook loan is one of the easiest lines of credit. They are processed fast, and your credit score is not a factor like in other financial institutions. However, borrowers have been cautioned to be extra careful when taking logbook loans because of the numerous risks that come with them. In this post, we outline the four most important things that you must know prior to taking a logbook loan.
The difference between APN (Annual Percentage Interest) and other bank rates
Logbook loans attract high-interest rates compared to conventional credit from banks. While common banks offer their credit at interest rates of as low as 5%, most logbook loans have as high as 400% APN. Take an example, of Mobile Money Logbook Company that has an APR of 99.9%. Therefore, a client who borrows £1000 for a period of 18 months will be charged £665.10. The client will, therefore, pay a total of £1665.10 by the end of the repayment period. Having a clear picture of this interest rate will help you to plan appropriately. Note that this is just one company; others might have higher interest rates.
Financial impact for non-repayment
Once you sign the agreement and the loan is released to you, it is prudent to make the monthly payment on time. Because every logbook loan lender has individual rules that govern actions for non-repayment, it is very critical to read through the respective policies. The main financial implications include the following;
- A harsh penalty could be slapped on you. This will raise the total amount you will pay by close of the repayment period.
- Because the loan is taken against your car, the lender could come for the vehicle and sell it to recover the money.
- If the lender sells the car and the amount raised is not enough to clear the loan, the lender will still come after you to recover the balance. You will be sued in a court of law to help recover the balance.
Non-repayment implications on credit score
While logbook loans do not factor your credit score when you are applying, things change in case of non-repayment. Because the logbook firm is a licensed lender, he is allowed by law to provide credit, and his report to the credit reference bureau will further damage your score. Since most repayments are made through banks, they usually include info pointing your details and inability to repay the loan. It is, therefore, very critical to ensure that you make all monthly payments on time.
The flexibility of the lender
The lender you go to for a logbook loan is very important for a smooth repayment session. Many are the times you will get reports of people’s vehicles being towed and getting auctioned because they failed to remit monthly dues. When you select the lender, it is important to get it right on all the particulars of their flexibilities.
Establish whether the lender can renegotiate the deal in the case of financial difficulties: If you had agreed to remit £ 90 every month, but you are finding it difficult, the best lender should agree to renegotiate. For example, the figure can be lowered to about £80.
Find out how fast the lender moves to recover the vehicle if you fail to remit monthly dues: Because you have already surrendered the ownership of the car by taking the loan, the lender is at liberty to come for it any time after defaulting. However, you should borrow from a lender who is not hasty to take the car away. Some will look for you to find out if there are difficulties and work for ways to address the issue.