Is A Logbook Loan Worth It?

Logbook loans in the UK have become very popular not because they are easy to access, but also due to numerous controversies about them. They are quick and perhaps the easiest to access even when one’s credit score is very poor. However, financial experts go to great lengths to discourage people from them. From associated risks to high-interest rates, the reports of people who have sunk into deep trouble are always hitting the headlines of every media in the UK. Therefore, are they worth?

A logbook loan is a type of credit service where cash is advanced against your car. Once you sign the agreement, the ownership of the car is temporarily transferred to the lender. However, you must continue paying the agreed monthly payment to continue using the vehicle.

Why the logbook loan?

  • Easy and fast access to personal credit

The ever rising living costs have put people’s lives on the edge. In many cases, what they earn is never enough, and an urgent need for extra cash can throw them off balance. Now, even when getting a bank loan is part of the options on the table, the process is bureaucratic and tedious. However, a logbook loan only requires one to proof of car ownership and source of income. In some situations, the cash can be on your account within the same day. This enables you to tackle emergencies such as medical bills, rent, and others.

  • Ability to control what you borrow

If you opt to borrow from a conventional bank, the institution controls what you can get. This makes people feel passive. However, logbook loans make people become part of the process because they know the amount they can get. Some logbook companies give as much as 70% of the current car value.

  • No background checks for your credit score

For many people falling into debt and seeing the credit score plummet can happen within a very short time. However, getting out is a difficult task. In some cases, it takes years. However, as far as you have a car and can proof source of income to repay the loan, it is very easy to secure a logbook loan.

The dangers that come with logbook loans

On the flipside, getting a logbook loan is like following a dangerous route though everybody is talking about the perils on the way. The major risks include;

  • Very high-interest rates

While the conventional loans are very cheap and indeed flexible, the logbook loans are not. The APR (annual percentage interest) is very high. It often goes up to 400% by some companies.

  • Risk of further harm to your credit score

Though borrowers are rarely told, defaulting on logbook loan can easily cause the credit score to get worse. Because they are licensed lenders, their report to credit reference bureaus could further damage the score.

  • Danger of having the car reposed

In many families, the car is the second most valuable asset after a house. Besides, it is very important because it defines the family. Dad takes kids to school using it before leaving for work with wife downtown. Besides, it is used for shopping, going camping, and making the family life enjoyable. Getting a logbook loan means envisaging life without it! That is right. If you default, it will get repossessed, and life could change completely.

Final verdict

Apart from these risks, the logbook loan provides a reliable option of credit to all. The loan can only help you by getting a bigger picture before taking it. The bottom line is; do not go for it until all the other options have been exhausted. However, if you select a good lender, negotiate for better rates, and only borrow what you need; the loan is okay.

Four Most Important Things You Must Know Before Taking a Logbook Loan

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.

Why Shady logbook loan lenders are your worst enemy

The benefits of logbook loans notwithstanding, we can’t be blind to the fact that shady logbook loan lenders have indeed made many people lose faith in logbook loans. Initially, logbook loans were meant to be a solution to a problem, a means through which bad credit individuals got a shot at redemption. It was, in no uncertain terms, a loan product that led to a paradigm shift on how people viewed individuals with a poor credit rating. While the intention for introduction of logbook loans was noble and well meaning, shady logbook loan lenders hijacked the goodwill to make the whole process of acquiring a logbook loan a nightmare of sorts.

In recent years, there has been a wild cry among UK individuals who have been swindled in one way or another and sadly, ended up losing their cars not to mention finding themselves deeper into debt. Cases of harassment bordering on physical abuse, emotional torment, uncouth professional behaviour, and death threats in extreme cases are just but some of the unethical ways that shady logbook loan lenders use to intimidate their borrowers to meet their end part of the bargain.

Indeed, the narrations by borrowers of harrowing experiences under the hands of shady logbook loan lenders is testimony to the fact that to some extent, logbook loans have been used to exploit unsuspecting borrowers. You only need to do a simple search online to come face to face with harrowing recounts of how some borrowers have been unduly treated and victimised under a logbook loan. The murky world of logbook loans has been characterised by extreme interest rates, harassment calls and wanton car repossession without much of a prior notice.

As if that is not worse enough, unsuspecting car buyers have found themselves in the deeper end of the pool when logbook loan lenders repossess their cars even when it’s clear that they were unaware the car had a logbook loan attached to it at the time of buying. It is clear that laws governing logbook loans are as old as civilisation and therefore it is about time that there was a change in the same. The bill of sale agreement give logbook loan lenders powers to repossess a car without following any due process and this clause has been effectively abused by shady logbook loan lenders for selfish interests.

Individuals who have suffered under the hands of shady logbook loan lenders report either of the following cases:-

  • Evasive lenders when it comes to explaining terms of the loan. Shady logbook loan lenders rarely divulge all information regarding the loan hence misleading borrowers to make uninformed decisions. In other words, the terms of the loan are vague and not clearly explained.
  • Harsh treatment by lender on missing one or two payments
  • High penalty charges and fees on default
  • Extreme and harsh collection practices
  • Car repossession without giving borrower sufficient time to get their finances in order

In light of the above, it’s crystal clear that shady logbook loan lenders are simply out to enslave borrowers and exploit them to the maximum. They are like vultures waiting to pounce any minute when a borrower faces some sort of financial constraints.

There is therefore the need for a relook into the laws that govern logbook loans. There need to be consumer protection especially those that buy cars unaware that they have a logbook loan attached to it. That notwithstanding, it’s imperative to do due diligence before engaging the services of a logbook loan lender or even buying a second hand car. After all, it is always important to be safe rather than sorry!