Logbook loans are fast becoming the loan option of choice for those of us who suffer from a bad credit rating but still own a car. Unfortunately, in today’s economic climate many people are falling deeper and deeper into debt. This means they often default on their debt which in turn drops their credit rating significantly.
And if you are in that situation, if you need a credit product of some form, be it a loan or perhaps even a mobile phone on a contract basis, you simply will not be approved. But there is hope for those suffering from bad credit and one of those solutions is a logbook loan.
In this blog, we will be looking at a few important things you should know about logbook loans so you can know what to expect when you apply for one for the first time. Having the knowledge beforehand takes the stress out of your application and makes things so much simpler. Let’s take a closer look.
How does approval for a logbook loan work
When you apply for a logbook loan you will need to provide a number of documents as part of your application. This has been discussed in greater detail on this site so we won’t go into it too much here. The great thing about these loans is that approval is quick and simple. Once you have applied (usually online), handed over the necessary documents and had your car assessed for its overall condition, you will know whether you have been granted a loan in as little as two hours.
Approval is done quickly as there are no credit checks necessary. The loan provider just needs to do some calculations as to the loan amount, repayment amount and a few other details based on the value of your vehicle as well as your monthly income.
How much can be borrowed?
This often differs from loan provider to loan provider but in general, the amount that can be borrowed is from 500 pounds to 50 000 pounds. Remember this is totally at the discretion of the loan provider and is based on the value of your car as well as your income and the amount of money you are able to pay back each month. The lender has your best interests at heart and it is important that you do not overcommit yourself, otherwise, if you miss payments, you may lose your vehicle.
Must the applicant be employed?
Yes! You must have a monthly income otherwise how will you be able to pay back the loan. It doesn’t matter that it is not a permanent job (for instance, you may be a waiter) but the fact that you earn money is crucial.
This is something that you will discuss with the lender. Bear in mind the longer the terms, the less you will pay each month but the more interest you will have to pay. Choose a term that works for you. Also be sure to check if there are any prepayment penalties. Some lenders do charge if you pay your loan back before the agreed term amount.
Make sure you know exactly how repossession works should you default on your loan. Some providers will take the car after just one missed payment. We believe that the borrower should be given every chance of making up for any missed payment before a car is repossessed to cover our costs.
So there you have it, a few important points to be aware of when taking out your first logbook loan.