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.
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.