Important factors you should know about logbook loans

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.

Repayment periods

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.

 
 

Repossession

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.

 

Why logbook loans are a necessary evil

No doubt, the internet is laden with arguments for and against logbook loans. Proponents of logbook loans see it as a wonder product, a means through which they have access to credit irrespective of their poor credit rating. On the other hand, opponents of logbook loans term it risky and a form of extortion going by the high interest rates associated with. While there is some merit from both the proponents and opponents of logbook loans, one thing that we can all agree on is the fact that logbook loans are a necessary evil.

Let me try to paint a picture for you. We all know that credit checks are a standard procedure when a person seeks to apply for any kind of credit. Now take a moment to imagine a situation whereby you urgently require credit for whatever reason but cannot be approved by any high street bank or financial lender because of the state of your credit history. Sucks, right? Unfortunately, this is an all too familiar experience to the majority of UK citizens struggling with bad credit rating.

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While in the past majority of UK individuals with a poor credit rating resigned themselves to fate and hoped for the best, the introduction of logbook loans changed the narrative for the better. In other words, logbook loans gave those with a poor credit history a new lease of life. Perhaps, you are wondering what a logbook loan is. Well, from its name, this is a type of credit facility that is secured against a person’s car. In short, if you do not own a car, you cannot be considered for a logbook loan.

Of course, it is easy to think that you can set up any car as collateral and be considered for a logbook loan. This is not usually the case. There are indeed exceptions. For one, logbook loan lenders insist that the car you wish to avail as security should be legally registered in your own name. In other words, you cannot use your spouse’s car, your parent’s car or a colleague’s car as security for a logbook loan. You must be the legal owner and the said car should not have any type of financial attachment to it not to mention that it must be in good condition.

That said, the requirements for applying for a logbook loan are pretty simple. You must be a United Kingdom citizen, own a car registered in your own name and be a person of sound mind above the age of 18 years. If you meet the aforementioned, you need not worry about the state of your credit history as the car acts as collateral. Should you be unable to meet the end part of your bargain, the lender can always dispose off your car and recoup their money.

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In light of that, why are logbook loans a necessary evil? Well a lot of people are repulsed from logbook loans because of the fact that they are an expensive way of availing credit. To some extent they are right considering that the average APR for logbook loans is 400%. However, think about it. If you have bad credit and cannot avail any credit because of your poor credit history, logbook loans are your best bet. Consequently, logbook loans accord you an opportunity to rebuild your credit history because the only way you can do that is by diligently servicing your loan without default. Of course, this will gradually improve your credit score status. If you have no credit history to your name and face problems availing credit because high street banks have no way of telling how responsible you are with credit, look no further than logbook loans!