The Link between Logbook Loans and Personal Credit Score

If you have a poor credit score, requests for a loan from conventional lenders will be rejected on first sight. You are a great risk and lending any cash to you is considered a great liability. The only place left to get credit is from lenders who do not factor the personal credit score such as logbook loan companies.

While it is true that the main factor that most logbook loan lenders are interested in is the capability to repay, there is a clear link to credit score. In this post, we bring out this link and demonstrate why you should make improving the credit score a priority.

Default can be reported to credit reference bureaus

When people take logbook loans, the likelihood of sinking deeper into financial turmoil is very high. In addition to the common risks such as losing the family car and hefty penalties, the lender can report cases of default to the credit reference bureau. This means that your credit score will become worse.

Because logbook loan companies are legal entities, they can file default reports directly to the credit reference bureau or capture the details in their bank details. In either way, the credit reference bureau will note you and degrade the credit score until the entire loan is cleared.

Logbook loan lenders can assist clients to fix poor credit score

Though your credit score is already poor, the logbook loan dealer can assist to address it. However, many people rarely appreciate this special role of the logbook loan lenders. If you select the logbook loan company carefully, the lender can assist in the following ways;

  • Helping you understand personal credit score and how it works
  • Helping you craft a good financial strategy for clearing loans and marching to financial freedom

Do not simply look at the logbook loan companies as entities out to make the highest possible profits. They also want to create a good image from a clients’ viewpoint. This will make them win more customers. Remember always to engage the lenders early enough before things get out of hand.

Allowing the lender to automatically draw monthly payments can worsen the credit score

One of the methods used by borrowers to prevent forgetting regular monthly loan repayment is allowing the lender to automatically draw from the account. This means that you can stop worrying about the loan because all monthly payments are cleared on time. However, if your salary is late or cash is not enough, the lender can get an overdraft. This will sink you deeper into financial trouble because it is still a form of borrowing.

Logbook loans often make people forget other loans

The risks that come with logbook loans are very many. To avoid them, many people prefer directing as much cash as possible to clear the logbook loan at the expense of other loans. Consequently, the factors that pulled down the credit score remain unattended. This means that by the time the logbook loan is cleared, the credit score will still be poor. Therefore, it will still be impossible to get a loan from the bank. The chances are that you might end up taking another logbook loan.

To sail through a logbook loan effectively and draw more value, it is important to plan appropriately. You need to think about repayment and how to address the damaged poor score. If you find it too much, do not hesitate to seek assistance from a financial expert.

 

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!