We all hit a financial emergency or two at one point or another. If you have a sufficient emergency fund then this financial bump wouldn’t hurt. However, the same is not the case for most people. When you don’t have ample savings to tide you up until you’re on your feet financially, taking out a loan is inevitable.
Logbook loans, in particular, are a popular option for people with bad credit. Logbook loans have helped thousands of borrowers in the UK. And if you are planning to take out one, understanding the financial product would help. And we’ve created this guide to help you do just that.
What is a logbook loan?
Logbook loans are secured loans offered for people with bad credit. Even if your creating is less than perfect and you’ve been rejected for a loan elsewhere, you can count on this financial product to save the day. Logbook loans, in essence, will cash in on your vehicle’s official trade value. This puts your vehicle as collateral for the loan, which also means you can borrow more, usually up to 70% of the vehicle’s trade value.
How much can you borrow?
With logbook loans, the usual offers start from £500 up to £50,000. Repayment terms, on one hand, start from 12 months up to 36 months. For smaller loan amounts, the term may sometimes last only for weeks while for larger loans, the term may be extended to longer than 3 years. Either way, your goal as borrower is to never miss a payment to avoid hefty penalties.
Who can apply for a logbook loan?
Anyone who is a vehicle owner and who lives in the UK can apply for a logbook loan. Naturally, you have to be of legal age as well as working full time to be eligible. One of the major things your lender will need is your proof of income in the form of your recent pay slips. Sometimes, they’ll even ask you to provide bank accounts just to prove that you are financially capable to repay the loan. Other documents you need to prepare include you vehicle’s MOT certificate, insurance and especially the logbook document.
How much does the loan cost?
Logbook loans can be very costly. Considering that it is a loan specific for borrowers with bad credit, the interest rates can be pretty steep. In fact, the representative APR for a typical logbook loan deal is 400% or more. Compared with traditional loans from banks for borrowers with bad credit, the difference in interest rates is astounding. But such is one disadvantage and consequence you need to embrace for having a poor credit history.
What are the risks involved?
Logbook loans are not only costly but it’s quite risky as well. The high risks involve the possibility of losing your car to your lender. When you get approved for a logbook loan, you’ve essentially agreed that ownership is no longer yours until the loan is repaid in full. But then a lot can happen in between. If you stumble into another emergency and you miss several repayments for your loan, your lender may enact on the nonpayment by recovering your vehicle. If this happens, you have to update your payments as soon as possible to get your car back again.
Should you apply for one?
Because logbook loans are risky, you should only apply for a deal when you know you can handle the monthly repayment without hitch. Like with other loans, there’s no secret. You just need to be a responsible borrower and repay your liabilities on time each month to avoid repossession.