What You Need to Know about Logbook Loans
When you have a poor credit score and you’re in need of quick cash, you’ll likely stumble upon logbook loans. Logbook loans are pretty popular in the UK for a number reasons. It does not require any credit check, for one. It’s also widely available online and you can get approved in as fast as within a day. But it’s also not without its disadvantages. For a better understanding of how the financial product works, here’s a quick guide to help you.
What is a logbook loan?
A logbook loan is a secured personal loan offered to people with bad credit. If you have a poor credit score but you own a vehicle free of financing then you can avail a logbook loan. The product is a suitable alternative for traditional personal loans. With a security involved, you can borrow more than what most personal loans can offer. Typical logbook loan offers start from £500 up to £25,000 at repayment terms from 12 months up to 36 months or sometimes longer. The maximum amount you can avail will depend on your vehicle’s trade value, which is usually up to 70% of said value.
How does a logbook loan work?
When you apply for a logbook loan, your lender won’t get your car, just your vehicle’s logbook document along with other key requirements. This means that you can still drive around in your car like you usually do only that ownership has been temporarily transferred to your lender. While your logbook isn’t fully paid yet, your lender essentially owns your vehicle. And since you agreed with the loan terms and you signed the “bill of sale“document, you understand that when you apply for a logbook loan, you put your vehicle at risk of repossession. For additional info on how logbook loans work, Money Advice Service is the place to go.
How costly is a logbook loan?
Logbook loans may be easy to get approved for but one of its downsides is the financial product’s high cost. The loan is attached with a high representative APR of 400% on average. When compared with other personal loans, logbook loans are multiple times more costly. But considering that there’s no credit check involved during the application assessment, the cost is often not that important a consideration for many borrowers looking for quick cash. In any case, it’s still crucial that you consider the loan’s high cost if you’re considering the financial product.
How risky is a logbook loan?
Other than its high cost, another key consideration to keep in mind when applying for a logbook loan is the risk of repossession. Since the loan is secured against your vehicle, you’re essentially cashing in on your vehicle to avail quick cash. In exchange, your loan provider takes ownership of your vehicle until your loan is fully paid. If you miss or delay with payments, your provider has the option to recover your vehicle. In other words, you can lose your vehicle to repossession for good if you are no longer unable to repay your loan. It’s part of the risk you take on when you apply for a logbook loan.
Is it worth it?
Considering the risks and cost as well as the advantages of the financial product, the question now is whether a logbook loan is worth it or not. To answer the question, you need not look elsewhere but at your financial situation. So long as you can afford the monthly repayments, it doesn’t hurt to consider getting a logbook loan to meet any financial emergency. Just remember to consider cheaper alternatives first before settling for a logbook loan.