Understanding Logbook Loans
Whether you need quick cash for an overdue bill or a major investment, it's not going to be easy to raise funds when you have bad credit under your belt. In fact, chances are high that you'll get more rejections than possible. This is because you are tagged as a high risk borrower. This means most banks and high street lenders are going to steer clear from borrowers like you.
Thankfully, there are alternatives for people with bad credit. One of the most popular options available in the market today is a logbook loan. Below is a quick quite to logbook loans to help you better understand the financial product.
What is a logbook loan?
Logbook loans, as the name suggests, are a type of secured personal loan. The security or collateral in this case is your vehicle. You can borrow anywhere from £500 to £50,000 depending on your lender and your car's official trade value. Repayment terms are set from 12 to 36 months.
With logbook loans, the most important requirement is your vehicle. You must be an owner of a vehicle that is less than 10 years in age and is free of any financing to avail the financial product. To know more about logbook loans, click here.
How much is the interest rate?
Interest rates per annum vary from lender to lender and deal to deal. But on average, the representative APR for logbook loans is somewhere at 400%. That already includes the interest rate and all charges associated with the loan. In any case, a 400% representative APR translates to a lot of money that goes to interest.
If you want a cheaper logbook loan, you'd want to look for offers with the lowest APR. At the same time, you need to pay attention to hidden fees as these can rack up your loan's cost significantly.
What are the risks?
While easy to avail and requires no credit check, logbook loans are not without its risks. Like any other personal loans, you need to pay attention financial consequences in case you can't repay the loan.
Other than the high interest rates associated with logbook loans, there's always the danger of repossession to keep in mind. Remember that you are taking out a loan against your vehicle. This means that your lender has the right to repossess your car in the event that you are unable to keep up with your liabilities. Lenders can use the bill of sale agreement to recover your car and sell it to cover for your outstanding balance.
Who is it for?
Despite the high cost and risks, logbook loans continue to thrive in the UK market because of its promise of quick cash. This is true even if you have bad credit history. No matter if you have a history of ccjs, default or bankruptcy, logbook loan lenders are more open to considering borrowers like you unlike banks and major high street lenders. For this reason alone, it's no surprise more and more borrowers turn to the financial product for their financial needs.
If you're planning to take out a logbook loan any time soon, do it with extra caution in mind. Make sure you know the risks and borrow only what you need and what you can afford to avoid losing your car in the end.