You’ve Heard of Payday Loans, But What’s A Logbook Loan?
If you’ve a poor credit rating and have been refused credit then there’s a good chance that you may have considered a payday loan – and possibly been turned off by the astronomical representative annual percentage rates.
However, these loans are not meant to be taken out over a longer period than a couple of weeks and so you should never be paying anywhere near the 4000% APR quoted. But what if you need a loan over a longer period of time but have been knocked back by the mainstream lenders? Then you may want to consider a logbook loan…
What is a logbook loan?
A logbook loan is a form of secured loan, the security coming from the equity in your vehicle – so, in theory, the more valuable your car, the bigger the loan you can apply for.
These loans are any purpose loans and you will not be turned down for having a poor credit rating; this is partly because the loan secured against your vehicle – meaning that you risk losing your car should you default on the loan – and is reflected in the representative APR which is usually in excess of 400%.
How much can you borrow?
Logbook loans are a more long term option than logbook loans and so bigger amounts can be borrowed. As mentioned above, this is often dictated by the value of your car and so loans often range from around £200 to £25,000.
How do logbook loans work?
Although a poor credit rating won’t hold you back, there are certain criteria that must be met before you can borrow against your car.
Obviously, you must be the registered keeper of the vehicle you are securing the loan against, you must also be over 18 and be able to afford the repayments on the loan. You must also provide proof of residence and proof of income.
Once you have applied and been accepted for a loan you must provide the lender with your vehicle’s logbook – once this has been handed over then the money will be transferred to your account and you will still be free to drive your car as normal.
When the loan term has ended and you have paid back the loan capital and interest then the V5 logbook will be returned to you.
Are there any drawbacks?
No financial product is without its drawbacks and logbook loans are no different; the main sticking point is the high annual percentage rate. However, these loans are designed for people with poor credit and this is reflected in the annual percentage rate – unfortunately, all bad credit loans come with high interest rates.
If you do have a poor credit rating then you must make sure that you will be able to meet the repayments on any loan you take out, remembering to factor in the higher interest rates and be aware that you do stand to lose your vehicle if you default on your logbook loan.