Financial emergencies happen and unless you have an emergency fund, you might find yourself needing a personal loan at one point or another. Personal loans are available at banks and major high street lenders. But they may not be easy to avail when you have a bad credit history under your belt. This is where financial options such as logbook loans come into play.
If you need quick cash and you have bad credit, logbook loan lenders offer you the promise of quick cash provided that you meet the requirements. Before you resort to this type of financing, however, it’s imperative to understand how the financial product actually works.
Logbook loans are personal loans that are secured against your car. To be eligible, you must be an owner of a vehicle that is less than ten years in age and is free of any financing. When you use your car as collateral what happens is you essentially handing over temporary ownership of your vehicle to your lender. The lender keeps your V5 or logbook document along with other requirements while you still get to keep and use your car. You also get the money once approved, which you can use to meet a wide variety of personal needs.
With logbook loans, loan amounts and repayment terms are more flexible then if you opt for an unsecured loan. Because the loan is secured against your car, your lender can offer a larger amount. In general, you can borrow from £500 up to £50,000 or up to 70% of your car’s official trade value.
As for the repayment terms, you can repay the loan in over 12 months or up to 36 months. Both the loan amount and repayment terms you can tailor according to your financial circumstance. Repayments may be done weekly or monthly which again will depend on your preference as a borrower.
To be eligible for a logbook loan, you need to meet the most basic of requirements, which include being of legal age, a UK resident and a vehicle owner. You’ll also need to prepare the following documents beforehand to expedite the processing:
While fast to process and easy to avail, logbook loans also have its downsides. One of which is the high interest ate. On average, the financial product has a representative APR of 400% or more. The interest, fortunately, has gone down over the years thanks to stiffer competition among lenders.
If you want the cheaper deal, scouting the market for offers with the lowest interest rates is one way to do it. Or you can check out one of our partners, Varooma at https://www.varooma.com/ for loan offers at representative APR of 190.3%.
Other than the high cost, there’s another risk to carefully consider. When you use your car as collateral, there’s always the possibility of vehicle repossession. It happens when you are unable to pay for your loan for several months. Your lender will attempt to contact you to make new payment arrangements. After several attempts with no response, that’s when the repossession may happen using the bill of sale document you signed prior to approval. Your lender can then sell the car to cover for your outstanding balance.