Facts That You Must Know About Logbook Loans

Logbook loans are secured loans that enable you to borrow money against your car. As your car is collateral, it may be repossessed if you do not keep up with payments. At the time of taking out a logbook loan, you will have to hand your logbook, which is also called a vehicle registration certificate, to your lender.  

Additionally, you will have to sign a bill of sale that assigns your lender temporary ownership of your car. However, you are completely free to use your car the way you want, but you are not authorised to sell it until the loan is repaid.  

Quick logbook loans provide an instant injection of cash when you have been caught unawares by some emergency, but they are one of the most expensive loans. They are subject to very high risks. As repayments are high, you are most likely to lose your car.  

How Payments Are Made on Logbook Loans? 

Logbook loans are usually small loans, as the market value of your car determines how much you would be able to borrow. The cost of depreciation is also taken into account while making a decision on the loan amount so that your lender can get their money back in case you default. 

Since these loans are small in size, you will most likely be expected to pay them down in weekly instalments. Each instalment will be amortised, meaning the repayment amount will go towards both principal and interest. However, some lenders might put you on interest-only payment plans. According to these plans, you will be required to pay down only interest and the principal amount at the end of the loan term in full.  

The latter option could be quite challenging because it is not always easy to settle the full debt in one fell swoop. Failing to do so will increase the risk of losing your car.  

What Can You Use Logbook Loans for? 

There are no restrictions on the usage of logbook loans. You can use them for whatever reason you want; however, you are not allowed to use these loans for illegal and unethical practices, such as gambling.  

Normally, people use quick logbook loans in order to get a quick injection of cash. They are meant to fund small emergencies. Instead of deciding on these loans impetuously, you should carefully mull over the associated risks. Are you completely confident about your repayment capacity? Do you have a backup plan in case your financial situation is turned upside down? 

How Much Money Can You Borrow With Logbook Loans? 

The minimum amount you can borrow with a logbook loan is £500, while the maximum is up to £50,000. Just because these loans could be this large, it does not insinuate that you can easily qualify for this much money. There are a few strings attached.  

The value of your car is one of the factors that your lender will consider while deciding the size of a logbook loan. A large amount of money is offered for new and expensive cars. If you have a secondhand and cheap car, you will be able to obtain a small amount of money. Most of the lenders will not be able to lend you more than half of your vehicle’s value.  

How Much Expensive Is a Logbook Loan? 

Logbook loans are undoubtedly exorbitant. All small loans, including payday loans, are expensive, but logbook loans could be more expensive than payday loans. Interest rates of logbook loans could go beyond 400% and they are not capped as other high-cost short-term debts such as payday loans.  

A lender will decide interest rates based on how much you borrow and how risky your financial condition is. It is vital to take into account the total cost of the debt before taking out these loans. Consequences of non-payment could be far-reaching.  

How Long Is the Repayment Term of a Logbook Loan? 

Most logbook loans last for 78 weeks, but they can be shorter and longer depending on the loan amount and the policy of a lender. You are absolutely allowed to pay back your debt before time, but you will have to pay early repayment charges, provided you repay more than £8,000 in a year.  

Is It Possible to Obtain a Logbook Loan With a Bad Credit Rating? 

Yes, you can take out a logbook loan with a bad credit score. In fact, these loans do require a credit score check. This is why your poor credit history will not get in the way of borrowing money. These loans have been designed to target poor credit borrowers who have been refused elsewhere.  

Just because your credit report is not checked, it does not mean that a lender will not consider your overall financial capacity. Logbook loans are secured against your car, so the risk is quite high of losing it if you fall behind on payments.  

Can You Get a Logbook Loan on a Second-Hand Car? 

Whether you have a new car or a second-hand car, you can take out a logbook loan, but make sure that you know the complete history of the car you are buying. At the time of purchasing a second-hand car, make sure that there are no outstanding logbook loans. Otherwise, you will end up being chased for the settlement of the debt, and if you fail to pay it off, you will lose your car.   

What are alternatives to logbook loans? 

If you need money and you find that logbook loans are risky for you, you should consider other alternatives, such as personal loans. If your credit rating is not stellar, you should try improving it, so you do not get high interest rates.  

Should you avoid getting a logbook loan? 

It is not a bad idea to take out a logbook loan, but it is quite expensive. They charge very high interest rates, even though they are secured by your car. In case you fail to repay your debt, you will end up losing your car. It is always better to find another way.