Logbook Loans: What You Need to Know
Taking out a personal loan when you have bad credit is tough for borrowers in the UK. Because of your poor credit history, major lenders such as banks and those in the high street are less likely to approve your application. Offering to save the day are logbook loan lenders who offer you quick cash options despite bad credit.
If you're thinking of taking out a logbook loan against your car anytime soon, below are things you need to know about the financial product.
What is a logbook loan?
A logbook loan, as the name implies, is a type of personal loan that is secured against your vehicle. To be eligible for a logbook loan, therefore, you need to be a vehicle owner. Full employment is not a requirement but you must be able to provide proof of steady income. Naturally, you also must be of legal age and a resident in the UK.
Though highly accessible for people with bad credit, logbook loans come with its share of pros and cons. The loan may offer quick cash but it's not always the best option for everyone.
What are the advantages of a logbook loan?
Logbook loans continue to carve a solid place in the lending industry because of its many advantages which include the following:
3. Flexible loan amounts and terms
Logbook loans also offer flexible loan amounts and terms. In general, you can borrow anywhere from £500 to £50,000 payable at terms from 12 months to 5 years or sometimes longer depending on how flexible your lender may be. The amount you can get approved for will also depend on your car's official trade value. Normally, you can take out loans that equals up to 70% of said value.
2. Fast processing
Since lenders do not run credit checks, approval is faster than ever. Provided that you meet the basic requirements, you can get approved for a logbook loan within the same day you applied for the loan. This makes the financial product an ideal source of quick cash for a number of personal needs.
1. No credit checks
Topping the list of advantages for logbook loans is the no credit check policy. No matter your credit score, you are welcome to apply. Logbook loan lenders do not run credit checks making it easier for borrowers with bad credit to take out a loan even if they've been refused elsewhere.
What are the disadvantages of a logbook loan?
Logbook loans also have its share of disadvantages and they are worth investigating thoroughly before signing any dotted line. Major disadvantages include:
1. High interest rate
If you ask financial experts, most of them will advise you to steer clear from logbook loans for the main reason that it's very costly. Logbook loans, on average, come with a whopping 400% Representative APR. Compared with traditional loans, this is a hefty interest rate you need to pay for annually just because you have bad credit history.
Another major risk associated with logbook loans is vehicle repossession. In the event that you can't repay the loan for a few months, there's a chance that you may lose your car if you can't keep up with your liabilities.
Is it for you?
While logbook loans may offer the promise of quick cash which is what most borrowers with bad credit often look, it pays to remember that it also has disadvantages that may cost you more in the end. Ifyou’re planning to take outa logbook loan, it's best to weigh the pros and cons accordingly before signing any dotted line.