A few things you need know regarding Logbook loans
No doubt, you probably have been bit by the logbook loan bug especially if you reside in the UK and reels from a poor credit rating. In most instances, individuals with a poor credit rating find it difficult availing credit as and when they need it. It is for this reason that the introduction of logbook loans a couple of years ago was met with ululations and untold enthusiasm. For once, UK individuals with a poor credit rating could now apply for a loan without having to worry about the state of their credit score. No doubt, not all of us have a perfect credit score.
Some of us due to one reason or the other found themselves with a poor credit score. While the assumption out there is that having a poor credit score is most of the time as a result of financial irresponsibility, the same does not apply to every single person with a poor credit rating. There are individuals who find themselves unable to meet their obligations due to incapacitation, dismissal from work or retrenchment. To collectively judge all these people as financially irresponsible is unfair so to speak. Well, thanks to logbook loans, scores of UK citizens with a poor credit score no longer need to worry about the state of their credit rating.
But what is a logbook loan?
In simple terms, a logbook loan is a type of financial product where a person signs off their car logbook in exchange for a given amount of cash for a predetermined period of time. What this specifically means is that in order to be considered for a logbook loan, you need to own a car legally registered in your own name which the lender will use as security in exchange for the amount of loan you need.
Do you only need a car to be considered for a logbook loan?
Some people tend to think that applying for a logbook loan is all about having a car and that’s it. But this is not the case. Granted, a car plays a fundamental role as you cannot be approved for a logbook loan if you don’t have a car as security. That said, you also need to be a UK adult of sound mind, demonstrate that you can repay your loan (proof of regular income is required), produce a MOT certificate (as proof that your car is roadworthy, have a car that is free from financial attachment and has been on the road for a period not exceeding 10 years and last but not least, the cars tax and insurance details should be in order. In a nutshell, owning a car is not enough if the said car is older than 10 years, in poor condition and has some form of financial attachments to it.
But what about the risks of logbook loans?
Granted, logbook loans are a great product for individuals with poor credit. The fact that no credit checks are performed prior to being approved has indeed endeared scores of UK citizens with poor credit to logbook loans. However, in as much as it provides individuals with an opportunity to not only enjoy credit with a poor credit rating as well as a chance to improve one’s credit score, there is also a number of risks associated with this type of loan product. For one, the APR for logbook loans is relatively high (400% on average) which means that a person can end up repaying more than twice the principal amount. Secondly, inability to repay the loan as agreed could to a person losing ownership of their car.
In light of this, it is highly recommended that you do due diligence and only apply for a logbook loan amount you can comfortable repay!