People opt for a logbook loan when their loan applications are declined by their banks for maintaining poor credit scores. Many borrowers have found solace in pursuing logbook loans. These types of loans are given against the security of the borrowers’ cars and they can be processed in real quick time. Logbook loan providers do not take into consideration credit scores of borrowers when they issue loans but their main concern is the ability of the borrowers to repay the loan amount.
Once the borrowers decide on taking logbook loans, it is crucial for them to understand all the risks that may be associated in turning those loans into heavy debt burden. It is wiser for the borrowers to avoid such risks. There are three major factors that can turn a logbook loan into a heavy debt burden.
1. High APR – One of the main features of logbook loans is that they are linked with some of the highest interest rates in the lending industry. Some of the lenders may keep their interest rates as high as even four hundred per cent. This can make the borrowers end up paying four times the amount that they have originally borrowed. This kind of high interest rates will turn the logbook loan into a serious financial burden.The amount which is sued to service such loans will not only become too high but it will also leave no respite in terms of available cash for other living expenses. As a result of these high Annual Percentage Rates, several borrowers are often forced to give up various important essentials in their daily expenses; this brings a financial strain in their daily lives. It has been found that many borrowers are able to hold on like this only for a short while before they start to default. There are some borrowers who allow logbook loan dealers to withdraw directly from their banks through monthly deductions. Any delay in receiving the salary will trigger an unwanted overdraft situation and will deepen the financial burden.
2. Taking the logbook loans over a longer tenure – As in the case of other loans from traditional banking institutions, the rule even for logbook loans is that the longer you stretch the repayment period, the higher the final loan amount you will end up paying. There is an even bigger problem that could pull people deeper into debt if the logbook loans are repaid over a longer period of time. It has already been determined that the APRs are very high. In such cases, repayment commitment over longer periods can result in loan fatigue. For instance, after addressing the current financial emergency, there is no guarantee that another emergency in the form of medical assistance or utility bills may not arise a few weeks down the line. In order to address such issues, it is necessary for borrowers to try their best and restrict the period of repayment to the shortest time period possible.
3. Borrowing a higher loan amount than what is actually required – As logbook loans are easily accessible by pledging your vehicle’s V5 document against them, it should not motivate you to take maximum amount that is available to you by the lenders. You have to try not to be tempted to fall into this trap. For example, if you want 1000 GBP to take care of an unexpected medical emergency, there is no need to take a 5000 GBP loan amount even if it is being offered to you. This will turn out to be a grave error on your part in planning your finances. There is a heavy risk of injudicious use of the loan amount as you had not planned for it, in the first place. You will also pay more for the repayment as the interest gets calculated on the larger amount. The debt gets to be repaid over a longer period of time and this can cause loan fatigue and increases the risk of you defaulting.
When borrowers have a poor credit profile and they are seeking loans, the likelihood is that during their search, they will come across the possibility of securing logbook loans. These types of loans work on the basic principle that if borrowers own vehicles, they can secure them against loans. The main reason why these loans are known as logbook loans is that the vehicle’s registration certificate or the logbook or V5 document is kept by the lenders for the entire duration of the term of the loan. The lender becomes the temporary owner of the vehicle but the borrower is allowed to use the vehicle during the loan’s tenure.
Logbook Loans – A Solution for People with Bad Credit –
Logbook loans have been specially designed as solution for borrowers who have bad credit. If people have good credit history, then they will not be applying for logbook loans, in the first place. They will be able to procure better interest rates by applying to the banks or going for supermarket loans with APRs at less than 10%.
It is a well known fact that borrowers who have issues on credit rating will find very limited options when they look for personal loans. Many lenders including the banking institutions are likely to reject their loan applications. Such borrowers would be treated as high-risk clients as lenders would be wary of extending loans to them. However, there are alternatives to conventional personal loans in the form of logbook loans.
Expect Quick Cash when you apply for a Logbook Loan
Borrowers may find that logbook loans come with some really high interest rates attached to them but they get lured because such loans promise them quick cash, particularly even after they have a bad credit score status. Borrowers will find that they can avail of logbook loans as long as they meet the criteria required for these loans. They will be able to receive the loan amount within twenty four hours of their application. When they are hit by financial emergencies, logbook loans are a fast way out of trouble for them. This is the main reason why logbook loans have become popular over the past few years among people with bad credit in the United Kingdom.
How to expect offers of high loan amounts with logbook loans?
Once the vehicle is secured with the logbook loan dealers, borrowers can expect high loan amounts based on the current market value of their cars. If their cars are new and valuable, they can expect amounts ranging from £500 and going up to £50,000. Such high loan amounts make logbook loans a popular choice among borrowers when they want to meet a vast variety of emergency financial needs.
No Credit Checks are carried out when you apply for Logbook Loans
Borrowers can expect to receive quick cash from the logbook loan lenders as there is no credit check involved for the assessment of the loan applications. Borrowers are required to meet minimal requirements for logbook loans, unlike with other kinds of standard personal loans. The borrowers need to be of legal age when they apply for logbook loans. They have to be residents in the United Kingdom and they have to own a car that is free of financing. They need not be worried about bad credit scores coming in the way of their loan applications as lenders are not concerned about their credit rating.
Lenders would only be interested in knowing that the borrowers have a regular source of income to repay the loan amount with timely installments. They will keep the vehicle’s V5 document as a pledge when they agree to sanction the loan amount based on the current market value of the car. Generally, they will extend up to 70% of the car’s current market value. By keeping the V5 document of your car, the lenders become temporary registered keepers of your vehicle for the tenure of the loan. If you miss out on the loan repayment installments, your vehicle will be sold to redeem the amount owed to them.
If borrowers have poor credit history and are seeking personal loans, then logbook loans are definitely worth considering.