First I would like to welcome you to my site where you will find all the information you need on logbook loans and especially the dangers of using this type of personal finance. So before you consider availing of this kind of funding, please read this first.
If you own a car which is under 10 years old as well as free or nearly free of taxes or any other financial penalties, and you can afford the repayments, then you can qualify to borrow money against your car. A logbook loan or V5 loan as it is also referred to as a loan which is secured to your vehicle.
Logbook loans are so called because you will be required to hand over your vehicle’s V5 logbook as security for the loan. However you will retain the use of your car, but technically the lender will own it until you have fully repaid the loan.
The amount that can be borrowed will depend on the value of the car and is usually around 60% of the vehicle’s trade value, but it can be higher. Logbook loans for older cars are more difficult to secure.
The amount is general between £500 and £50,000 but obviously also depend on the borrower’s ability to make the repayments.
Additionally, the borrower will have to be over 18 years of age, be the legal owner of the vehicle with no outstanding finance. During the term of the loan, the car will also need to be insured, taxed and have a valid MOT.
A loan against your car is regarded as a high-risk finance option, because of the very high-interest rates charged by such lenders. Interest rates can vary between 100% and 400% APR, rates that would even make credit card companies blush.
They are aimed at consumers who have low credit scores or no credit score and therefore, cannot secure finance from the high street banks or other mainstream lenders. If you fail to keep up the loan repayments the logbook loan lenders have the right to seize your motor and sell it to recoup the outstanding amount owed.
The loan company requires the customer to sign an agreement that gives them the right to repossess the car without having to get a court order and resell it. Most borrowers are not fully aware of the implications of signing such agreements. Also, there is very little consumer protection for the borrower.
It is also worth noting that if the sale of the vehicle does not cover the outstanding loan, the borrower is still liable for the balance. Late or missed payments may incur a charge for chasing letters and telephone calls.
Some Logbook loan lenders do not do proper credit checks on the borrower as the loan is secured loan against your car, so they have very little risk. Most also fail to do proper affordability checks to ensure the customer can make the repayments. The net result of all this is that many fail to make the payments and fall even deeper in debt in addition to losing their car. This can damage your credit score even further.
So it’s advisable to consider all other options before you resort to this type of financing. Hopefully, shortly all such lenders will have to be fully authorised by the FCA. This will provide some degree of protection for consumers.
In the current economic climate, many people in the UK are finding that they have low credit scores and in many cases through no fault of their own. In this situation, many are refused finance from the high street banks and other lenders. Therefore they view logbook loans as the only viable alternative for emergency funding.
Here are some things to look out for if you are determined to arrange this type of finance. First you need to get a quote from a number of logbook loans online lenders. Most go with the first logbook money quote they get which is a big mistake. Then compare logbook loans quotations as this will ensure that at least you get the best interest rate and terms available.
DO NOT borrow more that you can afford to repay. This is crucial. Regardless of how much credit is available to you do not be tempted to over borrow.