When you have bad credit and you can’t get approved for a personal loan, it doesn’t mean you should stop looking. While traditional secured personal loans are advantageous in a number of ways, there are alternatives for people with bad credit. One of which is a logbook loan.
Logbook loans are loans secured against a vehicle. If you’re a car owner, of legal age and a UK resident then you are eligible to apply even if you have a poor credit rating under your belt. But before you go ahead and sign any credit agreement, below is everything you need to know about the financial product.
What is a logbook loan?
As mentioned, logbook loans are secured personal loans that require a vehicle for collateral. The financial product is offered for people with bad credit and who can’t otherwise get approved for a traditional personal loan elsewhere. It is available and easily accessible online. If you meet the requirements and have the necessary documents ready, your loan application may get approved within the same day you applied.
How much can you borrow?
With a logbook loan, you can borrow anywhere from £500 to £50,000. The maximum amount you can borrow will depend on how much your vehicle is worth. Typically, lenders let borrowers avail up to 50% of the car’s official trade value. Some lenders may lend you up to 70% depending on your personal circumstance. In any case, it is recommended for lenders to keep the borrowing at minimum. In fact, following the simple rule to borrow only what you need and what you can afford makes perfect sense. If you want to borrow money, then head to TopLogbookLoan and apply there.
How long can you repay the loan?
Repayment terms vary from deal to deal but in general, logbook loans can be repaid in 12 months up to 36 months. Repayment can be done weekly or monthly. Before your loan application is approved, automatic debit deduction is usually set-up. Your job as borrower is to make sure your debit account always has sufficient balance to cover for the weekly or monthly repayments. Otherwise, your lender may sic the debt collector on you. In addition, there’s also hidden fees and charges to worry about for missed or late payments.
How much do logbook loans cost?
While secured on your vehicle, logbook loans have been criticized as extremely expensive. The typical representative APR for logbook loans is 400%, which is multiple times more than a traditional personal loan. This is because of the high risks lenders are taking. Even if you have collateral for the loan, the fact remains that you have bad credit and either a history of ccjs or default. To offset the risks, lenders are raising their interest rates instead.
But thanks to stiffer competition, lenders are now offer cheaper logbook loans deals. If you know where to look, you may be able to avail logbook loans with representative APRs from 150% to 300%.
What are the risks?
There’s another risk other than the high interest rate you should fully understand before taking out a logbook loan. It’s the risk of vehicle repossession. In the event that you are unable to repay the loan, your lender may repossess your vehicle as per the bill of sale and credit agreement. Oftentimes, you’ll be given a grace period to update your loan repayments. After several attempts and you are still unable to repay the loan, a debt collector will be tasked to collect the repayments. If you are still unable to keep up with the payments, this is when your vehicle is repossessed and may be sold to cover for your outstanding balance.