A logbook loan is secured against your vehicles V5 document/ logbook. Logbook loans have become a great option among those with poor credit score. They are easy to apply and are approved very fast, in many cases within 24 hours. Many people turn to logbook loans because their credit scores are very poor and cannot get access to conventional credit. While logbook loans present the easiest option to get cash urgently, they attract higher APR (annual percentage rates) rates compared to normal loans. After getting your loan approved, you should be ready to pay up to about 400% APR. Besides, here are 4 more very important things that you should know when applying for logbook loans. Though the lender does not factor credit score, borrowers must show proof of income While the main motivation for taking logbook loans is that there are no background checks, this is not all. It is crucial that you provide a proof of income that demonstrates you are capable of repaying the loan. It is because of this that lenders such as http://www.simplelogbookloan.co.uk/ ask applicants to provide bank statements that show their monthly income. If you do not have a reliable source of income, the lender will decline because the chances of defaulting are very high. You transfer the ownership of the vehicle to the lender When you submit V5 documents, it means that the vehicle ownership has shifted. The total ownership of the vehicle has moved to the lender, but you are allowed to keep the car until the lent amount is paid in full. Therefore, you have to be prepared for the worst if unable to service the loan. Even if the lender allows you to continue using the car after defaulting, for some time, the interest rates increase with a huge margin. Note that the current legislation allows the lender to tow away the vehicle and sell it to recover the remaining cash. Therefore, the lender will still come for the car even if you were just about to complete the payment when you defaulted. You are still responsible for car maintenance after taking the loan Because the ownership of the car after securing a logbook loan is temporarily transferred to the lender, some people argue that they should also be relieved off maintenance costs. This is a great misconception. Though the lender has taken the logbook, he does not have any other objective apart from recovering the money. In reality, you still own the car and, you will continue using it after clearing the loan. Therefore, you have the responsibility of maintaining it and servicing all associated costs such as insurance. You can achieve more by negotiating the APR and paying faster Despite the high-interest rates and inherent risks associated with V5 loans, you can still enjoy greater value from the deal. First, you can enjoy lower interest rates by making sure to pay the loan as fast as possible. Second, you should negotiate with the lender to get lower interest rates. Many lenders are willing to engage their clients building a community that can yield referrals to grow their business.
In his recent article on The Guardian, Bowcott Owen highlighted the risks facing many used car buyers today. Over the last decade, the number of logbook loans has increased so much. Because even those with poor credit score can qualify for the loans, many people rush to borrow without focusing so much on their repayment capability. The laws that guide logbook loans make it easy to access loans but fail to protect the used cars sold with loans attached to them. In one of the cases, James Watson bought a van in fall of 2016 only to have it repossessed by a logbook dealer a week later. When he reported his car had been stolen, the police told him that it had been repossessed by a logbook loan company to recover loan balance. The company pointed that the loaned stopped communicating with the lender after paying only a small amount. Watson ultimately lost his money. The current laws are archaic and insensitive to buyers Bowcott correctly argues that the current laws are insensitive to used car buyers. Logbook loans are regulated by Bill of Sale Act of 1878 that allowed people to use their property as collateral. The law was amended in 1882 but remain very insensitive to buyers. Though the law requires that all logbook loans be registered in the high court, private buyers rarely check whether the vehicle under consideration is under any order. Therefore, once the original owner defaults on payments, the lender can repossess and sell the car to recover his money. The need to review the law Just like Bowcott observes, the logbook loan borrowers and used car buyers need extra protection. Under the current law, the lender requires you to adhere to the loan agreement specifically to meet monthly repayment without failure. If you fail to remit the agreed amount on a monthly basis, the lender will add penalties and repossess the car. The danger does not end here. The lender can even take you to court if the car is sold but fetches less than the loan balance. Some possible legislative solutions
- The lender should not sell the car without involving the court and the borrower.
- The car should not be sold if the lender had paid more than 1/3 of the total amount.
- If the borrower is unable to continue paying the loan, the vehicle should be sold competitively so that the owner remains with the amount on top of the loan balance.
- The law should make the current listing of cars with loans and check mandatory before the sale of used cars.
Many are the times that media carry the stories of logbook loans that went bad. Well, it is no doubt that the interest rates are higher compared to conventional banks, but they are invaluable if you are extra careful. In this post, I share the story of Johnson, a supervisor with a local company who conquered all odds to succeed with a logbook loan. When Johnson defaulted on bank loans in the past, his credit score moved down, and no other financial institution could lend him more. Johnson defaulted on initial loans, and the remaining options were limited When Johnson, a father of three and a supervisor at a local company, took the first two loans, he expected everything to change for the better. Before starting the family baking business, his last born son fell ill and got admitted in a Manchester hospital. All the money he had borrowed and his savings were used on medical bills. It became so dire that he had to default serving the loans for 6 months. Things went from bad to worse. He was reported to the credit bureau, and his credit score fell so low that no other financial institution could agree to loan him. Once his son recovered, Johnson started servicing the loans to the extent that nothing was left to start their home bakery. His efforts to seek another loan from different banks never got approved because he was seen as a high-risk party. He had to look for alternatives to keep the dream of running the home bakery alive. Suggestion to take a logbook loan Though he had all along known about logbook loans, he never considered them because of the high-interest rates and risks. His wife compelled him to go ahead and take the loan against their only family Citroen so that they could start the family business. Before taking the logbook loan, Johnson visited a local financial expert who gave him invaluable advice to only select the best company. He used the following criteria to select the best logbook company;
- Evaluated the one with the lowest interest rates.
- Selected the company with the focus on helping clients.
- Negotiated with the company about his situation and better rates.
Logbook loans have become an attractive option in the UK with over 90,000 loans approved every year. One of the key reasons for this popularity is because the lender does not factor applicants' credit score. Indeed, most of the applicants are people whose applications for loans in banks have been declined. However, the poor credit score does not just make it difficult to get a bank loan; you will also find it a big challenge to get a mortgage, insurance cover, and other financial services. Therefore, the most important thing after getting a logbook loan is working on the credit score. Here are special tips on how to increase your credit score. Check and correct your credit score with credit agencies Many financial institutions will check your credit report and dismiss the loan application immediately if the score is low. However, many are the times when the scores provided by credit agencies are incorrect. Because agencies are third parties, the information they gather from banks, mortgage companies, and insurance firms among other institutions is not always right. Because banks and other companies are for-profit institutions, it is not uncommon to find clients credit info being submitted when it is very late. In other cases, the information may have incorrect figures or fail to reach the credit reference agencies altogether. Therefore, the first thing towards correcting your credit report is getting your report from three different agencies and correcting the details. Strictly follow the agreed logbook repayment plan One of the main factors that pull down credit score is outstanding debts. Now that you have added another debt, the burden has become bigger. You must, therefore, follow the agreed repayment plan faithfully because defaulting has huge implications. Unlike other types of loans such as unsecured bank credit that only accrues more interest; the logbook loan company will come for your car if you default. In fact, this is not all. The V5 loan company will even sue you if the car is sold and recovered cash does not clear the loan. Review all your loans and clear them progressively Your credit score will not improve if you fail to clear all outstanding debts. Though many people argue that getting out of debt is not easy, it is possible. One of the most recommended methods for addressing your debts is the Snowball Strategy. In this method, you work out the least amount that should be paid on every debt and then commit extra resources to clearing the debt with the lowest amount. Immediately the debt with the lowest balance is cleared, the same procedure is followed until all the debts are cleared. The motivation that comes with seeing debt after another being cleared will be enough to help you get out of debt completely. Consider borrowing from your account To build on your credit score, consider borrowing from your account. Though banks might be unwilling to loan you, they will be ready to enter into an arrangement to allow you borrow from a personal account. Then, you can repay the amount progressively to build a positive history with credit agencies. Note that efforts for building good credit score must be consistent especially on taking loans and repaying them promptly.