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.