If you own a car, you'd want to consider taking a loan with the car as security. Well, it is a quick way of getting financing even when you have bad credit. While it may be helpful, you risk losing the car if you forfeit your loan repayments. The interest rates in this type of loan are usually higher than traditional lending but a bit lower than payday and short-term unsecured loans.
Let's look at what a logbook loan is and the factors to consider before applying. Click here on Lånapengar.com for more details.
What Is A Logbook Loan?
A logbook loan is a credit product that uses the borrower's vehicle as security. You can borrow any sum of money against your car's value. The owner can temporarily own your car before you repay the amount in full.
That happens in such a way that while you can use your vehicle in the loan period, the ownership documents like the logbook are usually with the lender. If you cannot repay the loan, the creditor can sell the car to recover their money.
The amount you can borrow with a Logbook depends on your vehicle's value. Most lenders typically offer £500 and £50,000, which could be 50% to 70% of the car value.
APR for logbook loans falls anywhere between 209% and 500% depending on the loan terms, interest rates and the lender. If the loan runs for the whole period, then this can be costly borrowing. Be especially keen on how rapid the loan can be to avoid higher than standard interest rates. It would be wise to confirm the interest rate (whether flat or fixed), additional fees, early payment penalty and expected charges if you default.
Logbook Loan Eligibility
● Ownership
Before using your car as security, you need to have full ownership, which means you're done paying for it. Some lenders will credit you if you're still paying for the car on finance. In this case, you must, however, be close to your final payment. You will also be required to inform the finance provider prior to taking a loan.
● Type Of Vehicle
Most creditors will accept vehicles that are less than ten years old. This is only exempted if your car is of significantly high value. You should have your car's insurance, tax and updated MOT.
Logbook Loan Application
In Northern Ireland, England and Wales, a logbook loan consists of consumer credit and Bill of sale agreements, which help you secure the credit in the vehicle. This is, however, not compulsory in Scotland. Visit this site to see what is needed if you live in this part of the UK.
Bill Of Sale Registration
When you apply for this type of loan then complete the consumer credit and Bill of law agreements, the car ownership is transferred to the creditor. The documents are sent to a local solicitor where it is sworn and thereafter presented to the Royal Courts of Justice for registration in the Bill of Sale. It should be done within seven days. If the loan term exceeds five years, the Bill of sale must be renewed every five years for it to remain valid.
A borrower can check the registration of the Bill of Sale by sending an application to the Royal Courts of Justice. After your application is complete and the paperwork is done, the lender will deposit the funds to your account in about 48 hours.
Loan Repayment
During the loan processing and verification, you will be required to set a repayment period typically between 18 and 60 months. However, some lenders may penalise you if you set the time earlier. By law, you have a right to pay off a loan as soon as you can.
Your lender can calculate interest using two different methods;
1. Fixed Rate
The interest rate percentage is calculated based on the total credit and then spread over the loan period. The borrower will, therefore, repay more capital in subsequent months.
2. Front Loading
In the first few months of repayment, the majority of the payment will be towards interest and only little for the capital. Most of the principal balance payment is made towards the end of the loan period.
Logbook Loans Conclusion
If you're having a hard time managing your debts, a Logbook loan would be the worst decision you can make as you can quickly lose your car. It can be the best solution to a short term loan. Before you apply for this loan, confirm with your lender about the minimum period, interest and hidden charges.
