June 15, 2023
Do you know your car has the potential to arrange speedy funds? Logbook loans do exist besides other options like overdrafts, credit cards, any other short-term funding etc. They are a different line of credit that needs your car as a security.
These loans can be a convenient choice in many different situations. It is because of the fact that one can obtain helpful funding ranging up to £50000. Although it can provide you access to a big amount, it might cost you the car if you are inconsistent in repaying.
You must be aware of the essential nature of a logbook loan ahead of deciding if it is worth risking your car for these loans. Get a 360-degree overview of this financing option by reading through this blog.
Should you consider or avoid logbook loans?
At some point in time, you might contemplate getting these loans if you are unlucky with traditional lenders. It is a unique opportunity wherein you can unlock the cash stuck in your car to serve a different purpose.
There is no problem if you can arrange the value of the car, using which you have borrowed money. You can repay and get back the ownership of the vehicle. Otherwise, you will have to give up the possession of your asset forever.
Although you will not be the owner during the duration of the loan, the lender will still allow you to drive it. Features like this one can entice you to get these loans. However, you must thoroughly understand these loans and their alternatives before making any final decision.
1. Logbook loans – what are they exactly?
These loans are a form of secured loans where your car will play the role of security. The lender will have possession of the car, and you can get it back by repaying timely. You cannot afford to miss repayments, which will permanently lose the car.
These loans facilitate borrowing up to 70% of the car’s value. You can quickly draw out a significant amount of money. It is almost by getting a mortgage using your home as security while continuing to live in it.
Opt for these loans after thoroughly making sure that you can pay them back on time. Otherwise, you will have to lose the car that you and your family members need for your daily commute.
2. How does a logbook loan work?
These loans need you to transfer the car’s ownership to the lender for the time being. This process will require you to present the registration documents of the car. In other words, you can denote them as logbooks – that is why the name of the loans is like this.
The steps shaping up the process of acquiring these loans are:
- Receive a bill of sale certificate from the lender
- The lender will be the temporary car owner
- Get access to loan agreements to understand rates and terms
- Check if your loan pertains to an interest-only repayment pattern
- Pay the amount you have borrowed only after hitting the last month of the term
- Make sure that you have the lump sum available on the due date to avoid late payment
- Get the logbook back once the payments are complete from your end
3. Are these loans similar to a payday loan?
Payday loans are a popular choice among loan aspirants who can repay loans with their next month’s salary. On the other hand, you must be a car owner in the first place to be able to apply for a logbook loan.
With repayment terms varying between 3 months to 24 months, both these loans might seem like they are hitting the same chord. However, you can see some features to set them apart clearly. You can borrow payday advances without putting up security.
Getting a payday loan is comparatively easy, but a blemished credit profile can make getting approval difficult. You cannot expect to get a big loan amount as financial support in the case of these loans. It is, however, possible when you will consider a logbook loan.
The loan provider will levy heavy interest in the case of the former loans. On the other hand, the involvement of collateral factors can control the interest rate for the latter option. Nevertheless, these loans cannot guarantee minimal rates as different lenders will have different perspectives.
4. What are the disadvantages of these loans?
Every loan will introduce its pros and cons, and so does this financing option. You cannot escape the cons if you have noted the positive points so far. It will help you think rationally and decide if getting these loans would be right for you.
5. Price going beyond your limit
These loans will include a high-interest rate, with an APR of 400%. Compare the rates with unsecured loans, and you will be surprised to see the striking difference. The latter will cost you something around 12% as APR.
The overall price will be remarkably high for a logbook loan than any other financing option. If your credit scores are poor, you will have to compensate for it by paying high interest.
6. Late payment consequences
The direct impact of delayed or late payments is that the lender will repossess your car forever. They will return your car and use it to collect the loan amount and interest.
On top of this, you might have to bear the burden of additional fees like penalties. The lender will sell your car, and you cannot get it back.
7. Do you need alternatives to a logbook loan?
Thinking twice before finally sealing the deal for these loans can be helpful. They might be expensive for you and could be risky from a repayment perspective. Clarity on how you will handle the price and payments should be there.
However, if you are still confused, it is time you must look for alternatives.
Text loans: You can get short-term financing simply by sending a simple text. Surprisingly, you do not have to involve in any paperwork like the above loan option.
Unsecured loans: If you are unwilling to put your car at risk to take out additional money, an unsecured loan can be a suitable option for you. Obtain collateral-free money as tenant loans at competitive rates.
Quick loans: A logbook loan might need you to wait for some time as it involves little too much paperwork. Select these loans and enjoy having money after speedy approval. Receive loans in your checking account for ease of access.
The bottom line
As a borrower, you will have to assess the intensity of the risk factor of the available loan option. A logbook loan is also a perfect financing option provided you match the repayment affordability criteria.
You can explore the loan options of Florafinance as an alternative if you do not feel confident about getting the above loan. The biggest perils of considering an unaffordable loan are the unending cycle of debts.
Beware of your financial situation. Otherwise, you might land in new trouble. Take the safest borrowing route according to you.
Learn budgeting skills so that you can gather the necessary cash to cover loan payments without any hassle. Always have a look at different options to shop around for the best rates.
Ellie Brown is a proud resident of the UK and love to be a content writer and editor for the last 9 years. Writing blogs and articles is her passion that one can explore at the top blogging platforms. Ellie holds a key position at Florafinance as the Senior Content Editor and Chief Loan Consultant, leading a team of more than 70 professionals. Ellie Brown covers the major aspects of the UK’s lending industry in her blogs and guides loan seekers who come at Florafinance to apply for a loan. She possesses the Post-Graduate degree in Finance and Investment.